[January 11th, 2019] Tax Newsletter - Budget Law 2019
The Budget Law 2019 (Law no. 145/2018) was published in the Official Gazette no. 302 dated December 31, 2018. Here below is a brief summary of the main tax measures concerning companies.
IRES reduced on profits reinvested in instrumental goods and employment
From the fiscal year following the one in progress at December 31, 2018 (2019 for taxpayers adopting the calendar year), the IRES taxable base may be subject to an IRES rate of 15% for the portion corresponding to the profits of the previous year accrued to available reserves within the limits of the sum between:
The “hyper-amortization” discipline is extended to new instrumental assets (Annex A to Law 232/2016) intended for production facilities located in the territory of the State.
The increase in the purchase cost varies from 50% to 170% depending on the amount of investments made.
The 40% increase for intangible assets for those who benefit from the “hyper-amortization” is also extended.
R&D Tax credit
From the fiscal year following the one in progress at December 31, 2018 (2019 for taxpayers adopting the calendar year), the tax credit is generally granted at 25% and can only be increased to 50% in the following cases:
Tax credit for the purchase of recycled plastic products
For 2019 and 2020, the Budget Law recognizes a tax credit equal to 36% of the expenses for the purchase of (i) products made with materials from the separate collection of plastic packaging and (ii) biodegradable and compostable packaging according to UNI EN 13432:2000 or from the separate collection of paper/aluminum.
Tax credit for 4.0 training
The credit is extended for training costs incurred in the fiscal year following the one in progress at December 31, 2018 (2019 for taxpayers adopting the calendar year). The credit is also redefined as follows:
The Law specifies that the credit is granted within the limits of the “de minimis” Regulation (the total amount of “de minimis” aids granted by a Member State to a single enterprise may not exceed EUR 200,000 over three fiscal years).
ACE Abrogation
The ACE is repealed with effect from the fiscal year following the one in progress at December 31, 2018 (2019 for taxpayers adopting the calendar year). For the fiscal year in progress at December 31, 2018, the benefit is computed with a notional rate of 1.5%. The previous rules apply to the carry-forward of the excess of the fiscal year in progress at December 31, 2018.
Repeal of the tax credit for IRAP taxpayers without employees
The 10% tax credit on gross IRAP for taxpayers without employees is repealed.
IMU Deduction
As from January 1, 2019, the IMU related to instrumental real estate properties becomes deductible for IRES purposes at the rate of 40%.
Interest expenses deduction for real estate companies
The law reinstates the rule according to which interest expenses related to loans secured by mortgage on real estate properties to be rented are not subject to the limitations set out in art. 96 of the Income Tax Code (TUIR) for companies that effectively and predominantly carry out real estate activities.
Revaluation of business assets
Tangible and intangible goods (excluding stock-in-trade goods) and participations (booked as assets) in controlled and related companies resulting from the financial statement of the fiscal year in progress at December 31, 2017 may be revalued in the financial statement of the fiscal year following the one in progress at December 31, 2017 (2018 for taxpayers adopting the calendar year). The substitute tax for the recognition of higher values is 16% for depreciable assets and 12% for non-depreciable assets. The effects of the revaluation are recognized from the third fiscal year following the revaluation (from 2021 for taxpayers adopting the calendar year) and for capital gains/losses from the beginning of the fourth subsequent fiscal year (from 2022 for taxpayers adopting the calendar year). The revaluation surplus may be recognized with an additional substitute tax of 10%.
VAT provisions
Neutralization of VAT rates increases
The 2019 increases in VAT rates are neutralized, while the increases in VAT rates for 2020, 2021 are adjusted.
Data transmitted to the Health Card System
For 2019, taxpayers required to send data to the Health Card System cannot issue electronic invoices for transactions whose data are to be sent to the System itself.
Other news
Tax on digital services
The Law introduces the tax on digital services and, at the same time, repeals the so-called "web tax". The tax is applied to service providers (who meet certain revenues thresholds) to the extent of 3% of revenues from the provision of services such as: (i) the transmission on a digital interface of advertising aimed at users of the same interface, (ii) the availability of a multilateral digital interface that allows users to be in contact and interact with each other, (iii) the transmission of data collected from users and generated by the use of the digital interface. Intra-group services are excluded.
Retroactivity of the current wording of Article 20 of Presidential Decree 131/1986
The amendments made by Law 205/2018 (Budget Law 2018) to Article 20 of Presidential Decree 131/1986, concerning the requalification of deeds for the purposes of the registration tax, are “authentic interpretation” and therefore also apply retroactively with respect to the entry into force of the same (i.e. also to deeds registered before January 1, 2018).
