[January 10th, 2017] Tax Newsletter - Finance Act 2017 and related Tax Decree
“Super” and “hyper-amortization”
The “super-amortization” discipline is extended to 2017; in particular, the increase of 40% of the tax base allowed as deductions for the sole purpose of corporate income tax - IRES (the measure does not apply to IRAP) also applies to investments in new tangible assets made by December 31, 2017 or June 30, 2018, provided that at December 31, 2017 (i) the purchase order has been accepted by the seller and (ii) an advance payment of at least 20% of the purchase price has been paid. Purchase of vehicles with limited deductibility are excluded (the extension is applicable only to vehicles used exclusively for the business activity purposes).
The law also introduces (i) a 150% increase of the depreciable tax cost in relation to investments in new tangible assets with high technological content (the so-called “hyper-amortization”) and (ii) a 40% increase of the purchase price of specific intangible assets, strictly functional to the tangible goods benefitting from hyper-amortization.
For the determination of the 2017 advance payments according to the so-called “historical method”, no account is taken of the greater allowed deduction.
R&D tax credit
The R&D tax credit is extended until December 31, 2020. The extent of the benefit is increased to 50% for all types of eligible expenses and the maximum annual tax credit recognized to each beneficiary rises from 5 to 20 million Euro.
VAT Group
As of January 1, 2018, the law introduces the "VAT group" regime, through which a single taxable person for VAT purposes is established. The VAT taxable persons carrying on business, trade or professional activity, established in the Italian territory, having financial, economic and organizational links among themselves (as defined by the law) may opt for the “VAT group”. The option - to be exercised through electronic submission of a specific application - involves all the company for which the conditions are met and is valid for three years. Once the “VAT group” is set up, the members lose their VAT subjectivity and become a single taxable person for VAT purposes; as a consequence:
Exclusion of fund management company (SGR) from 3.5% income tax (IRES) surcharge
The 3.5% corporate income tax (IRES) surcharge, in force from the fiscal year following the year in progress at December 31, 2016 for the majority of credit and financial institutions, does not apply to SGR. However, for IRES purposes, the deductibility of the interest expenses for SGR is restored to 96% of their amount.
Extension and strengthening of investment incentives in start-ups and innovative SMEs
Starting from January 1, 2017, tax incentives granted in connection with investments in start-ups and innovative SMEs become structural. In addition, the rates for the individual (IRPEF) and corporate income tax (IRES) deductions (previously equal to 19% and 20%, respectively) increase to 30%. The maximum investment eligible for IRPEF taxpayers is also increased from Euro 500,000 to Euro 1,000,000 (instead, the limit for IRES taxpayers, equal to Euro 1.8 million, remains unchanged) and the minimum holding period of the investment is extended from two to three years for both IRPEF and IRES taxpayers.The effectiveness of the new measures, however, is subject to the European Commission authorization.
Tax losses of start-ups owned by listed companies
Under certain conditions, the law introduces the possibility for listed companies (or companies controlled by listed companies) to purchase and use the tax losses generated in the first three fiscal years by controlled start-ups. The sale must cover the full amount of tax losses and must take place with the same procedure laid down by the law for the tax credits sale. The purchaser is obliged to remunerate the selling company for the tax benefit received; the amount gained by the selling company is not subject to corporate income tax.
Streamlining of Allowance for Corporate Equity – ACE
The percentage rate for the ACE benefit is reduced to (i) 2.3% for the fiscal year in progress at December 31, 2017 and (ii) 2.7% as of the following fiscal years.
For companies other than banks and insurance companies, the law set forth that for the fiscal years following that in progress at December 31, 2015, the ACE base will be reduced for an amount equal to the increase of the stock in securities and financial instruments (other than participations) compared to the accounting stock held as at December, 31 2010.
In case of extraordinary transactions, the ACE amount to be carried forward will suffer the anti-avoidance limitations already provided for the tax losses and interest expenses (the so-called "net worth test" and "vitality test"). Furthermore, the law set forth that the ACE (and the interest expenses) amount may not be carried forward if the controlling entity of the company generating the ACE benefit changes and its core business changes in the two fiscal years before or following the transaction.
The so-called "Super-ACE" regime aimed at listed companies is repealed.
Step up of company assets
For entities notadopting the international accounting standards, the terms for the step up of the company assets (other than real estate as stock-in-trade) as resulting from the balance sheet at December 31, 2015, are reopened.
