Law no. 178/2020 (so-called “Budget Law 2021”) confirmed the allowances concerning tax credits that constitute the so-called “National Industry 4.0 Plan”.
The above plan is aimed to encourage and lead businesses in the technology and environmental sustainability transition and re-launches those investments that could be penalized by the pandemic crisis and the subsequent macro-economic recession.
With an allotment of approx. 24 billion Euro, the plan supports – both from a quantity perspective and in terms of admitted categories – investments in (i) new capital goods, (ii) R&D/technology innovation/design, and (iii) the so-called “training 4.0”.
In order to support and incentivize businesses investing in new capital goods – either tangible or intangible –, being functional to the technology/digital transformation of production processes and aimed to production sites located within the territory of State, Budget Law 2021 strengthens and extends up to 2022 the tax credit provided for investments in capital goods, already introduced by Law no. 160/2019 for 2020.
All businesses residing in Italy (including permanent establishments of non-resident entities) can benefit from the tax credit, regardless of their legal form, industry, size, and tax regime applied for the calculation of income, provided that they comply with rules on safety at workplace being applicable in their respective industry and that they paid social security contributions for their employees.
Professionals and artists can also benefit from the tax credit, though limited to capital goods other than those provided under the so-called “Industry 4.0” (i.e. “ordinary assets”).
All investments in new tangible and intangible capital goods – both those related to the so-called “Industry 4.0” (assets listed, respectively, under Appendix A(1) and B(2) to Law no. 232/2016), and those being not related to it, i.e. the so-called “ordinary” assets – are concerned by the provision. Investments in such assets must be aimed to production units located within the territory of State.
On the other hand, the following assets are expressly excluded: vehicles and other means of transport under art. 164 of TUIR; assets for which a tax rate lower than 6.5% is provided under Ministerial Decree dated 31.12.88; buildings; assets under Appendix 3 to Law no. 208/2015(3); free-transferable assets of companies operating in the following industries: energy, water, transport, infrastructures, post offices, telecommunications, collection and purification of waste water, and of waste collection and disposal.
The new tax credit applies to investments made from 16 November 2020 to 31 December 2022.
All investments made from 1 January 2023 to 30 June 2023 are also included, but only provided that – by 31 December 2022 – a purchase order of the concerned asset, being accepted by the seller, is made and that advances for at least 20% of the purchase cost of the asset are paid.
With reference to investments in tangible and intangible assets that are not related to the so-called “Industry 4.0”, made from 16 November 2020 to 31 December 2021 (or up to 30 June 2022, provided that a purchase order of the concerned asset, being accepted by the seller, is made and that advances for at least 20% of the purchase cost of the asset are paid by 31 December 2021), a tax credit equal to 10% of the cost determined pursuant to art. 110 of TUIR is provided.
If investments are made from 1 January 2022 to 31 December 2022 (or to 30 June 2023, provided that the above-described requirements are met), tax credit is equal to 6%.
As concerns investments in tangible and intangible assets related to Industry 4.0 (Appendix A to Law no. 232/2016), tax credit is different depending on the period in which the investment is made and on its amount.
For investments made up to 31 December 2021 (or 30 June 2022, provided that the above-described requirements are met) tax credit is equal to: 50% of the investment up to Euro 2.5 million; 30% of the investment for the amount exceeding Euro 2.5 million and up to 10 million; 10% of the investment between Euro 10 million and 20 million.
For investments made from 1 January 2022 to 31 December 2022 (or 30 June 2023, provided that the above-described requirements are met): 40% of the investment up to Euro 2.5 million; 20% of the investment for the amount exceeding Euro 2.5 million and up to 10 million; 10% of the investment between Euro 10 million and 20 million.
With reference to investments in intangible assets related to Industry 4.0 (Appendix B to Law no. 232/2016), tax credit is equal to 20% of the cost, within the limit of Euro 1 million, regardless of the period in which the investment is made
The benefit under analysis is not subject to IRES nor to IRAP taxation. Moreover, it is not relevant for the application of articles 61 and 109 of TUIR, para. 5, concerning the calculation of non-deductible interest payable and expenses, respectively, due to the presence of revenues or proceeds excluded from IRES taxation.
Tax credit is granted starting from the year in which assets come into operation in case of investments in “ordinary” assets, and starting from the year in which they are interconnected, in case of investments in “Industry 4.0” assets.
Tax credits can be used, without the need to previously file the tax return, exclusively through F24 form by offsetting 3 equal annual instalments. Subjects with revenues or considerations lower than Euro 5 million can offset the credit in a single annual instalment.
If the amount of the year is not fully used, according to the instructions provided by the Revenue Office during “Telefisco 2021”, the remaining amount can be used in following fiscal years.
The offset amount is not subject to the limits established for tax credits entered under the “RU” section of the tax return, nor to the annual offset and utilisation limits in case of overdue tax payables entered in the taxpayers’ list, whose amount is higher than Euro 1.500.
If assets concerned by the benefit are sold against a consideration or transferred to production sites located abroad – even if owned by the same subject – by 31 December of the second year following that in which the same assets come into operation or are interconnected tax credit is proportionally reduced, excluding the relevant cost from the original calculation base.
The tax credit can be combined with other benefits that concern the same costs only if this combination, even considering the non-relevance for the calculation of income for IRES purposes and of the taxable base for IRAP purposes, does not generate a ratio between the total benefits obtained and the cost incurred higher than 1.
Within the so-called “National Industry 4.0 Plan”, Budget Law 2021 includes some provisions on tax credit for investments in research and development, technology innovation, and design activities, extending their period of application by two further years and increasing the percentages and maximum utilization limits of the benefit, as already provided under Law no. 160/2019.
