NEWSLETTER N. 25 - 2021



    To determine the foreign tax credit, taxpayers that benefit from the patent box incentives must consider in any case the foreign income, including the expenses incurred for its generation (Italian tax authority, Principio di diritto n. 15 of 5 November 2021).



    For income purposes the sale of cryptocurrencies is deemed a sale of foreign exchange pursuant to section 67 (1-ter) of the Italian Tax Code (TUIR). Hence, it is relevant only if the average amount of cryptocurrencies available in all wallets held by the taxpayer exceeded the counter-value of EUR 51,645,69 for at least seven consecutive working days during a tax period. The exchange ratio between the virtual currency and the Euro at the beginning of the tax period (1st January) recorded on the platform, on which the virtual currency was purchased, must be used for verification purposes. Cryptocurrencies are subject to fiscal monitoring duties and must, therefore, be stated on the RW field of the Italian income tax return (code 14): These duties apply to cryptocurrencies held anywhere (foreign exchange, wallet hardware desktop, even if with direct availability of private keys) and, hence, even if not held abroad (Italian tax authority, answer to request for advance ruling 788 of 24 November 2021).



    A clause on the prohibition to unilaterally modify the lease payment contained in a lease agreement is unsuitable to justify the non-application of the dormant companies’ scheme under section 30 of the Italian law 724/1994, if the lease agreement is entered into by and between related parties (Italian Supreme Court ruling 34232 of 15 November 2021).



    The statutory and fiscal misalignment deriving from the differences in statutory and fiscal depreciation over time must be recovered in the first tax period with sufficient tax liabilities for an additional tax depreciation rate to be set off against them (up to the maximum amount set forth based on the depreciation ratios contained in the ministerial decree dated 31 December 1988) (Italian tax authority, answer to request for advance ruling 761 of 3 November 2021).



    Income tax deduction for property renovation measures pursuant to section 16-bis (3) of the Italian Tax Code (TUIR) is granted even in the event in which the seller (company that renovated the entire building to which the property unit to be sold belongs to) benefits from corporation tax deductions for energy efficiency measures pursuant to section 14 of the Italian law-decree 63/2013 made on the same property. Indeed, the cumulation of both tax deductions does not give rise to an undue tax advantage being obtained (Italian tax authority, answer to request for advance ruling 769 of 10 November 2021).



    The Italian tax authority provided clarifications on the measures contained in the so-called anti-fraud decree (Italian law-decree 157/2021) to combat fraud related to property improvement tax incentives, effective as of 12 November 2021.

    As to the 110 percent super bonus, it was clarified that the duty to obtain compliance certification required to be allowed to benefit from tax deduction at the time of filing the income tax return applies only to invoices issued and the relevant payments made as of 12 November 2021. Hence, no compliance certification is required for expenses incurred before 12 November 2021 and specified in the income tax return, even if filed and/or amended after 11 November 2021.

    As to accrual basis taxpayers, the duty to include compliance certification applies to invoices issued as of 12 November 2021 only, irrespective of the period to which the expenses are allocated.

    As to how the sworn statements for works falling within the scope of the 110 percent super bonus must be issued, it is set forth that in order to determine whether expenses are appropriate reference must be made not only to the price lists specified in the decree released on 6 August 2020 by the Italian ministry of economic development (MISE) on the "Technical requirements for access to tax deductions for energy efficiency works on buildings - so-called ecobonus", but also to the maximum amounts set forth for certain asset categories by a decree still to be released by the Italian ministry for ecological transition.

    While awaiting the adoption of the above-mentioned decree, it was clarified that in order to confirm the appropriateness of the expenses relating to:

    • energy efficiency measures reference must be made to the decree released by MISE on 6 August 2020;
    • works other than those aimed at energy efficiency, including those aimed at reducing the seismic hazard, falling under the scope of the 110 percent super bonus, reference must be made to the prices contained in the price lists prepared by the regions and autonomous provinces, official price lists or price lists released by the local Chambers of Commerce or, in the absence thereof, to market prices set forth for the place in which the works are carried out.


    As to the property improvement tax incentives other than the 110 percent super bonus, the duty to include compliance certification and a sworn statement on the appropriateness of expenses to be able to exercise the option for tax credit transfer or invoice discount applies to notices filed as of 12 November 2021.

    There is no duty to include compliance documentation and a sworn statement on the expenses incurred in the event in which, for invoice already issued, taxpayers already provided for the relevant payments and exercised the option for tax credit transfer through the execution of agreements between the transferor and the transferee or for invoice discount through the relevant registration before 12 November 2021, albeit not having provided for submission of the notices to the Italian tax authority yet.

