Italy: 2018 Italy Budget Law

1a. Super amortization 

The regime sets a 30% additional cost on the investments made from 1st January 2018 to 31st December 2018 (or 30th June 2019, provided that the purchase orders are accepted by the seller by 31 December 2018 and at least 20% of the price is paid by the same date). The additional cost of the investments produces a correspondent deductible depreciation. Such regime would not apply to buildings, assets with a depreciation rate of less than 6.5%, cars (except heavy vehicles such as trucks, buses, etc.). The super amortization is applied for both purchase and leasing agreement. 

1b. Hyper amortization 

The Law states a 150% hyper amortization forpurchase costs of new high-tech tangible assets correct specific digital and technological transformation processes under the model promoted by the Italian Government plan for industrial growth named “Industry 4.0 Plan”. The investments have to be made by 31st December 2018 or by 31st December 2019, provided that orders are accepted by seller by 31st December 2018 and at least 20% of the price is paid by the same date. 

Investments of certain intangible assets are closely linked to these high-tech assets and the Law extends facilitation to these assets. However these intangible assets are facilitated with a 40% bonus when they operate as “stand alone”, that is when they are not intrinsically linked to the operation of the tangible assets. In presence of an “embedded” software purchased together with a good “Hyper”, the whole cost of the source (comprehensive that of the software) will benefit from the 150% incentive.

With regard to the additional 40% extra-amortization, the intangible assets are: supply chain system aimed at e-commerce drop-shipping and other software and platforms related to 3D reconstructions. 

2. New definition of Permanent Establishment (P.E.) 

The Law, according to OECD BEPS Action 7 introduces, the possibility of having a PE presence in Italy even when a company does not have a physical presence into the Italian territory. 

The “anti-fragmentation rule” has been introduced, to avoid that a business be split between several companies connected for the sole purpose of avoiding the existence of a P.E.

3. Web tax 

It is a new tax on digital transactions, levied at 3% rate on the value of each digital transaction, imposed on Italian residents and non-Italian residents business rendering more than 3,000 digital business to business transactions in a calendar year, paid by the buyers of the services. It will be applied from 2019. 

4. Tax regime of certain capital incomes for individuals 

Incomes from disposal of qualifying participations realized by individuals, acting as non-entrepreneurs, with regard to ownership and transfer of corporate participations are to be subjected to the substitutive 26 % tax rate. 

Such provision applies to income from capital earned from 01/01/2018 (provisional measures have been introduced) to the capital gain realized starting from 1/01/2019. In addition, the compensation between “qualified” capital gains and “unqualified” capital losses (and vice versa), previously excluded, is also allowed. 

5. Dividend and income arising from participations in companies resident in low tax jurisdictions 

The Law introduces taxation of 50% on the dividend distributed by a foreign entity carrying out its main activity in industrial or commercial activity in the market of the country that previously were fully taxed. 

When 50% of dividend is taxed, an undertaking tax credit is allowed for any taxes paid abroad by the subsidiary. 

The law partially modified the “black list” dividend regime which statesthat dividend matured during the previous fiscal years when the subsidiary was resident in country is not included in the list of the Decree issued on 11/21/2001, and distributed starting from FY 2015 are not considered as black list.

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