IRES reduced on profits reinvested in instrumental goods and employment
From the fiscal year following the one in progress at December 31, 2018 (2019 for taxpayers adopting the calendar year), the IRES taxable base may be subject to an IRES rate of 15% for the portion corresponding to the profits of the previous year accrued to available reserves within the limits of the sum between:
- investments in new tangible instrumental goods (other than real estate and vehicles assigned to employees for most of the fiscal year period) and
- cost of permanent/temporary employees.
The “hyper-amortization” discipline is extended to new instrumental assets (Annex A to Law 232/2016) intended for production facilities located in the territory of the State.
The increase in the purchase cost varies from 50% to 170% depending on the amount of investments made.
The 40% increase for intangible assets for those who benefit from the “hyper-amortization” is also extended.
R&D Tax credit
From the fiscal year following the one in progress at December 31, 2018 (2019 for taxpayers adopting the calendar year), the tax credit is generally granted at 25% and can only be increased to 50% in the following cases:
- expenses related to personnel directly employed in R&D activities,
- contracts signed with universities, research institutes and similar bodies, as well as with resident start-ups and innovative SMEs, for the direct performance of R&D activities eligible for the tax credit.
Tax credit for the purchase of recycled plastic products
For 2019 and 2020, the Budget Law recognizes a tax credit equal to 36% of the expenses for the purchase of (i) products made with materials from the separate collection of plastic packaging and (ii) biodegradable and compostable packaging according to UNI EN 13432:2000 or from the separate collection of paper/aluminum.
Tax credit for 4.0 training
The credit is extended for training costs incurred in the fiscal year following the one in progress at December 31, 2018 (2019 for taxpayers adopting the calendar year). The credit is also redefined as follows:
- small companies: 50% of eligible expenses, up to a maximum of EUR 300,000 per year;
- medium companies: 40% of eligible expenses, up to a maximum of EUR 300,000 per year;
- big companies: 30% of eligible expenses, up to a maximum of EUR 200,000 per year.
The Law specifies that the credit is granted within the limits of the “de minimis” Regulation (the total amount of “de minimis” aids granted by a Member State to a single enterprise may not exceed EUR 200,000 over three fiscal years).
ACE Abrogation
The ACE is repealed with effect from the fiscal year following the one in progress at December 31, 2018 (2019 for taxpayers adopting the calendar year). For the fiscal year in progress at December 31, 2018, the benefit is computed with a notional rate of 1.5%. The previous rules apply to the carry-forward of the excess of the fiscal year in progress at December 31, 2018.
Repeal of the tax credit for IRAP taxpayers without employees
The 10% tax credit on gross IRAP for taxpayers without employees is repealed.
IMU Deduction
As from January 1, 2019, the IMU related to instrumental real estate properties becomes deductible for IRES purposes at the rate of 40%.
Interest expenses deduction for real estate companies
The law reinstates the rule according to which interest expenses related to loans secured by mortgage on real estate properties to be rented are not subject to the limitations set out in art. 96 of the Income Tax Code (TUIR) for companies that effectively and predominantly carry out real estate activities.
Revaluation of business assets
Tangible and intangible goods (excluding stock-in-trade goods) and participations (booked as assets) in controlled and related companies resulting from the financial statement of the fiscal year in progress at December 31, 2017 may be revalued in the financial statement of the fiscal year following the one in progress at December 31, 2017 (2018 for taxpayers adopting the calendar year). The substitute tax for the recognition of higher values is 16% for depreciable assets and 12% for non-depreciable assets. The effects of the revaluation are recognized from the third fiscal year following the revaluation (from 2021 for taxpayers adopting the calendar year) and for capital gains/losses from the beginning of the fourth subsequent fiscal year (from 2022 for taxpayers adopting the calendar year). The revaluation surplus may be recognized with an additional substitute tax of 10%.
VAT provisions
Neutralization of VAT rates increases
The 2019 increases in VAT rates are neutralized, while the increases in VAT rates for 2020, 2021 are adjusted.
Data transmitted to the Health Card System
For 2019, taxpayers required to send data to the Health Card System cannot issue electronic invoices for transactions whose data are to be sent to the System itself.
Other news
Tax on digital services
The Law introduces the tax on digital services and, at the same time, repeals the so-called "web tax". The tax is applied to service providers (who meet certain revenues thresholds) to the extent of 3% of revenues from the provision of services such as: (i) the transmission on a digital interface of advertising aimed at users of the same interface, (ii) the availability of a multilateral digital interface that allows users to be in contact and interact with each other, (iii) the transmission of data collected from users and generated by the use of the digital interface. Intra-group services are excluded.
Retroactivity of the current wording of Article 20 of Presidential Decree 131/1986
The amendments made by Law 205/2018 (Budget Law 2018) to Article 20 of Presidential Decree 131/1986, concerning the requalification of deeds for the purposes of the registration tax, are “authentic interpretation” and therefore also apply retroactively with respect to the entry into force of the same (i.e. also to deeds registered before January 1, 2018).