The step up takes place via payment of a substitute tax, to be paid in one installment, at the rate of 16% for depreciable assets and 12 % for non-depreciable assets. The positive balance can be stepped up by paying a 10% substitute tax.
The higher value allocated to the assets being stepped up is recognized for amortization tax purposes starting from the third fiscal year following the fiscal year in which the step up is 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 fiscal year in progress at the date of December 1, 2018.
Extension for the preferential tax regime of transfers/ assignments of assets to shareholders
The deadline for the preferential tax regime of transfer/assignment of assets to shareholders is postponed to September 30, 2017.
VAT credit notes
The discipline provided for by the Finance Act 2016 in relation to the VAT credit notes is cancelled and the original version, according to which the VAT notes related to bankruptcy proceedings (“procedure concorsuali”) can be issued only in the presence of unsuccessful procedures, is restored.
Changes of VAT rates
The VAT rates increase, set forth for 2018 and 2019, is remodeled. The ordinary VAT rate (22%) will be raised to 25% from January 1, 2018 and to 25.9% from January 1, 2019, while the reduced VAT rate (10%) will be raised to 13% from January 1, 2018.
Abolition of Equitalia
From July 1, 2017, Equitalia is suppressed and the collection activity will be carried out by a new public economic entity, called Agenzia delle Entrate – Riscossione (Revenue Agency – Collection), which will take over in all the legal relations, including litigation, of Equitalia.
VAT provisions
From January 1, 2017, the "VAT transactions form" (the so-called “Spesometro”) is abolished; therefore, the one relating to 2016 is the last to be presented.
However, the following new quarterly fulfillments are introduced:
Quarterly VAT invoices data informative report
VAT taxpayers will have to electronically file with the Tax Authority, in analytical form, the data of the issued and received invoices, including the customs bills (“bollette doganali”), and the relevant variations for each calendar quarter. VAT taxpayers who have opted for the electronic filing of the invoices are exempt from this obligation. The quarterly communications have to be file within the following deadlines:
The data and the modalities for the relevant filing will be defined by a decree to be issued by the Director of the Tax Authorities.
Penalty: Euro 2 for each omitted/erroneously submitted invoice, within the maximum limit of Euro 1,000 for each quarter, reduced to half if the filing of the omitted/proper communication takes place within fifteen days following the deadline.
Quarterly VAT liquidations data informative report
Within the same deadlines and with the same modalities as referred to in the paragraph above, the VAT taxpayers have to electronically file with the Tax Authority the periodical VAT liquidations data, even in case of VAT credit.
A decree to be issued by the Director of the Tax Authorities will define the filing procedures.
Penalty: from Euro 500 to Euro 2,000 for omitted, incomplete or inaccurate data reporting, reduced to half if the filing of the omitted/proper communication takes place within fifteen days following the deadline.
Repeal of specific fulfillments
As from January 1, 2017, the following obligations will be repealed:
Starting from year 2017, the VAT return shall be electronically file between February 1 and April 30. The deadline for the filing of the VAT return for year 2016 remains unchanged (i.e. by February 2017).
Statute of limitation
The statute of limitation for income taxes and VAT assessment is reduced by two years in case of option for the electronic filing of invoices and payments.
VAT warehousing regime
As of April 1, 2017, the application of VAT is suspended for all the Italian goods introduced into a VAT warehouse and the VAT due at the withdrawal of goods - other than those introduced for an intra-UE purchase - is paid by the 16th day of the month following the withdrawal without the possibility of offsetting against other taxes.
Amending tax return in favor of the taxpayer
The deadline for the filing of the amending tax return in favor of the taxpayer is extended to the fifth tax year following the filing of the tax return (to the fourth fiscal year following the filing of tax return up to 2015).
The filing of the amending return (also in favor) postpones the statute of limitation only for the amended data.
Tax Amnesty procedure
The law introduces the possibility for taxpayers to proceed with tax amnesty procedure for the amounts due to collection agents from 2000 to 2016. Taxpayers can pay off the debts without paying penalties and late-payment interest.
The following items are excluded:
The payment of the amount due by the taxpayer can take place in one installment by the end of July 2017 or it can be delayed up to a maximum of five installments to be paid by September 2018. In the event of omitted, insufficient or late payment, the declaration has no effect and the ordinary statute of limitation come into force again.
