Deriving business opportunities from Italy’s COVID-19 measures
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Deriving business opportunities from Italy’s COVID-19 measures

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Companies remain alert as the Italian economy recovers

Gian Luca Nieddu and Barbara Scampuddu of Hager & Partners consider the investment opportunities, which have arisen from the tax relief measures introduced to revive the Italian economy, following the initial outbreak of the coronavirus pandemic.

The economic and tax measures, which were adopted to deal with the emergency resulting from the COVID-19 pandemic, have promoted an array of interesting business opportunities in Italy that need to be carefully considered.

The Italian government has adopted huge-scale interventions in support of Italian companies to, firstly, ensure their stability, and then eventually to facilitate their recovery. Among key measures are the introduction of the extraordinary redundancy fund, the moratorium on instalments for mortgages and loans, and the extension of loans to firms.

This article takes a closer look at these measures introduced to relaunch the economy, and the investment opportunities that can be derived from them.


One of the main interventions adopted is the revaluation of the assets of all undertakings. Although the opportunity of revaluation is nothing innovative and is included in the budget law almost every year for revenue reasons, at this occasion, the fiscal burden is very low. In fact, a substitute tax of 3%, instead of 12%-16% normally provided by the budget law, is applicable to the greater value attributed to the assets; in some cases, the revaluation is even free of charge.

All companies can revalue business assets and shareholdings, including properties held for investment, with the only exception being assets whose production or exchange that the business activity is aimed at. Assets and shareholdings have to result from the balance sheet in progress on December 31 2019, and the revaluation must be carried out in the financial statement for the following year of 2020. The revaluation can be carried out separately for each asset or shareholding.

The greater value attributed to the assets can be recognised for depreciation purposes starting from 2021: (i) solely for accounting and statutory purposes; (ii) or alternatively, as mentioned above, also for the purposes of income taxes through the payment of a substitute tax of 3% applicable to the greater value attributed to the assets (payable in a maximum of three instalments in June 2021, 2022 and 2023).

In case of a transfer for consideration, assignments to shareholders or destination for purposes unrelated to the business of the assets, which are revalued prior to the start of the fourth financial year following that in which the revaluation was carried out (namely prior to 2024), the capital gain is determined referring to the cost of the asset or shareholding before the revaluation. Starting from the fourth financial year, instead, the revalued cost is relevant also for the capital gain.

In light of the above, Italian companies have a very convenient opportunity to increase the cost of their assets and shareholdings by paying a very low substitute tax equal to 3%. Considering that the Italian ordinary taxation for the purposes of income tax amounts overall to 27.9% (24% corporate income tax (IRES) and 3.9% Italian regional tax on productive activity (IRAP)) – the tax saving amounts to 24.9%.

In the same conditions, Italian companies also have the possibility of realigning the tax values to the higher statutory values recorded in the financial statement as of December 31 2019. In this regard, the difference between the tax value of an asset and the higher statutory value recorded in the financial statement of that asset can arise from the allocation of the merger deficit. Such a merger deficit can be recognised for the purposes of income tax through the payment of a substitute tax at a rate of 3%. For example, assuming that the merger deficit amounts to €1 million ($1.18 million) and is allocated to goodwill: the company can pay a substitute tax equal to €30,000 (payable in three instalments), and then deduct for tax purposes the depreciation of the goodwill equal to €55,500 each fiscal year, thus saving €15,000 each year (for 18 years).

In addition, in order to support the hospitality sector which was particularly affected by the economic crisis, for companies operating in the sector, the revaluation or realignment process for tax purposes is free of charge. In fact, no substitute tax or other tax is due on the higher values of assets and shareholdings. Therefore, in this case, the tax saving amounts to 27.9%. Furthermore, it is given more time for revaluation since it can be carried out in the financial statement for the year 2020, or also in 2021, and the higher values are recognised for depreciation purposes respectively starting from the same year.

Non-repayable grant

Another intervention adopted by the Italian government is the non-repayable grant provided in favour of undertakings with a turnover up to €5 million, and which have had a decrease in turnover in April 2020 equal to at least 33% when compared to April 2019.

The contribution is determined by applying a percentage to the difference between the amount of the turnover for the month of April 2020 and the amount of the turnover for the month of April 2019. Such percentage amounts to 20% for undertakings with revenues up to €400,000; 15% for undertakings with revenues from €400,000 up to €1 million; and 10% for undertakings with revenues from €1 million up to €5 million.

Tax credit for recapitalisation

Italian companies with a turnover between €5 million and €50 million can benefit from tax incentives through a tax credit for the recapitalisation equal to 20% on a maximum base of €2 million, a tax credit equal to 50% of capital losses (exceeding 10% of the equity), and a fund for small and medium enterprises (the Fondo Patrimonio PMI) aimed at subscribing newly issued bonds or debt securities to contribute towards their capital strengthening. To access these measures, companies must have suffered a loss of 33% of revenues compared to the previous year, and have approved a capital increase of no less than €250,000.

