NEWSLETTER N. 15 - 2021

Further to conversion of Decree-Law 73/2021 (so-called Sostegni-bis Decree) into law 106 of 23 July 2021, the following tax news have been introduced.

 

PAYMENT DEADLINES

The payment deadline for taxes due between 30 June and 31 August according to income tax, VAT and IRAP tax returns for taxpayers applying tax liability parameters (ISA), minimum and flat tax payers has been extended to 15 September 2021 without any increase (see July newsletter).

To this end, the Italian tax authority has provided clarification in its resolution 53/E as of 5 August 2021:

• it is not possible to postpone the payment due on 15 September 2021 by a further 30 days with an increase of 0.40%;
• however, payment by instalments is still possible (interest of 4% per year is due on the instalments due after 15 September 2021);
• the entire amount may be paid in monthly instalments (first instalment by 15 September 2021, without interest), by November;
• taxpayers, who have already started the payment by instalments according to deadlines prior to postponement may continue according to the initial deadlines; in this case, the deadlines for the instalments due between 30 May 2021 and 30 August 2021 are postponed (without interest) to 15 September 2021; any interest already paid that is no longer due following the postponement may be deducted from the interest due on subsequent instalments;
• in case of payment by several (freely chosen) instalments by 15 September 2021 without any instalment plan, the difference in balance may be paid either in one instalment (without interest) by 15 September 2021 or in a maximum of four instalments by November (first instalment by 15 September 2021 and with application of interests on the following instalments).

The resolution also specifies the deadlines and interest applicable (with specific tables) in case of payment by instalments, distinguishing between holders of a VAT ID and taxpayers without VAT ID participating in businesses subject to tax transparency scheme.

The payment deadline for instalments for the simplified settlement of tax claims entrusted to tax collection (so-called "rottamazione" and "saldo e stralcio") has been rescheduled.

The payment deadline for tax collection notices due between 8 March 2020 and 31 August 2021, even if they have already been deferred, has been postponed to 30 September.

 

RIDETERMINATION OF THE FISCAL COST OF LAND AND SHARES

The deadline for opting for the redetermination of the fiscal cost of land and unlisted shares owned by individuals as of 1 January 2021 has been extended from 30 June to 15 November 2021.

 

COVID-19 CONTRIBUTIONS AND INDEMNITIES EXLUDED FROM TAX RETURN

The exclusion for direct tax purposes of contributions and indemnities of any kind exceptionally granted as a result of the health emergency due to the spread of the COVID-19 virus is no longer subject to compliance with the limits and conditions set out in the European Commission Communication of 19 March 2020 C(2020) 1863 final "Temporary framework for State aid measures to support the economy in the current COVID-19 emergency". Hence, companies and professionals who have received said contributions and indemnities do not have to show the relevant amount in their tax return. Taxpayers who already sent the income ("REDDITI") and IRAP form according to the instructions provided, do not have to correct the submitted tax returns.

 

CONTRIBUTIONS TO LOSSES

Contributions to losses are granted to:

• holders of agricultural income pursuant to section 32 of Italian Tax Code (TUIR);
• taxpayers with proceeds or income of no less than EUR 10 million and no more than EUR 15 million in the second tax period prior to the one as of 25 July 2021,

and who meet the other requirements for the recognition of contributions foreseen by section 1 Law Decree 41/2021 and the other requirements foreseen by the "Sostegni-bis" decree.

Companies operating in the wedding, entertainment, party and ceremony organisation sector and in the food service and hotel industry are also granted contributions to losses. The terms thereof are to be defined by decree.

 

TAX CREDIT FOR LEASES

Regarding the tax credit for leases, the scope of application and the tax credit itself for non-residential property and business lease rentals has been extended.

 

TAX CREDIT FOR THE RESTORATION OF HISTORIC BUILDINGS

Owners under any title of buildings of historical and artistic interest under a preservation order pursuant to the Italian Cultural Heritage Code are granted a tax credit:

• for expenses incurred in 2021 and 2022 for the maintenance, protection and restoration of the above buildings,
• to the extent of 50% of the costs to be borne, up to a total maximum amount of said tax credit of EUR 100,000.

The tax credit is granted, if the building is not used for business purposes and may not be cumulated with other public contributions or financing nor with tax deduction provided for by section 15 (g) of Italian Tax Code (TUIR). The tax credit may be set-off or sold.

TAX CREDIT FOR "INDUSTRY 4.0" INVESTMENTS

The Italian tax authority has provided clarifications on the "Industry 4.0" tax credit for investments in new tangible and intangible fixed assets used on production facilities in Italy pursuant to section 1 (1051-1063) of Law no. 178/2020 (Budget Law 2021) (Italian tax authority, newsletter no. 9 as of 23 July 2021).

With reference to the "Industry 4.0" tax credit, the prohibition to set-off pursuant to section 31(1) of Decree-Law 78/2010 does not apply in case of liabilities of more than EUR 1,500 registered with the tax roll and for which the payment deadline has expired (Italian tax authority, answer to request for advance ruling no. 451 as of 1 July 2021).

