NEWSLETTER N. 22 - 2021

  • DIRECT TAXES

    PEX SCHEME FOR PROPERTY DEVELOPMENT COMPANIES

    Property development companies that carry out a business activity, have no employees and execute urban regeneration works through a management company meet the commercial activity requirement for participation exemption purposes (Italian tax authority, answer to request for advance ruling 744 dated 27 October 2021).

     

    TAX-EXEMPT INTEREST ON POSTAL SAVING BONDS

    Interest payments, premiums and other awards of postal saving bonds under article 6 of the Italian legislative decree 239/1996 are exempt from substitute tax, provided that: (i) all joint holders of the bonds are resident in a white-list country for the entire term during which they held the bonds and (ii) the bonds were deposited with an authorized resident intermediary. In the event of bonds jointly held by taxpayers subject to different tax schemes, no exemption scheme can be applied (Italian tax authority, answer to request for advance ruling 647 dated 1 October 2021).

     

    FISCAL COST OF INHERITED FOREIGN SECURITIES

    In the event of foreign shares and bonds not subjected to inheritance tax in Italy, the resident heir must bear the purchase price of the deceased party (de cuius). Indeed, in this case section 68 (6) of the Italian Tax Code (TUIR), according to which <<the final value, or in the absence thereof, the value declared for inheritance tax purposes must be born>> does not apply in the absence of inheritance tax liability since the requirement which allows for a "revaluation" of the inherited participation is no longer met (Italian tax authority, answer to request for advance ruling 675 dated 7 October 2021).

     

    INCOME OF A CIVIL PARTNERSHIP (SOCIETÀ SEMPLICE)

    The sale by a civil partnership of properties held for more than five years is not subject to tax. Hence, no income from participation is allocated to the partners according to the tax transparency principle since no taxable events are attributable to the company. The subsequent distribution of the sums from said sale to the partners cannot be taxable on behalf of the partners since the allocated sums are derived from income which is not taxable to the company (Italian tax authority, answer to request for advance ruling 689 dated 8 October 2021).

    In the event of company liquidation, the amount of tax-exempted income or income subject to substitute tax yielded by the civil partnership, therefore, increases the fiscally recognized cost of the participation held by the partners of the civil partnership (Italian tax authority, answer to request for advance ruling 691 dated 8 October 2021).

     

    PHOTO SHOOTING FEES AND IMAGE RIGHTS

    Fees paid to non-resident photo shooting testimonials and the respective rights of use of the image form "additional" income to the income from self-employment yielded by the professional (singer, actor, etc.). These fees are taxable in Italy pursuant to section 23 (1d) of the Italian Tax Code (TUIR) since the place of performance of the artist or the professional service to which the fees relate to is Italy (place of performance of the photo shooting sessions), whereas the place in which the right of image is excercised is of no importance (Italian tax authority, answer to request for advance ruling 700 as of 11 October 2021).

     

    AMENDMENT TO DEPRECIATION SCHEDULE FOR WIND POWER PLANTS

    In the event of separation of the intangible and the tangible part of a wind power plant as of 1 January 2016, the commercial law and tax mismatch on 31 December 2015 may be de-aligned separately for the two parts (intangible - 4 percent tax rate and tangible - 9 percent tax rate) and must start as of the business year in which taxes to be "offset" are generated, i.e. as of the year in which the maximum tax depreciation rate, calculated based on the tax rates specified in the Italian ministerial decree as of 31 December 1988, exceed the depreciation share allocated to the profit and loss account, and must occur at the highest possible amount set forth by law to avoid any contingent arbitrariness (Italian tax authority, answer to request for advance ruling 724 dated 18 October 2021).

  • VAT

    REPORTING OF CROSS-BORDER TRANSACTIONS

    In its order no. 293384/2021, the Italian tax authority set forth the new technical rules intended to replace the cross-border transaction report ("esterometro").

