The Italian law decree no. 104 as of 14 August 2020 (so-called "August decree") was converted into the Italian law no. 126 as of 13 October 2020 (published in the Italian Official Gazette no. 253 as of 13 October 2020), which entered into force on 14 October 2020. Without prejudice to the tax news introduced under the "August decree" and already explained in our previous newsletter no. 29/2020, please find below the amendments introduced during conversion into law.
Italian GAAP users may opt not to depreciate – entirely or in part - the cost of tangible and intangible fixed assets annually and to maintain the cost recorded in the latest regularly approved financial statements for the financial year that is current as per 15 August 2020.
The depreciation not made in 2020 is entered in the subsequent year's profit and loss account and subsequent depreciation is deferred according to the same criteria. Hence, the original depreciation schedule for such depreciation is extended by one year.
Those benefiting from the option not to make depreciation must allocate a non-claimable profits reserve of the same amount as the depreciation not made. If the profits of the financial year prove to be lower than the above mentioned depreciation, such reserve is supplemented by using profit reserves or other claimable equity reserves; if no such reserves are available, the reserve is supplemented up to the difference by allocating the profits of subsequent years.
Depreciation not entered in the balance sheet is deductible anyway:
- for corporate tax (IRES) purposes at the same terms and conditions and amounts as set forth under section 102, section 102-bis and section 103 of the Italian Tax Code (TUIR),
- and for regional tax on productive activities (IRAP) purposes at the same terms and conditions and amounts as set forth under section 5, section 5-bis, section 6 and section 7 of the Italian legislative decree no. 446/1997,
regardless of their entry into the profit and loss account.
REVALUATION OF BUSINESS ASSETS
Business assets may be revalued for commercial law purposes - and for tax purposes if the 3 percent substitute tax is paid - by businesses whose financial year does not coincide with the calendar year:
- in the financial statements relating to the financial year as per 31 December 2019, if approved after 14 October 2020,
- provided that the revalued business assets and equity investments are recorded in the financial statements relating to the financial year as per 31 December 2018.
As an alternative, revaluation may be made in the financial statements relating to the financial year as per 31 December 2020, provided that the revalued business assets and equity investments are recorded in the financial statements as per 31 December 2019.
NON-REFUNDABLE AID FOR UPLAND AREAS AFFECTED BY NATURAL DISASTERS
All those who
- did not apply for non-refundable aid under section 25 of the Italian law-decree no. 34/2020 by 13 August 2020, and
- starting from the date on which the natural disaster occurred, are domiciled or operate in areas affected by natural disasters, for which the state of emergency is declared until 31 January 2020 and classified entirely as upland areas, as specified in the list of Italian municipalities prepared by the Italian Institute of Statistics (ISTAT) or in newsletter no. 9/1993 by the Italian Ministry of Economics and Finance,
may file their application for the above-mentioned non-refundable aid no later than 30 days from the date of reopening of the electronic filing procedure, as provided for under the decision released by the Director of the Italian tax authority. To this end, the Italian tax authority shall reopen the electronic filing procedure by 29 October 2020 and specify the implementation modes.
CONVERSION OF DTA INTO TAX CREDITS
The rules set forth under section 44-bis of the Italian law-decree no. 34/2019 that allow to convert into tax credits DTA relating to:
- fiscal losses not yet set off,
- excess NID not yet neither deducted nor used,
by companies assigning claims against defaulting debtors, are supplemented as follows:
Tax credits from conversion may be used as of the date of legal effectiveness of the assignment and, hence, as of the 2020 tax period.
If the company assigning claims opts for tax consolidation, first the losses and excess NID relating to financial years prior to the beginning of the national and worldwide tax consolidation and, only subsequently, the total losses carried forward by the controlling entity must be taken into account. As of the date of legal effectiveness of the assignment of claims, the controlling entity is not to subtract the losses relating to total deferred tax assets converted into tax credits from taxable incomes.
If a controlled company opts for tax transparency under section 115 of the Italian Tax Code (TUIR), first the losses and excess NID relating to the financial years prior to the beginning of the tax transparency scheme of the controlled company, jointly with those not allocated to the shareholders under section 115 (3), and only subsequently the tax losses attributed to participating shareholders and not yet subtracted from their taxable incomes, having regard to the value of the claims assigned by the company under the tax transparency scheme in the same proportion that losses were attributed, must be taken into account. As of the date of legal effectiveness of the assignment of claims, the participating shareholders are not to subtract the losses relating to total deferred tax assets converted into a tax credit from their taxable incomes and excess NID relating to the total deferred tax assets converted into a tax credit are neither deductible nor can be used as a tax credit.