Reopening of the terms for the voluntary disclosure procedure
The terms to adhere to the voluntary disclosure procedure reopens - from October 24, 2016 to July 31, 2017 - for those who have not adhered to the procedure before. Infringements committed up to September 30, 2016 in relation to both foreign activities and declarative infringements on taxes can be remedied. The application for the procedure can be filed in relation to declarative infringements for foreign activities also by taxpayers who had already adhered to the national voluntary disclosure procedure and vice versa.
The taxpayer can pay the amount due in:
Sector Studies repeal and introduction of synthetic reliability indices
As from fiscal year in progress at December 31, 2017, the Sector Studies are abolished and the synthetic indices of tax reliability (to be defined by a Decree of the Ministry of Economy and Finance), connected to reward levels for the most reliable taxpayers, are introduced.
Provisions on tax simplification
Some tax simplifications are introduced; the main ones are listed below:
The “super-amortization” discipline is extended to 2017; in particular, the increase of 40% of the tax base allowed as deductions for the sole purpose of corporate income tax - IRES (the measure does not apply to IRAP) also applies to investments in new tangible assets made by December 31, 2017 or June 30, 2018, provided that at December 31, 2017 (i) the purchase order has been accepted by the seller and (ii) an advance payment of at least 20% of the purchase price has been paid. Purchase of vehicles with limited deductibility are excluded (the extension is applicable only to vehicles used exclusively for the business activity purposes).
The law also introduces (i) a 150% increase of the depreciable tax cost in relation to investments in new tangible assets with high technological content (the so-called “hyper-amortization”) and (ii) a 40% increase of the purchase price of specific intangible assets, strictly functional to the tangible goods benefitting from hyper-amortization.
For the determination of the 2017 advance payments according to the so-called “historical method”, no account is taken of the greater allowed deduction.
R&D tax credit
The R&D tax credit is extended until December 31, 2020. The extent of the benefit is increased to 50% for all types of eligible expenses and the maximum annual tax credit recognized to each beneficiary rises from 5 to 20 million Euro.
VAT Group
As of January 1, 2018, the law introduces the "VAT group" regime, through which a single taxable person for VAT purposes is established. The VAT taxable persons carrying on business, trade or professional activity, established in the Italian territory, having financial, economic and organizational links among themselves (as defined by the law) may opt for the “VAT group”. The option - to be exercised through electronic submission of a specific application - involves all the company for which the conditions are met and is valid for three years. Once the “VAT group” is set up, the members lose their VAT subjectivity and become a single taxable person for VAT purposes; as a consequence:
- the supply of goods and services between the members are no longer subject to VAT;
- the transactions performed between a member and a third party are considered as performed by the VAT group and vice versa;
- VAT rights and obligations (payment, invoicing, filing of the VAT return, etc.) are in the hand of the “VAT group” (through its representative).
Exclusion of fund management company (SGR) from 3.5% income tax (IRES) surcharge
The 3.5% corporate income tax (IRES) surcharge, in force from the fiscal year following the year in progress at December 31, 2016 for the majority of credit and financial institutions, does not apply to SGR. However, for IRES purposes, the deductibility of the interest expenses for SGR is restored to 96% of their amount.
Extension and strengthening of investment incentives in start-ups and innovative SMEs
Starting from January 1, 2017, tax incentives granted in connection with investments in start-ups and innovative SMEs become structural. In addition, the rates for the individual (IRPEF) and corporate income tax (IRES) deductions (previously equal to 19% and 20%, respectively) increase to 30%. The maximum investment eligible for IRPEF taxpayers is also increased from Euro 500,000 to Euro 1,000,000 (instead, the limit for IRES taxpayers, equal to Euro 1.8 million, remains unchanged) and the minimum holding period of the investment is extended from two to three years for both IRPEF and IRES taxpayers.The effectiveness of the new measures, however, is subject to the European Commission authorization.
Tax losses of start-ups owned by listed companies
Under certain conditions, the law introduces the possibility for listed companies (or companies controlled by listed companies) to purchase and use the tax losses generated in the first three fiscal years by controlled start-ups. The sale must cover the full amount of tax losses and must take place with the same procedure laid down by the law for the tax credits sale. The purchaser is obliged to remunerate the selling company for the tax benefit received; the amount gained by the selling company is not subject to corporate income tax.
