NEWSLETTER N. 8 - 2019

NEW PARAMETERS FOR SUPERVISORY BODIES

The Italian financial distress and insolvency code for businesses requires new duties upon limited liability and cooperative companies.

Hence, section 2477 of the Italian Civil Code is amended as follows: <<The appointment of a supervisory body or a statutory auditor is mandatory, if the company: a) is required to prepare consolidated financial statements; b) controls a company required to have its statutory accounts audited; c) has exceeded at least one of the following limits for two consecutive business years:

1) total balance sheet assets: EUR 2 million;

2) income from sales and services: EUR 2 million;

3) average employees in the course of the business year: 10>>.

As to the scenario under c) above, there shall be no duty to appoint a supervisory body or an auditor if none of the above limits is exceeded for three consecutive business years. As regards the first-time application of the new provisions, reference must be made to the two business years prior to 16 December 2019.

Consequently, as of 16 March 2019, limited liability companies must:

• within 120-180 days as of 31 December 2018: verify whether the parameters for appointing a supervisory body have been exceeded;
• within the subsequent 30 days: appoint a Board of Statutory Auditors, a sole auditor or a statutory auditor, if the company's articles of association provide for such appointment;
• no later than by 16 December 2019: amend the company's articles of association, if they do not provide for such appointment; and appoint a board of statutory auditors, a sole auditor or a statutory auditor within the subsequent 30 days (Italian legislative decree no. 14 of 12 January 2019, published in the Italian Official Gazette no. 38 of 14 February 2019, ordinary supplement no. 6).

BILATERAL AGREEMENT EU-SWITZERLAND

Dividends paid by an Italian company to the Swiss parent company that renounced tax benefits for Swiss holding companies may benefit from withholding tax exemption in Italy under the bilateral agreement entered into by and between the EU and Switzerland (Italian tax authority, answer to request for ruling 57 of 15 February 2019).  

CAPITAL SECURITIES

The Italian tax authority clarifies the tax rules for capital securities, if they contain not only debt components (normally recorded in the balance sheet as liabilities) but also participative instruments (normally recorded in the balance sheet under equity based on the substance over form principle) (Italian tax authority, decision 30 of 26 February 2019).

HYPER DEPRECIATION

For the purposes of hyperdepreciation, directly connected ancillary costs, such as installation costs, are eligible up to 5 percent of the cost of the assets, if there is a significant disproportion compared to the cost of eligible assets (Italian tax authority, Principio di diritto 2 of 1 February 2019).

MEAL VOUCHERS

Additional payments in the form of meal vouchers that replace company canteen services are excluded from employed income (and similar income) up to the amount of EUR 5.29 (increased to EUR 7 if paid electronically) pursuant to section 51 of the Italian Tax Code (TUIR), regardless of the number of vouchers used (Italian tax authority, Principio di diritto 6 of 12 February 2019).

RESIDENTIAL PROPERTIES USED FOR "BUSINESS PURPOSES"

Amortisation of residential buildings used for a trade business only are deductible for corporate tax (IRES) and regional tax on productive activities (IRAP) purposes (Italian tax authority, answer to ruling application 28 of 6 February 2019). 

AGRICULTURE AND PHOTOVOLTAIC ENERGY PRODUCTION

The Italian tax authority clarifies the criteria to be used in order to establish whether the production of energy from photovoltaic sources qualifies as agricultural income (Italian tax authority, answer to ruling application 33 of 12 February 2019).

SALE OF SHARES IN PARTNERSHIPS

The sale of shares in partnerships does always give rise to other income, regardless of how the consideration is paid (Italian tax authority, answer to ruling application 14 of 12 February 2019). 

FOREIGN TAX CREDIT

In there is no permanent establishment in the foreign country, the tax withheld there on technical services does not entitle to a foreign tax credit in Italy, except if the double taxation agreement entered into with the foreign country establishes that such services may be subjected to taxation in the foreign country (Italian tax authority, answer to ruling application 23 of 1 February 2019).

SALE OF TAX CREDIT

If it is ascertained that there is no entitlement to a tax credit in the film and audiovisual sector after such tax credit has been sold, the tax authorities may recover such tax credit not only from the seller but also from the buyer (Italian tax authority, answer to ruling application 9 as of 18 February 2019).

ELECTRONIC INVOICING

As regards electronic invoicing, the Italian tax authority has clarified as follows:

• for transactions with non-resident taxpayers, resident VAT payers may issue an e-invoice over the SDI platform or by filing a report on cross-border transactions (<<esterometro>>);
• non-residents are never required to register with the SDI platform, not even if they are identified in Italy for VAT purposes;
• the non-resident supplier/service provider that is identified in Italy for VAT purposes may deduct VAT based on paper invoices issued by the resident VAT payer;
• <<paper invoice>> means a document that shows truly and solely the content of the XML e-invoice since no further elements, other than those contained in the e-invoice, can be shown thereupon;

VAT payers resident or established in Italy only are required to file a cross-border transaction report(<<esterometro>>) (Italian tax authority, answer to ruling application 67 of 26 February 2019).

HEIRS OF THE DEAD SELF-EMPLOYED PROFESSIONAL

In the event of death of the self-employed professional, her/his heirs may keep the VAT number of the dead professional until payment for the last invoice or the service still to be invoiced is received. As an alternative, the heirs may provide for early invoicing and tax settlement for invoices with deferred tax settlement still to be received and close the VAT number (Italian tax authority, decision 34 of 11 March 2019).

TAX FREE SHOPPING

Operators that issue invoices for transactions under section 38-quater DPR 633/1972 and submit data on invoices to the OTELLO 2.0 system are not required to provide for other notices; more precisely, they are exempted from filing the cross-border transactions report (<<esterometro>>) and the high-value transactions report (<<spesometro>>) (Italian tax authority, answer to ruling application 8 of 7 February 2019).

VAT DEBIT NOTES

Upon expiration of the deadlines for the issuance of a VAT debit note under section 26 of the Italian DPR 633/1972, filing a supplementary VAT return for adjustment under section 8 (6-bis) Italian DPR 322/1998 is not admissible, if there is no error or omission with regard to the issuance of the invoice (Italian tax authority, answer to ruling application 55 of 14 February 2019). 

AGREEMENT TERMINATION

The consensual termination of a usufruct right on a business property is subject to mortgage and cadastral fees of 3 percent and 1 percent respectively (Italian tax authority, answer to ruling 41 of 12 February 2019). 

NON RESIDENTS

Foreign companies must fulfil all tax agents duties, even if they do not have a permanent establishment in Italy, i.e. retain withholding taxes, issue certifications on income and file tax agents tax returns (Italian tax authority, Principio di diritto 8 of 12 February 2019).

Yours sincerely,

HAGER & PARTNERS