[January 11th, 2016] Tax Newsletter - Finance Act 2016
No increase for VAT and excise duties (paragraphs 5 – 7)
VAT and excise duties increase is postponed to 2017.
IMU/Tasi on bolted plants (paragraphs 21 – 24)
Bolted plants are excluded from the determination of the cadastral value, thus resulting in savings of IMU/Tasi. However, to enjoy benefits from tax year 2016, it is necessary to formally request a renovation of the cadastral value by June 15, 2016 (through Docfa procedure).
Reduction of IRES rate (paragraphs 61 - 62)
For periods following that in progress on December 31, 2016, the IRES rate will be reduced from 27.5% to 24%. As from the same term, the withholding tax rate on dividends paid to EU or EEA corporate shareholders will consequently be reduced from 1.375% to 1.20%.
IRES surcharge for credit and financial institutions (paragraphs 65 – 69)
From the tax period following that in progress at December 31, 2016 a 3.5%, IRES surcharge will be introduced for banks and financial institutions (excluding insurance companies). The Act introduces special rules for the application of IRES surcharge in relation to subjects who have exercised the option for consolidated or fiscal transparency. The introduction of the supplemental rate is compensated by the full deductibility of the interest expense, for the purpose of IRES and IRAP.
Super amortization (paragraphs 91 – 94)
Companies and professionals are recognized an increase of 40% of the tax base allowed as deductions for the sole purpose of income tax (the measure does not apply to IRAP) in relation to investments in new tangible assets made between October 15, 2015 and December 31, 2016; investments in (i) buildings, (ii) tangible assets with ministerial depreciation rate lower than 6.5%, (iii) pipelines, rolling stock and aircrafts as per Annex 3 of the Finance Act are excluded from the benefit. The benefit applies to both direct acquisition and to that arising from finance leases. The higher deduction does not affect the determination of the advance payments due for the tax year in progress at December 31, 2015. Furthermore, for the determination of the advance payments due for the tax year in progress at December 31, 2016, according to the so-called “historical method”, no account is taken of the greater deduction allowed.
Realignment of values that emerged from business combinations (paragraphs 95-97)
For business combinations carried out as from the period following that in progress on December 31, 2015, the period of amortization related to higher values of goodwill and trademarks emerged as a result of business combinations and object of realignment has been reduced from ten to five years.
Tax credit for investments in the South (paragraphs 98 to 108)
The Act introduces a special tax credit for the purchase of new tangible assets in favor of companies located in Campania, Puglia, Basilicata, Calabria, Sicily, Molise, Sardinia and Abruzzo, performed from January 1, 2016 to December 31, 2019. The benefit does not apply to companies operating in the sectors of steel, coal, shipbuilding, synthetic fibers, transport, production, energy distribution, credit, finance, banking and insurance. The tax credit, allocated based on the purchasing cost of the goods, according to specific limits set by the Finance Act, is equal to 20% for small companies, 15% for medium-sized companies, and 10% for large companies.
The tax credit cannot be cumulated with de minimis aid and State aid, which concern the same costs.
Finally, to take advantage of the tax credit, stakeholders are required to file a specific communication with the Tax Office.
Preferential tax regime for transfers and assignments of assets to shareholders (paragraphs 115-120)
The assignment or the sale to shareholders of real estate or registered movable assets (not instrumental to the business) made by companies are subject to a preferential tax regime, provided they are performed by September 30, 2016. The sale/assignment is subject to an 8% substitute tax (increased to 10.5% for the so-called “dummy companies”) applied to the difference between the market value of the assets and their tax base. In addition, the proportional registration tax (if any) will be reduced by half, while the mortgage and cadastral taxes are due as a fixed amount.
Issuance of VAT credit notes (paragraphs 126 – 127)
Article. 26 of Presidential Decree 633/72 on the procedure for issuance of VAT credit notes is completely reformed. In particular, it makes clear how credit notes are to be issued in the case of (i) contract termination due to default of the transferee or purchaser in contracts creating continuing obligations and (ii) transactions subject to the reverse charge regime. Furthermore, the possibility for the supplier to issue credit notes is anticipated as of the date of placing the debtor in bankruptcy proceedings (“procedure concorsuali”) or as of the date of issuance of the approval decree of a restructuring agreement (“accordo di ristrutturazione”). The new rules will apply where the debtor is subject to bankruptcy proceedings after December 31, 2016.