Streamlining of Allowance for Corporate Equity – ACE
The percentage rate for the ACE benefit is reduced to (i) 2.3% for the fiscal year in progress at December 31, 2017 and (ii) 2.7% as of the following fiscal years.
For companies other than banks and insurance companies, the law set forth that for the fiscal years following that in progress at December 31, 2015, the ACE base will be reduced for an amount equal to the increase of the stock in securities and financial instruments (other than participations) compared to the accounting stock held as at December, 31 2010.
In case of extraordinary transactions, the ACE amount to be carried forward will suffer the anti-avoidance limitations already provided for the tax losses and interest expenses (the so-called "net worth test" and "vitality test"). Furthermore, the law set forth that the ACE (and the interest expenses) amount may not be carried forward if the controlling entity of the company generating the ACE benefit changes and its core business changes in the two fiscal years before or following the transaction.
The so-called "Super-ACE" regime aimed at listed companies is repealed.
Step up of company assets
For entities notadopting the international accounting standards, the terms for the step up of the company assets (other than real estate as stock-in-trade) as resulting from the balance sheet at December 31, 2015, are reopened.
The step up takes place via payment of a substitute tax, to be paid in one installment, at the rate of 16% for depreciable assets and 12 % for non-depreciable assets. The positive balance can be stepped up by paying a 10% substitute tax.
The higher value allocated to the assets being stepped up is recognized for amortization tax purposes starting from the third fiscal year following the fiscal year in which the step up is 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 fiscal year in progress at the date of December 1, 2018.
Extension for the preferential tax regime of transfers/ assignments of assets to shareholders
The deadline for the preferential tax regime of transfer/assignment of assets to shareholders is postponed to September 30, 2017.
VAT credit notes
The discipline provided for by the Finance Act 2016 in relation to the VAT credit notes is cancelled and the original version, according to which the VAT notes related to bankruptcy proceedings (“procedure concorsuali”) can be issued only in the presence of unsuccessful procedures, is restored.
Changes of VAT rates
The VAT rates increase, set forth for 2018 and 2019, is remodeled. The ordinary VAT rate (22%) will be raised to 25% from January 1, 2018 and to 25.9% from January 1, 2019, while the reduced VAT rate (10%) will be raised to 13% from January 1, 2018.
Abolition of Equitalia
From July 1, 2017, Equitalia is suppressed and the collection activity will be carried out by a new public economic entity, called Agenzia delle Entrate – Riscossione (Revenue Agency – Collection), which will take over in all the legal relations, including litigation, of Equitalia.
VAT provisions
From January 1, 2017, the "VAT transactions form" (the so-called “Spesometro”) is abolished; therefore, the one relating to 2016 is the last to be presented.
However, the following new quarterly fulfillments are introduced:
Quarterly VAT invoices data informative report
VAT taxpayers will have to electronically file with the Tax Authority, in analytical form, the data of the issued and received invoices, including the customs bills (“bollette doganali”), and the relevant variations for each calendar quarter. VAT taxpayers who have opted for the electronic filing of the invoices are exempt from this obligation. The quarterly communications have to be file within the following deadlines:
- First Quarter: by May 31;
- Second Quarter: by September 16;
- Third Quarter: by November 30;
- Fourth Quarter: by February 28 of the following year.
The data and the modalities for the relevant filing will be defined by a decree to be issued by the Director of the Tax Authorities.
Penalty: Euro 2 for each omitted/erroneously submitted invoice, within the maximum limit of Euro 1,000 for each quarter, reduced to half if the filing of the omitted/proper communication takes place within fifteen days following the deadline.
Quarterly VAT liquidations data informative report
Within the same deadlines and with the same modalities as referred to in the paragraph above, the VAT taxpayers have to electronically file with the Tax Authority the periodical VAT liquidations data, even in case of VAT credit.
A decree to be issued by the Director of the Tax Authorities will define the filing procedures.
Penalty: from Euro 500 to Euro 2,000 for omitted, incomplete or inaccurate data reporting, reduced to half if the filing of the omitted/proper communication takes place within fifteen days following the deadline.
Repeal of specific fulfillments
As from January 1, 2017, the following obligations will be repealed:
- Communication of the data related to agreements stipulated with leasing companies;
- Acquisition Intrastat filing obligation for both goods and services;
- Communication of transactions with counter parties located in “Black List” countries starting from the one relating to 2016.