    The compliance documentation and the sworn statement are issued according to the same modes as for the 110 percent super bonus, yet with the peculiarity that the new sworn statement on the appropriateness of amounts and compliance with maximum costs eligible according to the type of work carried out, if any, may be issued:

    • even on plain paper, if there is no sworn statement form provided for by law, as long as it is specified that the taxpayer is aware of his or her criminal liability in the event of untrue representations and the use of false deeds as well as of the loss of the tax incentives obtained based upon untrue representations under section 75 and section 76 of the Italian DPR 445/2000;
    • even in the absence of progress of works or completion of works, provided that the works have been at least started.

    No sworn statement on the appropriateness of the expenses related to the so-called "tax deduction for purchases of earthquake-resistant properties", since this tax deduction is commensurate to the expenses incurred upon the purchase of the property and not to the expenses incurred to carry out the construction works (Italian tax authority, newsletter 16/E of 29 November 2021).



    To verify the prerequisite of at least 60 percent of works being completed on 30 June 2022 - requirement to benefit from the extension by another 6 months of the 110 percent super bonus - reference must be made to the measure as a whole.

    Hence, if refurbishment and plant installation works, not falling within the scope of the property improvement tax benefits and works on structural improvements (for which the tax deduction for earthquake-resistant properties applies) are carried out concomitantly, the achievement of the completion percentage must be verified with regard to the measure as a whole and not just with regard to works aimed at reducing the seismic hazard eligible for tax deductions (Italian tax authority, answer to request for advance ruling 719 of 24 November 2021).



    If earthquake protection and energy efficiency measures (to replace winter air conditioning plants as well as windows and doors) are carried out concomitantly on the same building and for which the option for tax credit transfer or invoice discount is exercised, three separate forms must be filled out to report the option, i. e. a separate form for each measure completed (Italian tax authority, answer to request for advance ruling 784 of 18 November 2021).



    To verify the achievement of 25 percent of the gross total dispersing surface requested to benefit from the super bonus in relation to measures on thermal insulation, the unheated building surface must not be considered, since the legal provision refers to horizontal, vertical, and inclined opaque surfaces that mark the buildings' heated volume (Italian tax authority, answer to request for advance ruling 779 of 16 November 2021).



    Even works for which the building permit was issued after 1 January 2017 - irrespective of the starting date of the authorization procedure - are eligible for the "tax deduction for seismic hazard improvements - purchases" for expenses incurred as of 1 January 2021 only.

    The "tax deduction for seismic hazard improvements - purchases" can be benefited from even in the event in which a property on which works aimed at improving the seismic hazard are carried out is located in a municipality that is reclassified from seismic hazard zone 4 (non-eligible) to seismic hazard zone 3 (eligible), provided that the works have not been completed yet on the date on which the resolution on the change of the seismic hazard zone is adopted. In such an event, the prior sworn statement required to benefit from the tax incentive may be filed by the company no later than on the date of the notarial deed of purchase and sale (Italian tax authority, answers to requests for advance ruling 770, 772, 773 and 775 of 10 November 2021).



    The tax deduction for seismic hazard improvements (even as a 110 per cent tax deduction) relating to works in progress on buildings that are reclassified from a seismic hazard zone 4 (not eligible) to seismic hazard zone 3 (eligible) is granted for expenses incurred as of the date on which the change of the seismic hazard zone takes effect, even if no prior sworn statement on seismic hazard improvements has been filed, as long as the sworn statement is filed by:

    • the deadline for the filing of the income tax return, which includes the first tax deduction instalment, in case of direct tax deduction on the income tax return;
    • before the filing of the notice on the exercise of the tax credit transfer or invoice discount option pursuant to section 121 of the Italian law-decree 34/2020 (Italian tax authority, answer to request for advance ruling 764 of 8 November 2021).



    As to income taxes, the position held by an employee of a corporation is not compliant with the office of the Chairman of the Board of directors or the office of sole director of such corporation since the powers of representation, direction, control and the disciplinary powers of the corporation being dependent upon the one and the same individual do not reflect the diversity of the parties required for an employment relationship and the relevant separate duties that are required for the essential and unfailing element of subordination. Therefore, the cost of employment is not deductible from the corporation's income. For the relevant cost to be deductible from corporate income, compliance of the office of a shareholder-director as a member of the Board of Directors of a corporation with the role of employee of the same corporation must not be verified under formal aspects only (with regard to the articles of association and the resolutions adopted by the corporation), but whenever required it must be ascertained whether there is actually a relationship of employer and employee, an authority of direction and disciplinary powers and, more specifically, whether duties other than those required by the corporate office held are carried out (Italian Supreme Court, ruling 36362 of 23 November 2021).

