NEWSLETTER N. 20 - 2021

  • DIRECT TAXES

    EXEMPTION FROM REGIONAL TAX ON PRODUCTIVE ACTIVITIES (IRAP) PAYMENTS

    The IRAP 2019 balance payment that could benefit from the payment exemption under section 24 of the Italian law-decree 34/2020 needed to be reported in the State aid table contained in the IRAP 2020 tax return (2019 tax period), IS box of section XVIII. The failure to report can be remedied through the submission of an addition IRAP tax return (Italian tax authority, resolution 58 of 29 September 2021).

     

    CARRIED INTEREST

    To assess the requirement under section 60 (b) of the Italian law-decree 50/2017 (so-called carried interest) and more specifically the investment:

    • that must be repaid to ordinary shareholders, and
    • on which the minimum return that must be yielded by the same shareholders before the beneficiaries of the incentive scheme are awarded any contingent special return,

    in the event of capital reduction or annulment or reconstruction reference must be made to the investment value of the shareholders after recapitalization (Italian tax authority, answer to request for advance ruling 622 of 23 September 2021).

     

    REPATRIATES SCHEME: REMOTE WORK

    Employees of an Italian company who are working remotely and predominantly from abroad under a smart working scheme, cannot benefit from the special repatriates scheme under section 16 of the Italian legislative decree 147/2015 (Italian tax authority, answer to request for advance ruling 621 of 23 September 2021).

    However, if the requirements are met, the scheme under section 16 of the Italian legislative decree 147/2015 can be benefited from by employees working as smart workers predominantly in Italy on behalf of a foreign company (Italian tax authority, answer to request for advance ruling 596 of 16 September 2021).

     

    CONSTRUCTION TAX DEDUCTIONS IN THE EVENT OF SUCCESSION ON DEATH

    In the event of succession on death of a property subjected to regeneration works eligible for tax deductions under section 16-bis of the Italian Tax Code (TUIR), the remaining tax deduction instalments are transferred entirely to the heirs, who continue to have direct and physical control of the property, irrespective of whether it is used or not as a main home.

    If the direct and physical control of the property is exercised jointly by several heirs, the tax deduction is equally divided amongst them.

    The requirement of direct and physical control of the property must be met not only for the year, in which the inheritance is accepted, but even for each year, in which the taxpayers intend to benefit from the remaining tax deduction instalments.

    In the event of sale or donation by the heir, who holds direct and physical control of the property, the remaining tax deduction instalments not used by the same are not transferred to the purchaser/recipient. Similarly, in the event of death of the heir who acquired the tax deduction instalments unused by the deceased party who incurred the eligible expenses, the remaining tax deduction instalments are not transferred to the subsequent heir (Italian tax authority, answer to request for advance ruling 612 of 20 September 2021).

     

    CONSTRUCTION TAX DEDUCTIONS IN THE EVENT OF CHANGE OF THE INTENDED USE

    In the event of works performed on a residential property unit (A/3) subsequently used as office with a concomitant change of the intended use, the regeneration works of existing building stock do not entitle to deduction under section 16-bis TUIR, since the property no longer qualifies as residential property.

    In any case, however, the energy efficiency measures are eligible for the tax deductions under section 14 of the Italian law-decree 63/2013, since even works carried out on non-residential properties are eligible for tax deduction (Italian tax authority, answer to request for advance ruling 611 of 17 September 2021).

     

    SUPER BONUS

    In the event of works carried out on two residential property units and on one garage, with concomitant change of the intended use of the garage as appurtenance and its unification to one of the residential property unit, all three property units registered in the land registry at the beginning of the works, including the appurtenance, must be taken into account in order to assess the expense limit on which to calculate the super bonus tax deduction (Italian tax authority, answer to request for advance ruling 608 of 17 September 2021).

     

    TAX DEDUCTIONS ON PENDING DEPRECIATION

    In the event of pending depreciation in the 2020 financial statements pursuant to section 60 (7-bis) of the Italian law-decree 104/2020, the company may choose whether:

    • to deduct depreciation instalments not recorded in the profit and loss account for corporate tax (IRES) and regional tax on productive activities (IRAP) purposes,

    or

    • not to deduct depreciation instalments not recorded in the profit and loss account for corporate tax (IRES) and regional tax on productive activities (IRAP) purposes and to deduct depreciation pursuant to the original depreciation schedule extended by one year (Italian tax authority, answer to request for advance ruling 604 of 17 September 2021).

     

    TAX CREDIT FOR INDUSTRY 4.0 CAPITAL GOODS INVESTMENTS - OVERLAPPING WITH OTHER GOVERNMENT INCENTIVES

    The sum of the capital goods investment tax credit pursuant to section 1 (184-197) of the Italian law 160/2019, increased by tax savings and other government incentives granted on eligible investments, must not exceed the eligible cost. If the result of the sum is higher, the taxpayer must reduce the tax credit awarded accordingly for the maximum threshold, equal to 100 percent of the cost, not to be exceed, if added to other government (tax and other) incentives granted for the same capital goods investment (Italian tax authority, answer to request for advance ruling 604 of 17 September 2021).