Tax bill compensation (paragraph 129)
The compensation of tax bill in favor of companies having a certified credit from a public administration that is not expired, is certain, of a fixed amount and due, is extended to 2016, too.
Terms of assessment for income tax and VAT (paragraphs 130-132)
The system of doubling the terms of assessment in case of penal infringements has been abolished. The expiration date for assessment are, however, extended to (i) December 31 of the fifth year following the filing of the tax return, and (ii) December 31 of the seventh year, in case of omitted tax return (currently the ordinary statute of limitation is December 31 of the fourth year following the filing of the tax return, and December 31 of the fifth in the event of omitted tax return). The new rules will apply to notices relating to the tax period in progress at December 31 2016 and later.
Start date for reform of the administrative tax penalties (paragraph 133)
The entry into force of the reform of tax penalties (see Tax Newsletter November 6, 2015) is brought forward to January 1, 2016. With exclusive reference to the procedure of voluntary disclosure, penalties in force at the date of filing of the application shall apply.
Obligation to report to the Tax office by the criminal prosecutors (paragraph 141)
The Act introduces the obligation for the criminal prosecutors, in case of violations for which the obligation to report is foreseen, to report to the Tax Office their knowledge of offences, which may bring gain or unfair advantage.
Transactions with blacklisted countries - deductibility of costs and CFC regime (paragraphs 142-144)
Starting from the tax period following that in progress on December 31 2015, costs related to transactions with counterparties domiciled in countries with privileged tax system will be deductible in accordance with the ordinary rules as per Presidential Decree 917/86 (Tuir). In addition, the Act introduces an unambiguous criterion for the identification of the “low taxed” countries relevant for the application of CFC rules as per art. 167 Tuir. Starting from the tax period following that in progress on December 31, 2015 “low taxed” countries will be considered those where the nominal tax rate is lower than 50 per cent of the Italian one (excluding entities resident in the EU or EEA States with an effective exchange of information).
Country by Country reporting (paragraphs 145 – 146)
The Finance Act introduces the obligation for multinational companies, fiscally resident in Italy, with consolidated turnover of at least 750 million euro, to file an annual “Country by Country” report showing the amount of revenue and gross income, paid and accrued taxes, together with other elements, which indicate an actual economic activity. This is also valid for resident companies controlled by foreign companies that are required to prepare consolidated financial statements and are resident in countries which (i) are not requested to make a “Country by Country” report, (ii) do not have an agreement with Italy requiring the exchange of information, or (iii) are in default with respect to that obligation. The failure to submit the report (or the delivery of incomplete and / or untrue data) is subject to an administrative fine ranging from EUR 10,000 to EUR 50,000. The details of the new regulations will be clarified by a decree of the Ministry of Economy and Finance to be issued within 90 days from the date of entry into force of the Finance Act.
New obligation for purchases from non-Italian residents (paragraph 147)
The indication of the criteria for the collection of information on purchases of goods and services received by non-Italian residents will be regulated by a decree of the Ministry of Economy and Finance.
Changes to the patent box regime (paragraph 148)
In accordance with the OECD guidelines and in compliance with the regulations contained in the Ministerial Decree, in the indication of privileged goods, the term "intellectual property" will be replaced by the term "copyrighted software". For the purpose of the benefit, the Act also allows the possibility of considering as a single intangible, a set of intangibles if used together for the realization of a product or process.
Benefit companies (paragraphs 376 – 382)
The new legal classification of “benefit companies” is introduced, i.e. companies, that, whatever their form, pursue, next to a profit objective, one or more purposes of common benefit. These companies will exhibit the term "benefit company" next to their name, in order to make third parties know also about their non-profit purposes. The benefit companies will include in their annual report the objectives and actions taken, as well as the new non-profit goals they intend to pursue. Those companies will be subject to the provisions concerning misleading advertising and to the supervision of the Antitrust Authority.
Step up of company assets (paragraphs 889-897)
The Act provides a new option of step up of assets as resulting from the balance sheet at December 31, 2014. The step up takes place via payment of substitute tax, to be paid in one installment, at the rate of 16% for depreciable assets and 12 % for non-depreciable assets. The higher value allocated to the assets being stepped up is recognized for amortization tax purposes starting from 2018 (i.e. the third year following the year in which the revaluation was performed).
In case of transfer or assignment of the asset before four years since the step up, the gain (or loss) does not take into account the stepped up amount.
