[July 5th, 2017] Tax Newsletter - Conversion Law of the so-called" Manovra Correttiva"
Split payment
As at July 1, 2017, in order to identify the Public Administration (PA), the companies controlled by the PA and the listed companies (FTSE MIB index of the Italian stock exchange) requiring the application of the split payment mechanism, the sellers/service providers may require the purchasers/service recipients to issue a document certifying they are entitled to the split payment. In addition, the Ministry of Finance issued the implementing decree defining the methods for determining the parties to which the split payment mechanism applies.
As at January 1, 2018, companies resulting in a VAT credit position following the application of the split payment mechanism may obtain the VAT refund in advance. The implementation procedures will be defined by a decree of the Ministry of Economy and Finance.
VAT deduction
The new deadline for VAT deduction (i.e. filing of the VAT return related to the year in which the right to deduct arose) applies to invoices and customs bills issued since January 1, 2017.
Limits on the use of VAT credits offsetting
The law introduces the obligation to obtain the so-called “Visto di conformità” for quarterly VAT credits (TR forms), destined to the “horizontal” offset (i.e. among different taxes), if the amount exceeds € 5,000. For VAT purposes, it will be possible to submit the F24 form for offsetting the annual / quarterly credit from the tenth day following the filing date of the VAT return/application showing the credit and the relevant “Visto di conformità”.
Redefinition of the ACE base
The law deletes the amendment to the calculation basis of the ACE benefit, which took into account the changes in net worth compared to the one existing at the close of the fifth previous fiscal year: therefore, the incremental criterion on a fixed basis, which takes into account the changes in net worth compared to the one existing at December 31, 2010 (for company with the fiscal year coincident with the calendar year), has been restored. However, the ACE notional rate is further reduced for the fiscal year in progress at December 31, 2017 from 2.3% to 1.6% and for the following fiscal years, from 2.7% to 1.5%. These provisions shall apply from the fiscal year following the one in progress at December 31, 2016 (2017 for taxpayers adopting the calendar year).
The obligation to recalculate, according to the so-called “historical method”, the 2017 IRES advance payments (for taxpayers adopting the calendar year) taking into account the IRES of the previous fiscal year determined by applying the new ACE provisions remains valid.
Enhanced cooperation procedure (WebTax)
Non-resident companies and entities in the State territory, which:
a) belong to multinational groups with consolidated revenues exceeding 1 billion euros per year, and
b) sell goods/provide services in the State territory for an amount exceeding 50 million euros per year using resident companies or permanent establishments of foreign companies belonging to the same group,
may ask the Tax Authority for the evaluation of the existence of a permanent establishment in Italy by submitting an application. If the Tax Authority certifies the existence of a permanent establishment, it will be possible to define trough a tax settlement agreement the tax debts of the permanent establishment for the fiscal years for which the deadlines for the return filing have expired. For taxpayers who pay the full tax liability of the permanent establishment, the applicable penalties are reduced to half and the crime for omitted tax return cannot be applied.
If an agreement is not reached, the Tax Authority will challenge - by December 31 of the year following the notification - the taxes and interest and apply the ordinary penalties.
Non-resident companies and entities that have had formal knowledge of inspections and audits or of the initiation of any administrative or criminal investigation about the potential permanent establishment cannot apply this procedure. A Tax Authority regulation will define
the implementation methods.
Synthetic tax reliability indicators
In place of the Sector Studies, the synthetic tax reliability indicators are introduced, expressing, on a scale from 1 to 10, the degree of fiscal reliability of the taxpayer; they are approved by a Decree of the Ministry of Economy and Finance within December 31 of the fiscal year for which they apply.
The implementing procedure will be provided by decree of the Minister of Economy and Finance.
Based on these indicators, the taxpayer will have access to some tax benefits graded depending on the different levels of tax reliability assigned (e.g., the reduction of at least one year of the ordinary statute of limitation for IRES / IRAP / VAT).
Compulsory Tax mediation
A provision excluding from the scope of the mediation the taxes that constitute the traditional own resources of the European Union (customs duties) is introduced.
Pending tax litigation amnesty
For pending litigations in which the Tax Authority is involved, the tax litigation amnesty is extended to the judgments whose appeal was notified to the counterparty by 24 April 2017 (and no longer by December 31, 2016)
With reference to pending litigations involving local taxes, the Municipalities may decide whether to adopt the amnesty procedure or not by August 31, 2017.