The tax credit may be cumulated with other tax benefits up to the "costs incurred" for the purchase of the eligible asset and is calculated considering all other tax benefits including the contributions to losses and the subsidised loan under the "development agreement/program agreement" entered into pursuant to section 4(6) of the decree issued by the Italian ministry of economic development as of 9 December 2014. For this purpose, the tax benefit related to the financing shall be calculated according to the same parameters used in order to establish, pursuant to the relative Community rules on State aid according to Commission Regulation (EU) no. 651/2014 as of 17 June 2014, the maximum aid intensity (Italian tax authority, answer to request for advance ruling no. 483 as of 15 July 2021).

 

EMPLOYEES WORKING FROM HOME IN ITALY UNDER A SECONDMENT AGREEMENT

Italy has entered into administrative agreements interpreting the provisions pursuant to section 15 (employment) of the DTA entered into with Austria, France and Switzerland, in order to neutralise the tax effects of the COVID restrictive measures with respect to:

• employees who habitually carry out their activity in the other contacting State, but are constrained or forced to temporarily work in their State of residence;
• frontier-workers who are forced to remain in the State of employment without daily returning to their State of residence.

However, the above agreements to not apply to other States. Hence, with reference to the other States the following applies. In order to determine:

• the tax residence and
• the tax scheme applicable to salaries for employees paid to residents and non-residents who, due to the health emergency following the spread of the COVID-19 virus, carry out their work activity from home in Italy, instead of in the foreign country where they were seconded,

reference shall be made exclusively to the national provisions and the DTA entered into between Italy and the foreign country (Italian tax authority, answer to request for advance ruling no. 458 as of 7 July 2021).

 

REPAYMENT OF AMOUNTS ALREADY TAXED

The Italian tax authority provides clarifications on the tax scheme of the amounts returned to the payer (as unduly received) and subject to taxation in previous years (Italian tax authority, newsletter no. 8 as of 14 July 2021).

 

VALUE ADJUSTMENT

The value adjustment option shall be exercised for the entire difference between the book value and the tax value, as a partial value adjustment is not allowed. This also applies if the goodwill is attributable to several companies and is separately shown and quantified for accounting purposes.

For tax suspension purposes, the shareholder's equity as of 31 December 2020 includes the financial result achieved in 2020 and not distributed to the shareholders (Italian tax authority, answer to request for advance ruling no. 476 as of 7 July 2021).

 

CONTRIBUTION OF SHARES AND DEMERGER - ABUSE OF RIGHT

According to the Italian tax authority, the following reorganisation is abusive:

• the company ALFA, a company owned by shareholders (individuals) A, B, C and D, transfers the controlling shareholdings held in BETA and GAMMA to the newly incorporated ALFA HOLDING under the tax neutrality scheme pursuant to section 175 of Italian Tax Code (TUIR);
• ALFA carries out a non-proportional demerger in favour of ALFA 1 (held by shareholder A) and ALFA 2 (held by shareholder B, C and D): ALFA 1 and ALFA 2 will be assigned 50% of ALFA HOLDING respectively.

According to the Italian tax authority, the above reorganisation scheme aims at obtaining an unjustified tax advantage for shareholders B, C and D. Such unjustified tax advantage is attributable to the savings resulting from the application of the tax neutrality scheme instead of the tax scheme provided by section 9 of Italian Tax Code (TUIR), if the tax neutrality scheme pursuant to section 177 (2 and 2-bis) if Italian Tax Code (TUIR) is not applicable (Italian tax authority, answer to request for advance ruling no. 493 as of 20 July 2021).

 

110% SUPERBONUS - WINDOWS AND DOORS

In case of the replacement of windows and doors (even in case of a different geometry), the 110% tax deduction pursuant to section 119 of Decree-Law 34/2020 (as linked secondary works) applies, provided that the total surface of the windows and doors afterwards is not greater than before.

However, the tax deduction applies only to those works that may be classified in categories other than "new construction" pursuant to section 3 (1) (3) DPR 380/2001 (Italian tax authority, answer to request for advance ruling no. 524 as of 30 July 2021).

 

110% SUPERBONUS - TRUST

The 110% tax deduction provided for by section 119 Decree-Law 34/2020 also applies to the usufructuary of a residential property unit held in a trust, whose settlor and trustee is the son/daughter, provided that he/she bears the expenses related to the works. 

The general rule according to which the tax deduction only applies to income earners also applies to the usufructuary, because the option for the discount on the invoice or for selling the tax credit pursuant to section 121 of Decree-Law 34/2020 may not be exercised in case of no taxable income (Italian tax authority, answer to request for advance ruling no. 498 as of 21 July 2021).

 

110% TAX DEDUCTION FOR SEISMIC HAZARD IMPROVEMENTS - EARTHQUAKE ZONES

Regarding the 110% tax deduction for seismic hazard improvements pursuant to section 16 of Decree-Law 63/2013, the works shall be carried out on buildings located in earthquake zones 1, 2 and 3 of the order of the Italian council of ministers no. 3274 as of 20 March 2004. In order to identify the correct earthquake zone for the building subject to works, reference shall be made to the aforementioned order, which the municipalities and other local authorities must also comply with when classifying earthquake zones.