     

    TAX CREDIT FOR INDUSTRY 4.0 CAPITAL GOODS INVESTMENTS - TIMEFRAME COORDINATION

    There is a - partial - overlap between the provisions relating to industry 4.0 capital goods investments under section 1 (184 et seq.) of the Italian law 160/2019 and those contained in section 1 (1051 et seq.) of the Italian law 178/2020.

    To coordinate the time frames of the incentives’ schemes, a distinction must be made between investments, for which a binding order has been submitted and a 20 percent prepayment made

    • by 15 November 2020: In this case the investments, if made by 30 June 2021, continue to fall under the provisions pursuant to the Italian law 160/2019.
    • and those made on or after 16 November 2020: In this case the investments fall under the new scheme pursuant to the Italian law 178/2020 (Italian tax authority, answer to request for advance ruling 603 and 602 of 17 September 2021).

     

    CONVERSION OF DTA INTO TAX CREDITS

    The Italian tax authority provides clarifications on the incentives on tax credits for deferred tax assets (DTA) relating to tax losses and NID in excess further to business combination transactions pursuant to section 1 (233-243) of the Italian law 178/2020 (Italian tax authority, resolution 57 of 7 September 2021).

  • VAT

    DEDUCTION OF VAT PAID AT CUSTOMS

    The actual beneficiary of the imported goods only - used for its business activity - may deduct VAT paid at Customs after registration of the customs receipt with the purchases register and in compliance with the provisions contained in section 19 of the Italian DPR 633/1972. The right to deduct VAT coincides with the date on which the purchaser/employer meets two requirements: i) VAT has become chargeable, ii) possession of an invoice and/or customs receipt (Italian tax authority, Principio di diritto n. 13 of 29 September 2021).

     

    BUSINESS NETWORKS - OFFSETTING

    The Italian tax authority provides clarifications on the VAT and direct tax scheme of the offsetting of costs and revenue between business networks and the businesses adhering to such networks (Italian tax authority, answer to request for advance ruling 623 of 24 September 2021).

     

    NEW ELECTRONIC PROCEEDS FILE

    The starting date of the use of the new daily electronic proceeds file "DATA TYPE FOR PROCEEDS - version 7.0 - June 2020" and of the subsequent adjustment of electronic data acquisition devices is postponed from 1 October 2021 to 1 January 2022.

    Moreover, the deadline within which producers may declare compliance with the technical specifications of one of the models already approved by the Italian tax authority is set forth on 31 December 2021 (Italian tax authority, decision 228725 of 7 September 2021).

     

    TAX DEDUCTION EVEN IN DEFAULT OF AN ACTITIY EXERCISED

    There is a right to have VAT paid on purchases which are preparatory to starting a business activity reimbursed, even if such business activity is not started eventually (Italian tax authority, answer to request for advance ruling 584 of 14 September 2021).

     

    TRANSFER ABROAD OF AN EXISTING BUSINESS

    The transfer abroad of an existing business between two VAT taxpayers both resident abroad is irrelevant in Italy; however, inventories existing in Italy - which belong to the foreign business and are transferred jointly with the same - are subject to VAT in Italy (Italian tax authority, answer to request for advance ruling 637 of 30 September 2021).

     

    ANCILLARY SERVICES

    In the event of a sale of a property

    • the partition of the real estate registry map of the building plot,
    • the registration of the building to be sold and purchased with the real estate registry,
    • the connection to the utilities’ networks

    are ancillary services and, hence, subject to the same VAT scheme as the sold and purchased property. The preparation of the house rules does not qualify as an ancillary service to the sold and purchased property and, hence, is subject to the regular VAT scheme (Italian tax authority, answer to request for advance ruling 640 of 30 September 2021).

  • CASE LAW

    PENALTY FOR UNDUE REIMBURSEMENT

    The administrative penalties for the failure to pay a tax pursuant to section 13 of the Italian legislative decree 471/1997 do apply, even in case of undue reimbursement of sums previously actually paid by the taxpayer (Italian Supreme Court judgement 20585 of 19 July 2021).

     

    REVERSE CHARGE

    The sole determinant for the reverse charge scheme under section 17 (6) (a) of the Italian DPR 633/1972 to be applicable is that the activity actually carried out falls within a Section F ATECO Code and not that the provider holds an activity code falling within said section (Italian Supreme Court judgement 20585 of 19 July 2021).

  • TAX COLLECTION

    SETTLMENT OF TAX LIABILITIES UP TO EUR 5,000

    The Italian tax authority provides clarifications on the automatic settlement of tax liabilities up to EUR 5,000 registered with the Italian tax collection authority between 2000 and 2010 (Italian tax authority, newsletter 11 of 24 September 2021).

     

    Yours sincerely,

    HAGER & PARTNERS

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