The Italy 2020 Budget Law (Law no. 160 of December 27 2019) published in the Official Gazette on December 30 2019, introduces new measures and tax incentives for the competitiveness of companies.
For 2020, the list of tax credits available for business investments in Italy has grown: a new tax credit is introduced for investments in research and development, ecological transition, technological innovation ‘4.0’, and other innovative activities.
In particular, the measure provides for:
a) Tax credit for research and development
The new measure substantially replaces the previous research and development credit referred to in Article 3 of Legislative Decree no. 145/2013. It was therefore terminated early in 2019, instead of 2020.
The percentage of the contribution and the basis of the calculation have changed significantly. For research and development activities that can be facilitated, the tax credit is granted in the amount of 12% of the relative calculation basis (which takes the place of the differentiated contribution of 50% or 25% depending on the eligible items), net of the other incentives or contributions for any reason received by the company on the same eligible expenses.
The new regulation also introduces a maximum limit of €3 million of the tax credit per fiscal year.
Investments in research and development, fundamental research, industrial research and experimental development in scientific or technological field are also considered facilitated activities.
b) Tax credit for technological innovation
The tax credit for technological innovation covers activities - other than research and development - aimed at creating new or substantially improved products or production processes.
The rule specifies that “new or substantially improved products or production processes” is to be understood as a tangible/intangible asset/service/process, that differs from those already made or applied by the company in terms of technological characteristics/performance/eco-friendliness/ergonomics/other relevant substantial elements in the various production sectors.
For the technological innovation activities that can be facilitated, the tax credit is foreseen, separately, in the amount of 6% (or 10% for technological innovation activities aimed at achieving an ecological transition goal or digital innovation ‘4.0’) of the relative calculation basis, net of the other incentives or contributions for any reason received by the company for the same eligible expenses, with a maximum limit of €1.5 million of the tax credit per fiscal year.
c) Tax credit for other innovative activities
Furthermore, design and aesthetic ideation activities carried out by companies (operating in the textile and fashion, footwear, eyewear, goldsmith, furniture and furnishings and ceramics sectors) for the conception and realisation of new products and samples, are part of the innovative activities eligible for tax credit.
For these activities, the tax credit available is of 6% of the relative calculation basis, net of the other incentives or contributions for any reason received by the companies for the same eligible expenses, with a maximum limit of €1.5 million of the tax credit per fiscal year.
For the purpose of determining the calculation basis, as an example, the following expenses are considered eligible:
- personnel expenses relating to researchers and technicians;
- expenses for contracts concerning the direct performance by the commissioner of activities eligible for tax credit;
- expenses for consultancy services and equivalent services related to activities eligible for tax credit;
- depreciation allowances related to movable tangible assets used in activities eligible for tax credit, etc.
By the decree of the Minister of Economic Development, which will be published within sixty days from the date of entry into force of the 2020 Budget Law (i.e. January 1 2020), the criteria for the correct application of the measure will be provided.
The tax credit can only be used in compensation of the tax due in the same fiscal year, in three yearly installments of equal amount, starting from the fiscal year following the year of maturity of the tax credit.
For the purposes of the recognition of the tax credit, the effective payment of the eligible expenses and their correspondence to the accounting documentation prepared by the company must result from a specific certification issued by statutory auditors.
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