    As specified in our newsletter no. 17/2021, data relating to transactions by and vis-à-vis taxable persons not established in Italy must be specified on nd submitted as a regular e-invoice in a XML file as of 1 January 2022 (by using the entire invoice or the entire batch of invoices) according to the same invoice template and the same invoicing rules.

    As to data on sales vis-à-vis taxpayers not established in Italy the <<CodeBeneficiary>> must report the value “XXXXXXX”.

    The XML file prepared for data reporting must be submitted to the SDI platform within the term of issue of invoices or documents certifying payment consideration (Note: no reporting on sales is required, if a customs receipt has been issued).

    For data on sales and services performed by taxpayers not established in Italy, the XML invoice file must be prepared in a way as to pass the controls made by the SDI platform. The <<CodeBeneficiary>> fields to be filled out in order to have the file delivered must be filled out as follows:

    • with a code relating to a channel accredited with the SDI platform (web services or SFTP channels);
    • with ‘0000000’, if a certified e-mail (PEC) is specified as delivery channel and if such certified e-mail is specified in the PECBeneficiary field;
    • with ‘0000000’, if the PECBeneficiary field is not filled out: in this case the file will be redirected to the address registered by the purchaser/employer as the e-invoices delivery channel or made available on the portal's (Fatture e Corrispettivi) registered users’ area.

    The <<CodeBeneficiary>> field may be fill out for instance with the value usually used by the purchaser/owner to have e-invoices delivered.

    The following document types may be used:

    • TD17 Supplementing/self-invoicing for purchase of services from abroad;
    • TD18 Supplementing for purchase of intra-Community goods;
    • TD 19 Supplementing/self-invoicing for purchase of goods pursuant to section 17 (2) of the Italian DPR 633/72.

    The XML file prepared for data reporting must be submitted by day 15 of the month following the one in which the document proving the transaction (intra-Community transactions) has been delivered or the one in which the transaction has been effectuated (transactions outside the EU) (Note: data on purchases must not be reported if a customs receipt has been issued or an e-invoice submitted via the SDI platform has been delivered).

     

    LETTERS OF INTENT

    In its order no. 293390/2021 the Italian tax authority specified the following:

    • the criteria and the modes on how to perform risk analysis and control activities on regular exporters;
    • the invalidation procedures for letters of intent submitted and the prohibition procedures for the issuance of new letters of intent through the Italian tax authority's electronic channels;
    • the issuance modes for e-invoices relating to non-vatable transactions pursuant to section 8 (1c) of the Italian DPR 633/1972 submitted via the SDI platform.

    The provisions contained in the above mentioned order shall take effect as of 1 January 2022.

    In the event of a refusal the letters of intents shall be invalidated and become irregular at the time of the request of electronic feedback on successful delivery to the Italian tax authority. The Italian tax authority shall notify the interested taxpayer and the seller or service performer to which the letter of intent is addressed to via certified e-mail (PEC).

    The taxpayer may submit all relevant documentation to prove its status of regular exporter to the competent tax office and such tax office shall unlock the letter of intent procedure if it finds that the assumptions that led to the invalidation of the letter of intent are no longer valid.

    Moreover, after the refusal, the VAT payer shall be no longer allowed to submit other letters of intent via the Italian tax authority's electronic channels: if the taxpayer tries to submit the form, he or she will be delivered a denial report from the system.

    In order to issue an e-invoice for non-VATable transactions pursuant to a letter of intent under section 8 (1c) of the Italian DPR 633/1972 the regular invoice XML file annexed to order no. 89757/2018 only must be used by specifying:

    • the specific code N3.5 "non-VATable - further to letter of intent" in the 2.2.1.14 "Type" field;
    • (i) the wording "INTENT", (ii) the delivery protocol of the letter of intent, (iii) its progressive numbering (iv) the date of the electronic delivery report issued by the Italian tax authority in the 2.2.1.16 "OtherOperationalData" bloc.

    The invalidation of a letter of intent leads to the rejection of an e-invoice submitted to the SDI platform with the wording "non-VATable" and the reason for such rejection will be notified to the seller or the service provider via the relevant report.