Starting from year 2017, the VAT return shall be electronically file between February 1 and April 30. The deadline for the filing of the VAT return for year 2016 remains unchanged (i.e. by February 2017).
Statute of limitation
The statute of limitation for income taxes and VAT assessment is reduced by two years in case of option for the electronic filing of invoices and payments.
VAT warehousing regime
As of April 1, 2017, the application of VAT is suspended for all the Italian goods introduced into a VAT warehouse and the VAT due at the withdrawal of goods - other than those introduced for an intra-UE purchase - is paid by the 16th day of the month following the withdrawal without the possibility of offsetting against other taxes.
Amending tax return in favor of the taxpayer
The deadline for the filing of the amending tax return in favor of the taxpayer is extended to the fifth tax year following the filing of the tax return (to the fourth fiscal year following the filing of tax return up to 2015).
The filing of the amending return (also in favor) postpones the statute of limitation only for the amended data.
Tax Amnesty procedure
The law introduces the possibility for taxpayers to proceed with tax amnesty procedure for the amounts due to collection agents from 2000 to 2016. Taxpayers can pay off the debts without paying penalties and late-payment interest.
The following items are excluded:
- customs duties and VAT on imports;
- State aid recoveries;
- credits arising from conviction sentences of the Court of Auditors;
- fines and penalties owed as a result of Court measures and criminal judgements.
The payment of the amount due by the taxpayer can take place in one installment by the end of July 2017 or it can be delayed up to a maximum of five installments to be paid by September 2018. In the event of omitted, insufficient or late payment, the declaration has no effect and the ordinary statute of limitation come into force again.
Reopening of the terms for the voluntary disclosure procedure
The terms to adhere to the voluntary disclosure procedure reopens - from October 24, 2016 to July 31, 2017 - for those who have not adhered to the procedure before. Infringements committed up to September 30, 2016 in relation to both foreign activities and declarative infringements on taxes can be remedied. The application for the procedure can be filed in relation to declarative infringements for foreign activities also by taxpayers who had already adhered to the national voluntary disclosure procedure and vice versa.
The taxpayer can pay the amount due in:
- one single installment by September 30, 2017;
- three monthly installments, the first to be paid by September 30, 2017.
Sector Studies repeal and introduction of synthetic reliability indices
As from fiscal year in progress at December 31, 2017, the Sector Studies are abolished and the synthetic indices of tax reliability (to be defined by a Decree of the Ministry of Economy and Finance), connected to reward levels for the most reliable taxpayers, are introduced.
Provisions on tax simplification
Some tax simplifications are introduced; the main ones are listed below:
- from July 1, 2017, the notification of tax assessments and other acts to professionals, individual entrepreneurs and companies, may be made through the Certified E-mail (PEC);
- as of 2017, with reference to the Certification of Withholding taxes (“Certificazione Unica”) related to 2016, the deadline for providing the copies of the certifications of income paid to employees, assimilated employees and self-employees is postponed from February 28 to March 31;
- suspension of the terms, from August 1 to September 4, for the transmission of documents and information required to the taxpayers by the Tax Authorities (except in the case of access, inspections, audits and for the VAT refund procedures) and for the payment of the amounts due as a result of automatic controls, formal checks and liquidation of taxes on income subject to separate taxation. From January 1, 2017, the IRPEF and IRAP payment of the balance and the first advance payment for individuals, entities and associations falling under Article 5 of the Income Tax Code, must be made by June 30; for IRES taxpayers, the IRES and IRAP balance and the first advance payment is due by the last day of the sixth month following the closing of the fiscal year. There is also the possibility to pay the VAT balance by June 30 with a 0.4% increase for each fraction/month following March 16;
- with effect from the fiscal year following the one in progress at December 31, 2016, options for Transparency, (national and worldwide) Consolidation and Tonnage Tax, will be intended as tacitly renovated in the absence of revocation;
- for amounts lower than € 30,000, the annual and quarterly VAT credit may be claimed for refund without special formalities (except for the VAT return or the TR form);
- cancellation of VAT numbers of taxpayers who, in the three previous years, have not carried out any business, artistic / professional activity. Penalties for the omitted filing of the form for the cessation of activity for VAT purposes are also cancelled;
- as of 2017, travel and transportation services directly bought by the client are not qualified as payments in kind for self-employed workers.
