Italy: The 2019 Budget Law

“Hyper” depreciation 

The Budget Law 2019 extends the ‘hyper’ depreciation regime (introduced by the Budget Law 2017) to investments made in 2019 in tangible assets used in the technological and digital development of enterprises covered by the Industry 4.0 Plan promoted by the Italian government. 

For FY 2019, the additional amortization amounts to: 

- 170% for investments up to €2.5 million 

- 100% for investments from €2.5 to €10 million 

- 50% for investments from €10 to €20 million 

No additional amortization is provided for investments over €20 million.

Reduced corporate income tax at 15% 

As of the Fiscal Year 2019, companies meeting certain prerequisites will benefit from a reduction of the standard 24% CIT (IRES) by nine percentage points on a portion of their income. Specifically, a reduced 15% CIT rate will apply to the lower of an amount of income corresponding to: (i) the previous fiscal year’s profits set aside for balance sheet reserves (other than nondistributable reserves); or (ii) the total of investments into new fixed assets and costs to hire new personnel. 

The Law provides detailed rules for the calculation of the eligible profits. 

New Web Tax The Law introduces a new tax applicable to the provision of digital services by repealing the old measure introduced by the 2018 Budget Law but never entered into force. 

According to the new rules, the Italian tax shall now be due by both individuals and enterprises (both resident or nonresident in Italy) carrying on business activities that, individually or at the group level, jointly meet during the fiscal year the following thresholds (the Taxable Persons): 

- Total amount of revenues (wherever arising) not lower than €750,000,000 

- An amount of revenue derived from digital services (arising in Italy only) not lower than €5,500,000 

The Italian Web tax shall be applied only to revenues derived from the following digital services (the Digital Services): 

a) Provision of advertising on a digital interface targeted to users of the same interface 

b) Provision of a digital multilateral interface aimed at allowing users to interact (also in order to facilitate the direct exchange of good and services) 

c) Transmission of data collected from users and generated by the use of a digital interface 

Tax credit for R&D 

The 2019 Budget Law amends the R&D credit by reducing the general applicable rate from 50% to 25%. Specifically, starting from 2019, while the tax credit will be applied generally in the amount of 25%, a 50% rate is applied only to: (i) expenses incurred with respect to R&D contracts signed with universities, and research organizations as well as with independent innovative start-ups and Small and Medium Enterprises (SMEs); and (ii) expenses for employees directly hired to carry out R&D activities. 

The maximum annual amount of the tax credit granted to each company will be €10 million. 

Extension of the step-up regime for the cost of business assets and unlisted shares 

The Budget Law 2019 extends the deadline for the optional step-up of the tax cost of assets and shares in unlisted entities, held on 1st January 2019 by resident individuals and by non-resident entities without a permanent establishment in Italy. 

The step-up is subject to payment of a substitute tax on the cost, to be appraised by 1 July 2019, and is applied as follows: 

- 11 percent in the case of shares representing more than20 percent of the voting rights or 25 percent of the stated capital

- 10 percent in the other cases 12 percent for depreciable assets or 16 percent in the case of non depreciable assets.

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