     

    DEDUCTION OF VAT ON IMPORTS

    A German company identified in Italy for VAT purposes may deduct VAT on imports assessed in Italy - after interrupting the common transit procedure to which the goods were subjected to since they are intended to be released for free circulation and consumption in Germany after transiting through Italy - pursuant to section 60 (last paragraph) of the Italian DPR 633/1972. To this end it is irrelevant that the goods are used to carry out taxable transactions in Germany (Italian tax authority, answer to request for advance ruling 644 dated 1 October 2021).

     

    RECOVERY OF VAT CHARGED IN EXCESS

    In the event of VAT charged in excess, the supplier may:

    • first of all, issue a VAT debit note within the terms set forth under section 26 of the Italian DPR 633/1972;
    • submit a reimbursement application pursuant to section 30-ter, but only after (i) the Italian tax authority's has «finally assessed» that no VAT was due and (ii) VAT has been reimbursed to the purchaser/employer.

    It is, however, impossible to submit a supplementary tax return pursuant to section 8 (6-bis) of the Italian DPR 322/1998, if VAT due recorded in the annual VAT returns submitted is «in line with the invoices issued to the purchasers to whom no VAT debit notes can be issued since the year is closed (Italian tax authority, answer to request for advance ruling 633 dated 5 October 2021).

     

    VAT RATE FOR POWER PLANT REVAMPING

    The regular VAT rate applies on the revamping/renewal works (i.e. structural and overall upgrading of an existing power plant that produces electricity and heat) requiring the replacement of some plant components (motors and heat pumps) to optimize consumption and to improve energy efficiency (Italian tax authority, answer to request for advance ruling 692 dated 8 October 2021).

  • TAX CREDITS

    SUPER BONUS – RESIDENTIAL USE

    A co-owner of several buildings (up to 4 property units), on which renovation works including the demolition and reconstruction works under section 3 (1d) of the Italian DPR 380/2001 are carried out (also with the purpose to amend the intended use to residential use), may benefit from the 110 percent tax deduction in relation to expenses incurred for energy efficiency measures on the pre-existing part of the buildings (Italian tax authority, answer to request for advance ruling 709 dated 15 October 2021).

     

    SUPER BONUS – ORNAMENTS ON FACADES

    The expenses eligible for the 110 percent tax deduction pursuant to section 119 of the Italian law-decree 34/2020 include those relating to the removal of decorative elements on insulating facades and their re-mounting, provided that an authorized technician confirms that these costs are strictly connected to the performance of the eligible works (in this case the thermal insulation) (Italian tax authority, answer to request for advance ruling 685 dated 7 October 2021).

     

    SUPER BONUS – THERMAL INSULATION

    The roof surface is included in the calculation of the total gross dispersing surface under section 119 (1) of the Italian law-decree 34/2020 for the creation of the building's thermal insulation provided that the attic is a heated unit. Indeed, the insulation requirement of more than 25 percent of the gross dispersing unit must be met through the insulation of the surfaces that (before the works) marked the heated volume towards the outside, of cold rooms or of the ground (Italian tax authority, answer to request for advance ruling 680 dated 7 October 2021).

     

    SUPER BONUS – COMMON AREAS OF FUNCTIONALLY INDEPENDANT PROPERTY UNITS

    The expenses eligible for the 110 percent tax deduction include the expenses for works on common parts of a building comprising two or more property units that meet the requirements to be defined as "functionally independent and with autonomous access from the outside" and are owned by different persons (hence, even including also "condomini minimi", i.e. buildings made of at least two property units owned by at least two different owners). With regard to the above-mentioned expenses, reference must be made to the maximum expense ceilings relating to works on common parts, multiplied by the number of property units, and not to the single maximum ceilings relating to the works carried out on functionally independent units (Italian tax authority, answer to request for advance ruling 665 dated 6 October 2021).