As at July 1, 2017, in order to identify the Public Administration (PA), the companies controlled by the PA and the listed companies (FTSE MIB index of the Italian stock exchange) requiring the application of the split payment mechanism, the sellers/service providers may require the purchasers/service recipients to issue a document certifying they are entitled to the split payment. In addition, the Ministry of Finance issued the implementing decree defining the methods for determining the parties to which the split payment mechanism applies.
As at January 1, 2018, companies resulting in a VAT credit position following the application of the split payment mechanism may obtain the VAT refund in advance. The implementation procedures will be defined by a decree of the Ministry of Economy and Finance.
VAT deduction
The new deadline for VAT deduction (i.e. filing of the VAT return related to the year in which the right to deduct arose) applies to invoices and customs bills issued since January 1, 2017.
Limits on the use of VAT credits offsetting
The law introduces the obligation to obtain the so-called “Visto di conformità” for quarterly VAT credits (TR forms), destined to the “horizontal” offset (i.e. among different taxes), if the amount exceeds € 5,000. For VAT purposes, it will be possible to submit the F24 form for offsetting the annual / quarterly credit from the tenth day following the filing date of the VAT return/application showing the credit and the relevant “Visto di conformità”.
Redefinition of the ACE base
The law deletes the amendment to the calculation basis of the ACE benefit, which took into account the changes in net worth compared to the one existing at the close of the fifth previous fiscal year: therefore, the incremental criterion on a fixed basis, which takes into account the changes in net worth compared to the one existing at December 31, 2010 (for company with the fiscal year coincident with the calendar year), has been restored. However, the ACE notional rate is further reduced for the fiscal year in progress at December 31, 2017 from 2.3% to 1.6% and for the following fiscal years, from 2.7% to 1.5%. These provisions shall apply from the fiscal year following the one in progress at December 31, 2016 (2017 for taxpayers adopting the calendar year).
The obligation to recalculate, according to the so-called “historical method”, the 2017 IRES advance payments (for taxpayers adopting the calendar year) taking into account the IRES of the previous fiscal year determined by applying the new ACE provisions remains valid.
Enhanced cooperation procedure (WebTax)
Non-resident companies and entities in the State territory, which:
a) belong to multinational groups with consolidated revenues exceeding 1 billion euros per year, and
b) sell goods/provide services in the State territory for an amount exceeding 50 million euros per year using resident companies or permanent establishments of foreign companies belonging to the same group,
may ask the Tax Authority for the evaluation of the existence of a permanent establishment in Italy by submitting an application. If the Tax Authority certifies the existence of a permanent establishment, it will be possible to define trough a tax settlement agreement the tax debts of the permanent establishment for the fiscal years for which the deadlines for the return filing have expired. For taxpayers who pay the full tax liability of the permanent establishment, the applicable penalties are reduced to half and the crime for omitted tax return cannot be applied.
If an agreement is not reached, the Tax Authority will challenge - by December 31 of the year following the notification - the taxes and interest and apply the ordinary penalties.
Non-resident companies and entities that have had formal knowledge of inspections and audits or of the initiation of any administrative or criminal investigation about the potential permanent establishment cannot apply this procedure. A Tax Authority regulation will define
the implementation methods.
Synthetic tax reliability indicators
In place of the Sector Studies, the synthetic tax reliability indicators are introduced, expressing, on a scale from 1 to 10, the degree of fiscal reliability of the taxpayer; they are approved by a Decree of the Ministry of Economy and Finance within December 31 of the fiscal year for which they apply.
The implementing procedure will be provided by decree of the Minister of Economy and Finance.
Based on these indicators, the taxpayer will have access to some tax benefits graded depending on the different levels of tax reliability assigned (e.g., the reduction of at least one year of the ordinary statute of limitation for IRES / IRAP / VAT).
Compulsory Tax mediation
A provision excluding from the scope of the mediation the taxes that constitute the traditional own resources of the European Union (customs duties) is introduced.
Pending tax litigation amnesty
For pending litigations in which the Tax Authority is involved, the tax litigation amnesty is extended to the judgments whose appeal was notified to the counterparty by 24 April 2017 (and no longer by December 31, 2016)
With reference to pending litigations involving local taxes, the Municipalities may decide whether to adopt the amnesty procedure or not by August 31, 2017.
