[December 10th, 2015] Tax Newsletter - Patent Box
The discipline of the Patent Box is gradually taking shape thanks to the circular and measures recently published on the subject, whose main aspects are summarized below.
Model for the option - With Decision no. 144042 dated November 10 2015 the Model to be used for the exercise of the option for the regime of preferential taxation of income derived from the use of intangible assets has been approved. The Model must be used for the exercise of the option for the first two tax years following the one in progress as at December 31, 2014 (i.e. 2015 and 2016 for those with tax period coinciding with the calendar year) and it must be submitted electronically, using the software of the Tax Authority, within the tax period in which the tax regime begins. The transmission of the Model can be submitted directly by the taxpayer or through entitled intermediaries.
The Model has a rather simplified structure; in particular it contains sections on (i) information on processing of personal data, (ii) data of the person who exercises the option and the signatory representative and iii) commitment to electronic filing by the entitled intermediaries.
First clarifications – With Circular no. 36 / E dated December 1 2015, the Tax Authority has provided the first clarifications on the issues outlined below.
- Procedures and effects arising from the exercise of the option: it was made clear that the option is exercisable also by companies that, at the time of the transmission of the Model, are not able yet to assess whether the conditions to enter the regime or simply its cost effectiveness exist. If, following the exercise of the option, the system should not be accessible / affordable, the taxpayer will not be affected;
- Losses: if the economic exploitation of the intangible asset generates losses, these will contribute to the formation of the business income for the period. For these losses there is a "recapture" mechanism, i.e. they will be recovered when the intangible asset starts producing income; the same will, therefore, count as a reduction of gross income until they are exhausted.
- Extraordinary operations: operations of merger, division or transfer of business as a result of which the intangible asset, previously used directly, is licensed for use to other companies of the group, are not considered illegal or tax avoidance, even if the operation aims only at preventing the mandatory ruling.
Ruling - With Decision no. 154278 dated December 1 2015, the Tax Authority has illustrated the methods of presentation and the main content of the ruling on the Patent Box, both in the case in which the filing of the application is mandatory (i.e. in the event of direct use of intangible assets ) and in the case in which it is optional.
If the share of income is determined within a ruling agreement, the exercised option will be effective from the tax year in which the application is submitted. Additional documentation, together with explanatory and supplementary statements, may be presented within 120 days from submission of the application. The Tax Authority, in the absence of essential elements, will refuse the application within 30 days from receipt. With regard to applications submitted by June 30, 2016, the deadline for the rejection is 180 days.
Model for the option - With Decision no. 144042 dated November 10 2015 the Model to be used for the exercise of the option for the regime of preferential taxation of income derived from the use of intangible assets has been approved. The Model must be used for the exercise of the option for the first two tax years following the one in progress as at December 31, 2014 (i.e. 2015 and 2016 for those with tax period coinciding with the calendar year) and it must be submitted electronically, using the software of the Tax Authority, within the tax period in which the tax regime begins. The transmission of the Model can be submitted directly by the taxpayer or through entitled intermediaries.
The Model has a rather simplified structure; in particular it contains sections on (i) information on processing of personal data, (ii) data of the person who exercises the option and the signatory representative and iii) commitment to electronic filing by the entitled intermediaries.
First clarifications – With Circular no. 36 / E dated December 1 2015, the Tax Authority has provided the first clarifications on the issues outlined below.
- Procedures and effects arising from the exercise of the option: it was made clear that the option is exercisable also by companies that, at the time of the transmission of the Model, are not able yet to assess whether the conditions to enter the regime or simply its cost effectiveness exist. If, following the exercise of the option, the system should not be accessible / affordable, the taxpayer will not be affected;
- Losses: if the economic exploitation of the intangible asset generates losses, these will contribute to the formation of the business income for the period. For these losses there is a "recapture" mechanism, i.e. they will be recovered when the intangible asset starts producing income; the same will, therefore, count as a reduction of gross income until they are exhausted.
- Extraordinary operations: operations of merger, division or transfer of business as a result of which the intangible asset, previously used directly, is licensed for use to other companies of the group, are not considered illegal or tax avoidance, even if the operation aims only at preventing the mandatory ruling.
Ruling - With Decision no. 154278 dated December 1 2015, the Tax Authority has illustrated the methods of presentation and the main content of the ruling on the Patent Box, both in the case in which the filing of the application is mandatory (i.e. in the event of direct use of intangible assets ) and in the case in which it is optional.
If the share of income is determined within a ruling agreement, the exercised option will be effective from the tax year in which the application is submitted. Additional documentation, together with explanatory and supplementary statements, may be presented within 120 days from submission of the application. The Tax Authority, in the absence of essential elements, will refuse the application within 30 days from receipt. With regard to applications submitted by June 30, 2016, the deadline for the rejection is 180 days.