In particular, as explained in newsletter 24/E of 2020, the classification of Italian municipalities by seismic hazard is available on the website of the Civil Protection Department: http://www.protezionecivile.gov.it/documents/20182/1272515/Mappa+classificazione+sismica+al+31+gennaio+2020+per+comuni/df142eb4-4446-42ce-b53ba3abde5d7d48 (Italian tax authority, answer to request for advance ruling no. 516 as of 27 July 2021).

 

110% TAX DEDUCTION FOR SEISMIC HAZARD IMPROVEMENTS - SWORN REPORT

If the taxpayer intends to benefit from the 110% tax deduction pursuant to section 16 (1-septies) of Decree-Law 63/2013, as provided for by section 119 of Decree-Law 34/2020, the appropriateness of the expenses incurred in relation to the subsidised works shall not be subject to a sworn report, since the tax deduction is calculated on the price of the individual property unit as stated in the deed of sale and not on the expenses incurred by the company in relation to the subsidised works.

To this end, taxpayers may use the form provided for sworning and attached to Ministerial Decree no. 58 of 2017 before the amendments made by Ministerial Decree of 6 August 2020 (Italian tax authority, answer to request for advance ruling no. 494 as of 20 July 2021).

 

TAX DEDUCTION FOR FACADE RENOVATIONS - LIGHTING

If the requirements for the tax deduction pursuant to section 1 (219 ff.) of Law 160/2018 are met, the tax deduction for facade renovations may also apply to expenses incurred for the installation of ceiling or wall lighting fixtures, given that these are ancillary works and complete the facade renovation works, the costs of which are closely linked to the implementation of the work itself (see answer to request for advance ruling no. 520/2020).

In particular, the tax reduction for facade renovations may be applied if such works are necessary for "technical" reasons, which results, among others, from the project documents of he works (Italian tax authority, answer to request for advance ruling no. 483 as of 15 July 2021).

INCORRECTLY APPLIED VAT - PENALTIES

According to section 6 (6) of Legislative Decree 471/1997, the transferee/buyer who deducts VAT incorrectly applied by the supplier is subject to the following penalties:

• a fixed penalty between EUR 250 and EUR 10,000 in case the VAT is applied at a higher rate (e.g.: VAT applied at a rate of 22% instead of 10% etc.), without prejudice to the right to deduct VAT;
• a penalty equal to 90% of the incorrectly applied VAT in other cases (e.g.: VAT applied to transactions exempt of VAT or non-taxable transactions), after recovery of VAT unduly deducted.

Hence, according to the Italian tax authority, VAT may only be deducted if the error committed by the supplier concerns the application of a higher rate than the one due, but not if the transaction is exempt or non-taxable (Italian tax authority, resolution no. 51 as of 3 August 2021).

 

ANCILLARY SERVICES FOR VAT PURPOSES

The advisory services rendered by an advisor to a holding company in connection with the sale of a shareholding - in particular, the development of a suitable structure for carrying out the transaction, the support in the selection of tax, legal and financial advisors, the identification and management of negotiations with potential purchasers, the coordination of due diligence activities carried out on the target by potential purchasers, the performance of financial analyses, the preparation of marketing materials and documentation for potential purchasers, the consultancy service in relation to the possible implications and benefits deriving from the transaction, the consultancy service in relation to the negotiation/definition of the financial aspects of the agreements and of the documentation connected to the transaction, the assistance and coordination between the companies and all the consultants involved in the transaction, the use of one's own commercial relations and network in order to identify potential clients - shall not be considered as ancillary to the transaction of the sale of the shareholding. Hence, they are not subject to the VAT exemption scheme applicable to the sale of the shareholding. This applies if:

• the advisory services are rendered exclusively in favour of the holding company transferring the shareholding and not between the same parties as in the main transaction, i.e. the holding company and the acquiring fund;
• the parties to the main and ancillary transactions are not the same,
• nor are all the advisory services considered as "ancillary" services rendered, on behalf of the transferor, in connection with the share transfer transaction carried out for the benefit of the purchaser, since they are not re-charged to the purchaser of the shares (Italian tax authority, resolution no. 503 of 23 July 2021).

 

CONSIGNMENT STOCK

The Italian buyer may immediately deduct VAT paid at customs under a consignment stock contract with a UK supplier, provided that the goods concern his business activity and the customs declaration is recorded in the purchase register (Italian tax authority, resolution no. 509 as of 26 July 2021).

 

ECONOMIC INEFFICIENCY OF CONSIDERATION IRRELEVANT FOR VAT PURPOSES

The Italian tax authority may not object to the deduction of VAT paid on the purchase of goods and services in terms of economic inefficiency of the consideration compared to the normal value of the goods and services. Such an adjustment is allowed only if such economic inefficiency is an indication of a false invoice in the sense of a false transaction or of a false price or of the lack of relatedness, i.e. of the purpose of the goods or services purchased for transactions subject to VAT (Court of Cassation, ruling no.  19212 of 07 July 2021).

 

Yours sincerely,

HAGER & PARTNERS