Even partnerships are eligible for such tax benefit. If partnerships assign claims, first the tax losses and excess NID attributed to shareholders and not yet subtracted from their taxable incomes, having regard to the value of the claims assigned by the company in the same proportion as specified under section 5 of the Italian Tax Code (TUIR), must be taken into account. As of the date of legal effectiveness of the assignment of claims, the participating shareholders are not to subtract the losses relating to total deferred tax assets converted into tax credits from their taxable incomes and excess NID relating to the total deferred tax assets converted into tax credits are neither deductible nor can be used as a tax credit.
TAX CREDIT FOR LEASES IN THE TOURISM INDUSTRY
The tax credit under section 28 (2) of the Italian law-decree 34/2020 relating to business leases for tourism and accommodation structures is set forth at 50 percent. If two different agreements - one relating to the lease of the property and the other relating to the lease of the business - are entered into for the same tourism and accommodation structure, a tax credit is granted for both agreements.
Taxpayers are entitled to a tax credit for the lease of non-residential properties and the lease of the business of the tourism and accommodation structures until 31 December 2020.
EXEMPTION FROM IMU FOR THE TOURISM INDUSTRY
Appurtenances of properties classified in category D/2 are exempted not only from the payment of the second instalment but also from the payment of the 2020 first instalment of municipal property tax (IMU).
POSTPONEMENT OF TAX RETURN PAYMENTS DUE BY TAXPAYERS SUBJECT TO ISA (TAX RELIABILITY INDEXES)
Taxpayers subject to tax reliability indexes (ISA) that suffered a loss of turnover or proceeds of at least 33 percent in the first six months of 2020 compared to the same period of the previous year, that have not provided - entirely or in part - for the payments due on 20 July 2020 (or on 20 August 2020 with a surcharge of 0.4 percent), may regularise such payments by 30 October 2020 with a surcharge of 0.8 percent. In such case no penalties are due.
Furthermore, it is confirmed that the payment of the second or sole prepayment instalment of corporate tax and regional tax on productive activities (IRAP) due for 2020 (or for the tax period subsequent to the one as per 31 December 2019) owed by taxpayers subject to ISA that suffered a loss of turnover or proceeds of at least 33 percent in the first six months of 2020 compared to the same period of the previous year is postponed until 30 April 2021.
REGISTRATION TAX ON AGRICULTURAL LAND USED FOR AFFORESTATION
Registration tax on the sale of agricultural land used for afforestation is reduced to 1 percent. The minimum amount due is EUR 1,000.
For the application of the 1 percent tax rate, the purchaser must:
- confirm in the purchase deed that the land is used for afforestation,
- undertake to maintain this purpose of use for a period of at least 30 years,
- plant at least 250 trees per hectare within 12 months from purchase.
If the above requirements are not met, registration tax is owed at the regular rate, plus a 30 percent surcharge on the tax due.
TAX CREDIT FOR ENERGY-SAVING AND EARTHQUAKE-RESISTANT CONSTRUCTION
The threshold of expenses eligible for the energy-saving (eco-bonus) and earthquake-resistant construction (sisma-bonus) tax incentives under section 119 of the Italian law-decree no. 34/2020 incurred by 31 December 2020 is increased by 50 percent - hence from EUR 96,000 to EUR 144,000 - for rebuilding measures on buildings damaged by earthquakes and located in the municipalities specified in the lists annexed to the Italian law-decree no. 189/2016 and the Italian law-decree no. 39/2009. In such case, taxpayers are entitled to the above tax incentives as an alternative to the rebuilding aid. All expenses required to restore the damaged buildings, including homes other than first homes (except for properties used for manufacturing purposes), are eligible for such tax incentives.
DEMOLITION AND CONSTRUCTION WORKS (SUPER BONUS)
In order to benefit from the so-called super bonus pursuant to section 119 of the Italian law-decree no. 34/2020, the resolutions on the approval of construction measures and the financing of the same, as well as on the option to assign the tax benefits connected therewith or to opt for a discount of the same amount of the tax benefits by the supplier, adopted by the condo board, are valid if they are adopted by a number of votes that represent the majority of those attending the meeting and at least one third of the building's value.
Furthermore, for the purpose of the tax incentives, "autonomous external access" means "an independent access which is not used jointly with other property units, with a gate to close or an entrance door that allows access from the street or the courtyard or from the garden, even if jointly owned".
HAGER & PARTNERS