2017 Budget Law: principal tax news Newsletter Special Edition 2 January 2017

Transcription

1 2017 Budget Law: principal tax news Newsletter Special Edition 2 January 2017 Legal - Tax Company law and taxation

2 2017 Budget Law: principal tax news This Newsletter outlines the main tax issues contained in the 2017 Budget Law (Law no. 232 of 11 December 2016, published in Official Gazette no. 297 of 21 December 2016), which came into force on 1 January IRPEF news Tax deductions for building renovations, earthquake-protection and energy-related works and purchases of furniture (paragraphs 2-3) The Budget Law has extended until 31 December 2017 the bonus applicable to building renovation work and qualified energy-saving building work (known as the eco bonus ) as well as the 50% deduction applicable to related purchases of furniture. As regards qualified energy-saving building work on shared building spaces, the 65% IRPEF and IRES deduction applies until 31 December The deduction rate has been increased further in cases where work is carried out on the cladding of the building (70%) or where work is carried out to improve winter or summer energy savings in line with specific standards (75%). The deductions are calculated on a total of up to Euro 40,000, multiplied by the number of property units that make up the building. Earthquake-protection works have also been included in the work eligible for tax relief, with a deduction of 50% (from 1 January 2017 to 31 December 2021). Cash accounting (paragraphs 17-23) The Budget Law has changed the system governing the taxation of income of smaller compagnie, which are subject to a simplified accounting regime, replacing the accrual principle with the cash principle. Under the new rules, smaller companies must calculate the taxable amount as the difference between total revenues and other income earned (and no longer received) in the tax year, and the costs incurred in the same period in the conduct of their business; the calculation will also include the revenue provided for by art. 57 of the TUIR, i.e. the normal value of goods used by the business owner or his/her family. Under the new rules, inventory is no longer calculated. Note that this regime will be the natural regime for smaller companies that do not use the flat-rate regime. If these companies do not intend to adopt the cash regime they may opt for the ordinary accounting regime (for a minimum of 3 years). Furthermore, the accounting obligations have been simplified by introducing a register in which to enter, chronologically, the revenue earned, indicating for each amount collected: a) amount; b) details, address and municipality of residence of the payer; c) details of the invoice or other document issued. A separate register will be used to enter, chronologically and with reference to the date of payment, the costs incurred over the financial year. Productivity bonuses and company welfare (paragraphs ) The Budget Law has changed some of the tax rules governing the variable remuneration of private-sector employees, the payment of which is linked to measurable and verifiable increases in productivity, profitability, quality, efficiency and innovation, and the rules governing amounts paid as a share of a company's profits. More specifically, the changes contained in the 2017 Budget Law expand the subjective area covering the private-sector employees included in the regime in question. The current rules concern recipients of private sector employment income of up to Euro 50,000 in the year prior to the year of receipt; the new limit is Euro 80,000. The Law also increases the bonus amount that may be paid. These amounts will rise from Euro 2,000 (as provided for by paragraph 182 of art. 1 of Law no. 208/2015) to Euro 3,000. Furthermore, for companies that involve all workers equally in the organisation of the work, as provided for by collective agreements and in compliance with the inter-ministerial decree of 12 March 2016, the bonus amount rises from the current Euro 2,500 to Euro 4,000. Alongside these measures, the Budget Law has strengthened the role of collective employment contracts, intercondeferal agreements and regional collective contracts, through which it will now be possible to exclude from the IRPEF taxable base any work and services provided directly by a business and that may be used by all employees for educational, training, recreation and welfare purposes. 1