     

    "INCREASED" SUPERBONUS

    The 50 percent increase of the expense ceilings eligible for the super bonus pursuant to section 119 (4-ter) and (4-quater) of the Italian law-decree 34/2020 to renovate buildings damaged by earthquakes is an alternative to the reconstruction aid. Indeed, the higher tax incentives subsequently require a formal waiver of the reconstruction aid, even though being entitled to it (Italian tax authority, answer to request for advance ruling 662 dated 5 October 2021).

     

    FACADE RENOVATIONS - BALUSTRADES, ROLLING SHUTTERS AND LIGHTENING

    In addition to the expenses relating to the renovation of balustrades on balconies, also expenses relating to the renovation of rolling shutters are eligible provided that they qualify as ancillary and completion works of the project. On the contrary, the expenses incurred for the installation of a facade lightening system are not deemed eligible expenses (Italian tax authority, answer to request for advance ruling 673 of 6 October 2021).

     

    TAX CREDIT FOR SANITATION AND INDIVIDUAL PROTECTIVE EQUIPMENT

    The Italian tax authority provided clarifications on the tax credit for sanitation and individual protective equipment. More specifically, it clarified that the expenses incurred for the use of Covid-19 tests include the expenses incurred for health staff provided that such expenses are incurred in favour of those who work for the beneficiary company (Italian tax authority, newsletter 13 dated 2 November 2021).

  • REGISTRATION, MORTGAGE AND LAND REG-ISTRY FEES

    DEEDS ON CONVERSION OF LAND ENTERED INTO BY AGREEMENTS/URBAN DEVELOPMENT AGREEMENTS EXECUTED WITH PUBLIC BODIES

    The transfer of land by an individual to the municipality, in the framework of an agreement/urban development agreement on the conversion of land, does not fall under the scope of section 20 of the Italian law 10/1977 and does not benefit from the incentive scheme under section 32 (2) of the Italian DPR 601/1973 (Italian tax authority, answer to request for advance ruling 668 dated 6 October 2021).

    The opposite is set forth in the case-law of the Supreme Court, according to which <<if there are real urban development agreements in place with the aim to achieve public goals, it must be excluded that these agreements qualify as deeds on the transfer of properties against consideration, so that: - if they are entered into by and between companies, they shall not be subject to VAT; - if they are entered into by and between individuals, they shall not be subject to the proportional registration fees under section 1 of the Tariff - Part I enclosed to the Italian DPR 131 dated 26 April 1986. Hence, from a tax perspective … all urban development agreements shall be [are] subject to the tax treatment under the combined provisions of section 20 of the Italian law 10 dated 28 January 1977 and of section 32 of the Italian DPR 601 dated 29 September 1973 (fixed registration fees and exemption from transcription fees)>> (Italian Supreme Court, ruling no. 30088 dated 26 October 2021).

    The implementing act of the urban development agreement under section 40-bis of Law 13/1997 of the Province of Bolzano falls under the scope of section 20 of the Italian law 10/1977 and benefits from the incentive scheme under section 32 (2) of the Italian DPR 601/1973, provided that it is subject to registration fees, whereas it shall not be fall within the scope of the above-mentioned law and DPR if it is subject to VAT (Italian tax authority, answer to request for advance ruling 670 dated 6 October 2021).

    Urban development agreements entered into pursuant to the new law 9/2018 of the Province of Bolzano - which is effective since 1 July 2020 and replaces the previous urban development law - continue to benefit from the incentives set forth under section 32 (2) of the Italian DPR 633/1972 (Italian tax authority, answer to request for advance ruling 670 dated 6 October 2021).

  • TAX COLLECTION

    TAX DEBT ASSUMPTION

    The tax code "80" called "Tax debt assumer" to be used in the event of assumption of third-party tax debt is introduced. Please note that all those who assume third party tax debt must provide for payment, with no possibility to set-off the tax debt, through the F24 payment form to be submitted via the electronic services made available by the Italian tax authority only. Otherwise, payment authorization will be declined (Italian tax authority, decision 59 dated 6 October 2021).

     

    Yours sincerely,

    HAGER & PARTNERS

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