All businesses, of any legal form, size and regime applied for the definition of business income, can benefit from the tax credit.
Research and development costs are admitted to the tax credit if they are related to technology and scientific basic research, industrial research, and experimental development activities, as defined under art. 2 of Ministerial Decree dated 26.5.2020 based on the criteria included in OECD’s Frascati Manual.
As concerns technology innovation activities, those that can benefit from the tax credit are those aimed to the realization of new or substantially improved products or production processes for an environmental transition or digital innovation purpose. These are defined under articles 3 and 5 of Ministerial Decree dated 26.5.2020 based on the criteria included in OECD’s Frascati Manual.
Lastly, design activities that can benefit from the tax credit are those performed for the ideation and realization of new products and samples (please refer to art. 4 of Ministerial Decree dated 26.5.2020) by businesses operating in the following industries: textile and fashion, footwear, eyewear, goldsmith’s art, furniture and ceramics.
The tax credit calculation base for the abovementioned activities – despite some specific limits/rules for some cases – is generally made up of:
The tax credit applies to the 2020 tax period an until the tax period underway at 31 December 2022.
Budget Law for 2021 increased the amount of the tax credit (compared to what already provided under Law no. 160/2019. Below is an overview of the provisions now in force:
Similarly to tax credits on investments in new capital assets, this tax benefit is not subject to the application of IRES or IRAP and, furthermore, it is not considered for the application of articles 61 and 109, para. 5 of TUIR relevant to the calculation of the non-deductibility of interest expenses and expenses relevant to revenues or proceeds excluded from IRES taxation.
Tax credits can be used exclusively in the F24 form to offset other taxes in 3 yearly instalments of an equal amount, starting from the tax period following the one in which they have been accrued and subject to the actual fulfilment of the reporting obligations provided.
The actual disbursement of eligible expenses and their matching with the accounting documentation prepared by the company need to result from the dedicated certification issued by the appointed auditors.
For the purposes of further checks, companies benefitting from the tax credit are required to prepare and keep in their files a sworn technical report illustrating the aims, contents and outcomes of the eligible activities carried out in each tax period with reference to the projects in progress.
Similarly to the tax credit for new investments in capital assets, this tax credit can be cumulated with other tax benefits relevant to the same costs, only if such cumulation does not lead to have a ratio between total benefits and costs borne higher than 1 - also considering that they do not contribute to the formation of income and of the IRAP taxable base.
Provisions relevant to tax credits relevant to expenses for the so-called 4.0 training have also been strengthened under Budget Law for 2021, with specific reference to the extension of the duration of norm (already amended by Law no. 160/2019) and to the types of eligible expenses. Below is an overview of the main features of this tax credit.
The tax benefit are theoretically addressed to all companies, regardless of their legal form, industry sector in which they operate or accounting regime adopted.
Eligible expenses are those pertaining to training activities aimed at acquiring and consolidating technology skills relevant to technologies included in the national Industry 4.0 plan, such as: big data and data and analytics, cloud and fog computing, cyber security, cyber-physical systems, rapid prototyping, augmented reality visualisation systems, advanced and collaborative robotics, human-machine interface, additive manufacturing, internet of things and of machines and digital integration of business processes. These activities mandatorily need to be applied to specific categories of activities (4) listed in Annex A to Law no. 205/2017.
The following costs are eligible:
Online trainings can also be eligible for this tax benefits, upon condition that specific requirements are met (circular letter by the Ministry of Economic Development no. 412088 dated 31.12.2018).
The tax benefit already in force up to 31 December 2020 will be applicable until 31 December 2022 further to Budget Law for 2021.
The tax credit granted varies depending form the company size:
The tax credit has been increased for all companies - without prejudice to the maximum yearly thresholds - up to 60% in case the addressees of the eligible training fall within the categories of disadvantaged or seriously disadvantaged workers, as defined by the Decree of the Ministry of Labour and Social Policies dated 17 October 2017.
Such tax credits do not contribute to the formation of income, nor of the IRAP taxable base. They are also not relevant for the purpose of the application of the provisions under art. 61 and 109, para. 5 of the T.U.I.R., as per Presidential Decree no. 917 dated 22 December 1986.
Tax credits can be used exclusively in the F24 form to offset other taxes, starting from the tax period following the one in which the eligible expenses were borne. Their use to offset other taxes in the box RU of the tax return is not subject to yearly limitations.
Should the aid to training concurrent with the tax credit be referred also to personnel costs of trainees, the company will have to check that the cumulation of the two incentives does not exceed the maximum amount set forth under regulation no. 651/2014 concerning aids to training.
(1) Appendix A – Assets that are functional to technology and/or digital transformation of companies within Industry 4.0, including a list of assets divided into three categories:
(2) Appendix B – Intangible assets (software, systems and system integration, platforms and applications) related to investments in Industry 4.0 tangible assets
(3) Bottling of natural mineral waters, mains; Production and distribution of natural gas, pipes for civil uses (urban networks); Thermal and hydrothermal plants, mains; Production and distribution of natural gas, pipelines for long-distance transport from production sites; Production and distribution of natural gas, pipelines for long-distance transport from gas and water deposits (supply and connection pipes); Rolling stock (excluding locomotives), except for machinery and equipment, even if moving on rails, needed for the performance of maintenance works; Airplane including complete equipment (including engine and except for specific rules due to safety requirements)
(4) Activities relevant to sales and marketing, IT, manufacturing techniques and technologies, within the limitations set forth in the abovementioned Annex.
For more information, please contact Alessandro Foderà