Only for real estate assets, the higher values are recognized for tax purpose with effect from the tax period in progress at the date of December 1, 2017.
VAT and excise duties increase is postponed to 2017.
IMU/Tasi on bolted plants (paragraphs 21 – 24)
Bolted plants are excluded from the determination of the cadastral value, thus resulting in savings of IMU/Tasi. However, to enjoy benefits from tax year 2016, it is necessary to formally request a renovation of the cadastral value by June 15, 2016 (through Docfa procedure).
Reduction of IRES rate (paragraphs 61 - 62)
For periods following that in progress on December 31, 2016, the IRES rate will be reduced from 27.5% to 24%. As from the same term, the withholding tax rate on dividends paid to EU or EEA corporate shareholders will consequently be reduced from 1.375% to 1.20%.
IRES surcharge for credit and financial institutions (paragraphs 65 – 69)
From the tax period following that in progress at December 31, 2016 a 3.5%, IRES surcharge will be introduced for banks and financial institutions (excluding insurance companies). The Act introduces special rules for the application of IRES surcharge in relation to subjects who have exercised the option for consolidated or fiscal transparency. The introduction of the supplemental rate is compensated by the full deductibility of the interest expense, for the purpose of IRES and IRAP.
Super amortization (paragraphs 91 – 94)
Companies and professionals are recognized an increase of 40% of the tax base allowed as deductions for the sole purpose of income tax (the measure does not apply to IRAP) in relation to investments in new tangible assets made between October 15, 2015 and December 31, 2016; investments in (i) buildings, (ii) tangible assets with ministerial depreciation rate lower than 6.5%, (iii) pipelines, rolling stock and aircrafts as per Annex 3 of the Finance Act are excluded from the benefit. The benefit applies to both direct acquisition and to that arising from finance leases. The higher deduction does not affect the determination of the advance payments due for the tax year in progress at December 31, 2015. Furthermore, for the determination of the advance payments due for the tax year in progress at December 31, 2016, according to the so-called “historical method”, no account is taken of the greater deduction allowed.
Realignment of values that emerged from business combinations (paragraphs 95-97)
For business combinations carried out as from the period following that in progress on December 31, 2015, the period of amortization related to higher values of goodwill and trademarks emerged as a result of business combinations and object of realignment has been reduced from ten to five years.
Tax credit for investments in the South (paragraphs 98 to 108)
The Act introduces a special tax credit for the purchase of new tangible assets in favor of companies located in Campania, Puglia, Basilicata, Calabria, Sicily, Molise, Sardinia and Abruzzo, performed from January 1, 2016 to December 31, 2019. The benefit does not apply to companies operating in the sectors of steel, coal, shipbuilding, synthetic fibers, transport, production, energy distribution, credit, finance, banking and insurance. The tax credit, allocated based on the purchasing cost of the goods, according to specific limits set by the Finance Act, is equal to 20% for small companies, 15% for medium-sized companies, and 10% for large companies.
The tax credit cannot be cumulated with de minimis aid and State aid, which concern the same costs.
Finally, to take advantage of the tax credit, stakeholders are required to file a specific communication with the Tax Office.
Preferential tax regime for transfers and assignments of assets to shareholders (paragraphs 115-120)
The assignment or the sale to shareholders of real estate or registered movable assets (not instrumental to the business) made by companies are subject to a preferential tax regime, provided they are performed by September 30, 2016. The sale/assignment is subject to an 8% substitute tax (increased to 10.5% for the so-called “dummy companies”) applied to the difference between the market value of the assets and their tax base. In addition, the proportional registration tax (if any) will be reduced by half, while the mortgage and cadastral taxes are due as a fixed amount.
Issuance of VAT credit notes (paragraphs 126 – 127)
Article. 26 of Presidential Decree 633/72 on the procedure for issuance of VAT credit notes is completely reformed. In particular, it makes clear how credit notes are to be issued in the case of (i) contract termination due to default of the transferee or purchaser in contracts creating continuing obligations and (ii) transactions subject to the reverse charge regime. Furthermore, the possibility for the supplier to issue credit notes is anticipated as of the date of placing the debtor in bankruptcy proceedings (“procedure concorsuali”) or as of the date of issuance of the approval decree of a restructuring agreement (“accordo di ristrutturazione”). The new rules will apply where the debtor is subject to bankruptcy proceedings after December 31, 2016.
Tax bill compensation (paragraph 129)
The compensation of tax bill in favor of companies having a certified credit from a public administration that is not expired, is certain, of a fixed amount and due, is extended to 2016, too.