For companies with a turnover of more than €50 million, a fund for relaunch (the Patrimonio Rilancio) is set up in the Cassa Depositi e Prestiti, an investment bank held by the Minister of Economy. The fund was created to support the recapitalisation of Italian stock companies, with the exception of banks and insurance companies, in particular through the subscription of convertible or subordinated loans.

The fund is also aimed at intervening in restructuring operations of companies in crisis for their relaunch, with this regard taking into account technological development, critical and strategic infrastructures, strategic production chains, environmental sustainability, employment levels and the labour market.

Tax credit for deferred tax assets

With the aim of supporting the liquidity of Italian stock companies facing economic uncertainty, a tax measure has been introduced to encourage such companies to sell their non-performing loans accumulated in the past years.

To benefit from the tax credit, by the end of 2020, the company must carry out the transfer for consideration of pecuniary receivables – both commercial and financing – from defaulting debtors. In this regard, a default occurs when the non-payment lasts for more than 90 days from the date on which it was due.

The relevant receivables have a maximum nominal value of €2 billion, determined by taking into account all the transfers made by 2020 by companies belonging to the same group or companies linked together by control relationships pursuant to Article 2359 of the Italian Civil Code and subsidiaries, even indirectly, by the same subject.

The company is allowed to transform the deferred tax assets (DTA) into a tax credit. DTA refers to the following components: (i) tax losses not yet compensated, and (ii) 'ACE surplus' not yet deducted or used through a tax credit, both considered at the date of the sale (the economic growth aid known as ACE, is an incentive for the capitalisation of companies). These components are assumed for a maximum amount not exceeding 20% of the nominal value of the receivables sold.

Consider the following example:

  • Tax losses: €1 million;

  • ACE surplus: €300,000;

  • Nominal value of NPL: €6 million, thus 20%: €1.2 million;

  • Income tax rate: 24%.

The company can benefit from a tax credit equal to €288,000, corresponding to €1.2 million x 24%.

Furthermore, assuming that the transfer price of the receivables amounts to €4 million, the loss of €2 million shall be deductible for tax purposes.

Other tax credits

To support the relaunch of the building sector, the deduction for specific interventions aimed to improve energy efficiency, reduce seismic risk, and to promote the installation of photovoltaic systems and columns for charging electric vehicles, has been increased to 110% of the costs incurred from July 1 2020 to December 31 2021 (the so called 'superbonus'). Individuals who bear the costs can benefit from the tax deduction in five annual instalments of the same amount; alternatively, individuals can transfer the deduction to third parties.

In order to support the business activities in the historical centres, a non-repayable grant is provided in favour of undertakings carrying out business activities for the sale of goods or services to the public in historic centres. The contribution is granted under the condition that the amount of turnover referring to the month of June 2020 is less than two-thirds of the amount of turnover in the corresponding month of 2019. The contribution is determined applying a percentage to the difference between the amount of the turnover for the month of June 2020 and the amount of the turnover for the corresponding month of 2019. Such percentage amounts to 15% for undertakings with revenues up to €400,000; 10% for undertakings with revenues from €400,000 up to €1 million; and 5% for undertakings with revenues exceeding €1 million (in all cases the reference is to revenues in the tax period 2019). In any case, the amount of the non-repayable grant cannot be higher than €150,000.

As mentioned above, the hospitality sector was particularly affected by COVID-19. In addition to the revaluation described above, a tax credit for the development and improvement of hotels and other tourist accommodation facilities is recognised to the extent of 65% of the costs for the two tax periods subsequent to the one in progress at December 31 2019.


Gian Luca Nieddu


Hager & Partners

Tel: +39 02 7780711

Gian Luca Nieddu is a partner at Hager & Partners where he leads the transfer pricing (TP) and tax value chain department. He is a chartered public accountant focused on international taxation matters, with specific skills in TP and value chain (re)structuring. For several years, he has been assisting multinational groups, both Italian and foreign, in their cross-border operations. He has also acquired expertise in global expansion projects for companies which have developed and maintained business on foreign markets (including on the internationalisation, advice on instruments for the capitalisation and growth of companies) as well as competencies on IP box regimes.

Gian Luca regularly speaks at conferences and courses (both in Italy and abroad) on transfer pricing and international taxation topics, as well as on R&D tax incentives and regularly contributes to publications (both in Italy and abroad) on the same subject matters.


Barbara Scampuddu


Hager & Partners

Tel: +39 02 7780711

Barbara Scampuddu is a partner at Hager & Partners where she leads the tax disputes department and research centre. She graduated summa cum laude in business and economy studies at the University of Cagliari in 1996. She attended the business school of Il Sole 24 Ore, the main Italian daily business newspaper, and received a master's degree in tax law. She is a professional tax adviser and auditor, admitted to the Italian Institute of Chartered Certified Accountants since 2001. Her professional practice areas are particularly focused on Italian and international tax consulting and tax litigation.

Since 2002, she teaches a master's level course in tax law at Il Sole 24 Ore in the area of mergers and acquisitions. Starting from 2013, she is also teaching a master's level course in tax law at Bocconi University, one of Europe's leading economics and business universities, as well as at the Università di Roma LUMSA.

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