Law No. 178 published in Italian Official Gazette on December 30 2020 (the so-called budget law 2021), introduced important measures in the field of tax incentives for enterprises.
Among the several changes introduced, key highlights are outlined below.
4.0 research and development tax credit
The tax credit for investments in research and development, ecological transition, 4.0 technological innovation and other innovative activities pursuant to the Italian Law No. 160/2019 is extended until December 31 2022.
The tax credit for research and development is increased from 12% to 20%, and the expenses limit is increased from €3 million (approximately $3.6 million) to €4 million. The tax credit for technological innovation design or aesthetic development is increased from 6% to 10%, and the expenditure limit is increased from €1.5 million to €2 million. Same thresholds are applicable for technological innovation activities in manufacturing as well as for the introduction of new or substantially better production processes for ecological or digital innovation purpose.
4.0 industry investments tax credit
Businesses resident in Italy, including permanent establishments of non-residents, as well as artists and professionals, that make investments in:
New capital goods used on production facilities located in Italy;
Starting on November 16 2020 and until December 31 2022, or by June 30 2023, provided that the relevant purchase order is accepted by the seller and a prepayment of at least 20% of the purchase cost is made by December 31 2022, are entitled to a tax credit for several types of eligible goods.
Business under voluntary liquidation, insolvency, compulsory administrative liquidation, that have taken arrangements with a creditor or are subject to other insolvency proceedings, are not entitled to the tax credit.
Research and development tax credits for southern Italy
The tax credit for research and development investments pursuant to section 1 (200) of the Italian Law No. 160/2019, including COVID-19 research and development projects, directly related to production facilities in the Italian regions of Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily is recognised for 2021 and for 2022 as follows:
25% to large enterprises that employ at least 250 people with an annual turnover of at least €50 million or an annual balance sheet total of at least €43 million;
35% to medium-sized enterprises that employ at least 50 people and with an annual turnover of at least €10 million;
45% to small enterprises that employ less than 50 people and with an annual turnover or an annual balance sheet total of no more than €10 million.
Special economic zones (SEZs)
For businesses starting new economic initiatives in special economic zones (SEZs), created pursuant to the Italian Law-decree No. 91/2017, income tax from such economic activity carried out in a special economic zones (SEZs) is reduced by 50% as of the tax period in which such new economic activity was started and for the six subsequent tax periods.
Tax credit for the capitalisation of companies
The tax incentives for the capitalisation of companies pursuant to section 26 of the Italian Law-decree No. 34/2020 are extended - for transferees only - to capital increases made until June 30 2021.
The tax credit is increased from 30% to 50% for capital increases resolved upon and effected in the first half-year of 2021. In such cases, no profits must be distributed until January 1 2025. The tax credit may be used as set-off only, as of the tenth day following the one on which the investment was made, after approval of the financial statements for business year 2020 and by November 30 2021.
Tax credit for advertising
A uniform tax credit amounting to 50% of the advertising investments made on daily newspapers and monthly magazines, including online newspapers and magazines, up to a maximum amount of €50 million in 2021 and 2022 respectively, is granted in 2021 and in 2022.
Tax credit for training
The tax credit for training aimed at acquiring or consolidating the technological know-how specified in the 4.0 Industry National Plan, as provided for under the Italian Law No. 205/2017 (46-56) is granted for the costs set out in Article 31 (3) of Commission regulation (EU) 651/2014 dated June 17 2014 for the tax period as of December 31 2020 until the tax period as of December 31 2022.
APAs for internationally acting companies
For filing an advance pricing agreement (APA) ruling request before the Italian tax authorities pursuant to section 31-ter of the Italian DPR No. 600/1973, the taxpayer has to pay a fee equal to:
€10,000 if the total turnover of the group to which the applicant taxpayer belongs is less than €100 million;
€30,000 if the total turnover of the group to which the applicant taxpayer belongs is in the range between €100 million and €750 million;
€50,000 if the total turnover of the group to which the applicant taxpayer belongs exceeds €750 million.
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