Terms of assessment for income tax and VAT (paragraphs 130-132)
The system of doubling the terms of assessment in case of penal infringements has been abolished. The expiration date for assessment are, however, extended to (i) December 31 of the fifth year following the filing of the tax return, and (ii) December 31 of the seventh year, in case of omitted tax return (currently the ordinary statute of limitation is December 31 of the fourth year following the filing of the tax return, and December 31 of the fifth in the event of omitted tax return). The new rules will apply to notices relating to the tax period in progress at December 31 2016 and later.
Start date for reform of the administrative tax penalties (paragraph 133)
The entry into force of the reform of tax penalties (see Tax Newsletter November 6, 2015) is brought forward to January 1, 2016. With exclusive reference to the procedure of voluntary disclosure, penalties in force at the date of filing of the application shall apply.
Obligation to report to the Tax office by the criminal prosecutors (paragraph 141)
The Act introduces the obligation for the criminal prosecutors, in case of violations for which the obligation to report is foreseen, to report to the Tax Office their knowledge of offences, which may bring gain or unfair advantage.
Transactions with blacklisted countries - deductibility of costs and CFC regime (paragraphs 142-144)
Starting from the tax period following that in progress on December 31 2015, costs related to transactions with counterparties domiciled in countries with privileged tax system will be deductible in accordance with the ordinary rules as per Presidential Decree 917/86 (Tuir). In addition, the Act introduces an unambiguous criterion for the identification of the “low taxed” countries relevant for the application of CFC rules as per art. 167 Tuir. Starting from the tax period following that in progress on December 31, 2015 “low taxed” countries will be considered those where the nominal tax rate is lower than 50 per cent of the Italian one (excluding entities resident in the EU or EEA States with an effective exchange of information).
Country by Country reporting (paragraphs 145 – 146)
The Finance Act introduces the obligation for multinational companies, fiscally resident in Italy, with consolidated turnover of at least 750 million euro, to file an annual “Country by Country” report showing the amount of revenue and gross income, paid and accrued taxes, together with other elements, which indicate an actual economic activity. This is also valid for resident companies controlled by foreign companies that are required to prepare consolidated financial statements and are resident in countries which (i) are not requested to make a “Country by Country” report, (ii) do not have an agreement with Italy requiring the exchange of information, or (iii) are in default with respect to that obligation. The failure to submit the report (or the delivery of incomplete and / or untrue data) is subject to an administrative fine ranging from EUR 10,000 to EUR 50,000. The details of the new regulations will be clarified by a decree of the Ministry of Economy and Finance to be issued within 90 days from the date of entry into force of the Finance Act.
New obligation for purchases from non-Italian residents (paragraph 147)
The indication of the criteria for the collection of information on purchases of goods and services received by non-Italian residents will be regulated by a decree of the Ministry of Economy and Finance.
Changes to the patent box regime (paragraph 148)
In accordance with the OECD guidelines and in compliance with the regulations contained in the Ministerial Decree, in the indication of privileged goods, the term "intellectual property" will be replaced by the term "copyrighted software". For the purpose of the benefit, the Act also allows the possibility of considering as a single intangible, a set of intangibles if used together for the realization of a product or process.
Benefit companies (paragraphs 376 – 382)
The new legal classification of “benefit companies” is introduced, i.e. companies, that, whatever their form, pursue, next to a profit objective, one or more purposes of common benefit. These companies will exhibit the term "benefit company" next to their name, in order to make third parties know also about their non-profit purposes. The benefit companies will include in their annual report the objectives and actions taken, as well as the new non-profit goals they intend to pursue. Those companies will be subject to the provisions concerning misleading advertising and to the supervision of the Antitrust Authority.
Step up of company assets (paragraphs 889-897)
The Act provides a new option of step up of assets as resulting from the balance sheet at December 31, 2014. The step up takes place via payment of substitute tax, to be paid in one installment, at the rate of 16% for depreciable assets and 12 % for non-depreciable assets. The higher value allocated to the assets being stepped up is recognized for amortization tax purposes starting from 2018 (i.e. the third year following the year in which the revaluation was performed).
In case of transfer or assignment of the asset before four years since the step up, the gain (or loss) does not take into account the stepped up amount.
Only for real estate assets, the higher values are recognized for tax purpose with effect from the tax period in progress at the date of December 1, 2017.