3 Business income tax - IRI (paragraphs ) With effect from 1 January 2017, self-employed persons and partnerships using the ordinary accounting regime may opt for proportional and separate taxation of business income, at a rate aligned with the IRES rate (24%) and with the possibility of deducting from the taxable base any amounts withdrawn by the business owner or by the partners themselves. The latter amounts will be included in the total taxable income for IRPEF purposes of the business owner or partner. A brief summary of the mechanism of the new business income tax (IRI) introduced by the 2017 Budget Law is described below. All business owners and partnerships, regardless of size (therefore including businesses that are entitled to adopt the simplified accounting regime), and joint stock companies with limited owners, as per art. 116 of the TUIR (limited liability companies whose revenues do not exceed the thresholds for the application of studi di settore [sector-based assessment tools used by the tax authorities to quantify the revenues of a taxpayer] - Euro 5,164,569 - and with a shareholder structure made up exclusively of up to 10 natural persons, or 20 in the case of cooperative companies) may opt for the IRI mechanism. Businesses may opt to apply the IRI through their income tax returns. The option is effective for 5 years and may be renewed. IRES and IRAP news Extension and enhancement of the rules on increasing the deduction of depreciation (paragraphs 8-13) The rules increasing depreciation rates by 40% (known as the superammortamento ) provided for by the 2016 Stability Law have been extended to In addition to this measure, the Budget Law has also introduced: hyper-depreciation (iperammortamenti), for companies purchasing the new capital goods included in the Industry 4.0 plan, which provides for an increase of 150%; super-depreciation (superammortamento) for software, for companies that adopt hyper-depreciation, which allows them to increase by 40% the purchase cost of software, systems and system integration, platforms and applications (i.e. intangible assets). This tax advantage applies to transactions performed up to 31 December 2017 or up to 30 June 2018, provided the investments refer to orders accepted by suppliers before 31 December 2017 and for which an advance deposit of at least 20% has been paid by the same date. Tax credit for research and development (paragraphs 15-16) The Budget Law has enhanced and extended the rules governing the bonus for research and development activities. The amendments are effective from the tax year following the one in progress as at 31 December More specifically, the period of time within which the research and development activities must be performed by companies in order to benefit from the tax credit has been extended by one year and, with effect from 2017, the rate has been increased from 25% to 50%. Furthermore, the maximum annual tax credit amount granted to each beneficiary has been increased from Euro 5 million to Euro 20 million. The eligible expenses have also been expanded and now include all costs relating to staff engaged in research and development activities (the classification as highly-qualified staff is no longer necessary). The subjective profile has also been extended and now includes all entities producing business income, including non-commercial entities during the course of commercial activities that produce business income and agricultural companies. Entities earning self-employment income deriving from the performance of artistic and/or professional activities are excluded. The new rules also state that the tax credit may only be used to offset other taxes with effect from the tax year following the one in which the research and development costs were incurred. This new rule is not subject to the obligation of effectiveness from the tax year in progress as at 31 December Deductibility of long-term leasing charges (paragraph 37) The Budget Law has raised the annual limit on the deductibility of long-term leasing charges for vehicles used by agents or sales representatives. 2

4 With effect from 1 January 2017, the annual limit has been increased from Euro 3,615,20 to Euro 5,164,57. The rule also extends the beneficial regime available to agents and sales representatives in relation to the maximum limit on deductions for the purchase (existing rule) and long-term leasing of vehicles and caravans (new additional rule). Exemption of SGRs (asset management companies) from the additional IRES charge of 3.5% (paragraph 49) As a result of changes introduced by the Budget Law, with effect from 1 January 2017, asset management companies (SGR) are exempt from the additional IRES charge of 3.5% introduced for credit and financial entities by the 2016 Stability Law. Essentially, the amendments will never come into force for SGRs given that their start date was 1 January Furthermore, the deductibility of interest expenses has been restored for SGRs, at a rate of 96% of the total amount. New Sabatini (paragraphs 52-57) The 2017 Budget Law has extended the New Sabatini Law (ex art. 2 of Decree Law 69/2013) and increased the contribution for investments of an innovative nature. More specifically, the deadline for granting loans has been extended by two years (until 31 December 2018). Consequently, the amount set aside for State contributions has been increased by Euro 28 million for 2017, Euro 84 million for 2018, Euro 112 million for each year from 2019 to 2021, Euro 84 million for 2022 and Euro 28 million for This measure has also been extended to include investments in technology to promote digital manufacturing (i.e. investments in big data, cloud computing, ultra-broad band, cyber security, advanced robotics and mechatronics, augmented reality, 4D manufacturing, radio frequency identification), with a 30% higher State contribution and to which 20% of the earmarked State resources are reserved. The new rules also provide for an increase from Euro 5 billion to Euro 7 billion for the maximum loan amount on the limit established at the Cassa depositi e prestiti S.p.A. Note that this measure is available to micro, small and medium-sized companies that have operating premises in Italy on the date the application is filed and that are correctly established and registered at the Register of Enterprises. Extension and enhancement of concessions for investments in start-ups and innovative SMEs (paragraphs 66-69) The 2017 Budget Law has extended and increased the tax incentives for those investing in innovative start-ups. In particular, the Law has included the deduction stated in art. 29 of Decree Law 179/2012, which provides for the following: an IRPEF deduction of 19% of the amounts invested in start-ups, rising to 25% for investments in start-ups with a social purpose or start-ups of high technological value; an IRES deduction of 20% of the amounts invested, rising to 27% for investments in start-ups with a social purpose or start-ups of high technological value. The maximum amount on which the deduction is calculated has also been increased to Euro 1 million. From 2017, the deduction will rise to 30% of the amount invested. However, these incentives are subject to approval by the European Commission. Additional benefits have also been introduced in relation to the costs and procedures for establishing innovative start-ups. These include the possibility of drawing up, and subsequently amending, the certificate of incorporation of innovative start-ups in electronic form signed with an unauthenticated digital signature (pursuant to art. 24 of the CAD) as well as the exemption from stamp duty and secretarial fees relating to the certificate of incorporation. Tax losses of start-ups owned by listed companies (paragraphs 76-80) Under the 2017 Budget Law it is now possible to transfer to listed companies the losses generated by new companies in their first three financial years of business. This rule concerns companies between which there is a relationship of ownership that grants a percentage of voting rights that may be exercised at an ordinary Shareholders' Meeting and a share of at least 20% of profits. The 20% ownership requirement must exist at the end of the tax year for which the companies take advantage of the possibility of transferring the losses. 3