  • VAT


    The Italian legislative decree 192 of 5 November 2021 transposing the so-called "quick fixes" into Italian law with a delay of almost two years compared to the deadline set forth at Community level was published in the Italian official gazette. We illustrated the news contained therein in our previous newsletter 22-2019, to which we hereby refer. The news is related to:

    • the call-off stock scheme;
    • chain transactions;
    • the requirements for intra-Community supplies;
    • the evidence of intra-Community supplies.

    Please be advised that under the new provisions, the following requirements must be met to exempt the sale of goods shipped or transported to other EU member states from tax:

    • the goods must be sold to another VAT payer acting as VAT payer in an EU member state other than the one from which the shipment or transport of the goods originates from;
    • the VAT payer benefiting from the sale is identified for VAT purposes in an EU member state other than the one from which the shipment or transport of the goods originates from and has notified the supplier of such VAT identification number.

    Further to the transposition of the new provisions VAT identification becomes a substantive - and no longer just a formal - requirement for the application of the intra-Community transactions scheme.

    Furthermore, the exemption shall not apply where the supplier fails to comply with the duty to submit a recapitulative statement or the recapitulative statement submitted does not contain the correct information on such supply, unless the failure to comply can be duly justified according to modes deemed acceptable by the competent authorities.



    A VAT payer may deduct VAT paid on advertising services purchased, provided that such services are directly and immediately linked to one or more taxable output transactions or to the VAT payers’ overall economic activities as general expenses. Deduction is granted, even if the invoiced price for the above-mentioned services is excessively high compared to the reference value defined by the Italian financial authority and even if these services did not contribute to an increase of the VAT payer's turnover (European Court of Justice, ruling C-334/20 of 25 November 2021).



    The VAT group scheme under section 70-quinquies (4-quater) of the Italian DPR 633/1972 that sets forth that the transactions between the parent company and/or the permanent establishment are relevant for VAT purposes, if one of the two entities belonging to the VAT group is established in another EU member state applies even after Brexit (Italian tax authority, answer to request for advance ruling 756 of 3 November 2021).



    An operational holding company - set up to provide financial, technical, and strategic services to group companies - is entitled to deduct VAT paid on purchases, even if the purchases occurred before the performance of the taxable services (Italian tax authority, answer to request for advance ruling 758 of 3 November 2021).



    Even if it is no longer possible to issue a VAT debit note pursuant to section 26 (2) of the Italian DPR 633/1972, the right to refund must be ensured in any case, in accordance with the principle of tax neutrality, whenever there is a mistake for which "there is no risk of loss of tax revenue". The refund application must be filed pursuant to section 30-ter (1) of the Italian DPR 633/1972 within two years from the date of payment and, hence, within two years from the deadline for monthly VAT payments (e. g. November 2019) that include the relevant invoices (e. g. by 16 December) (Italian tax authority, answer to request for advance ruling 762 of 4 November 2021).



    A VAT payer is not entitled to deduct VAT paid on purchases of goods, if such VAT payer has indicated knowingly a fictitious supplier on the invoice issued for such transaction under the reverse charge scheme, if data required to verify that the actual supplier was a VAT payer is missing or if it is sufficiently proven that such VAT payer evaded VAT or knew or should have known that the transaction, for which the right to deduct VAT was claimed, qualified as a similar evasion (European Court of Justice, ruling C-281/20 of 11 November 2021).



    The issue on whether a demerger of a limited liability company with the transfer of a part of its equity in favour of a partnership (not carrying out agricultural activities) is subject to fixed registration fees pursuant to section 4 (1b) of the Tariff enclosed to the Italian Registration Fee Code (TUR) is referred to the Joint Divisions of the Italian Supreme Court (Italian Supreme Court, ruling 33312 of 11 November 2021).



    A tax credit is "non-existent" if it lacks a constituting requirement (i. e. if the legal creditor situation is not confirmed by the taxpayer's accounting, equity-related, financial data) and if this cannot be recognized through automatic or formal controls on elements filed by the same taxpayer or reported to the tax registry. (Italian Supreme Court, ruling 34444 of 16 November 2021).


    Yours sincerely,


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