5 In addition, transfers of these losses must take place using the same methods required for transfers of tax credits for which a reimbursement is requested in the income tax return. The central authority, or the entity, office or officer responsible for ordering the payment must be informed of the transfer. Transfers must also be recorded in a public instrument or private document, authenticated by a notary public. Finally, the transfer procedure must be completed within the deadline for filing the income tax return. Reduction of the ACE - economic growth aid (paragraphs ) The rules governing the economic growth aid known as ACE have been changed. The changes affect joint stock companies, individual enterprises and partnerships. Firstly, the percentage rate used to calculate the notional return from the new own capital has been reduced. More specifically, from the tax year in progress on 31 December 2018, the rate will be 2.7%, while for the tax year in progress on 31 December 2017 the rate is 2.3%. Furthermore, with effect from the 2016 tax year, for IRPEF taxpayers the difference between the shareholders' equity as at 31 December 2015 and that at 31 December 2010 will be taken as the increase in own capital. Essentially, as a result of the new rules, the ACE base for IRPEF taxpayers will be calculated similarly to that for joint stock companies, based on the net increases in equity recorded year on year. IRPEF taxpayers need not reconstruct in detail all the changes in the shareholders' equity from 1 January 2011 since the ACE base for 2016 is calculated by adding any increases recorded in 2016 (calculated using the rules for joint stock companies) to the difference between the shareholders' equity as at 31 December 2015 and that at 31 December Finally, some of the main changes introduced by the 2017 Budget Law include extending to ACE surpluses the limitations established for tax losses and surplus interest expenses in the context of company mergers. The carry forward of ACE surpluses will therefore only apply if the company that produced them passes the viability test (based on results of revenues and costs for employees) and up to the value of the shareholders' equity recorded in the financial statements in the year prior to the year in which the merger was approved. Extension of the recalculation of the value of land and equity holdings, and of the revaluation of company assets (paragraphs ) The terms for the revaluation of equity holdings and land by natural persons have been extended and the rate of the related substitute tax has been confirmed at 8%. In addition, joint stock companies and resident entities subject to IRES will be entitled to revalue the corporate assets and equity holdings stated in their financial statements for the year in progress on 31 December 2015, by paying a substitute tax at a rate of 16% for depreciable assets and 12% for non-depreciable assets; a substitute tax of 10% is payable on the increase resulting from the revaluation. Assignment or transfers of assets to shareholders. Exclusion of real estate from a company's assets (paragraphs ) The Budget Law has reopened the terms for applying the rules governing the special regime for transfers and assignments of assets to shareholders, as provided for by the 2016 Stability Law (article 1, pars. 115 to 120, Law no. 208 of 2015). The measure expands the regime to include assignments, transformations and transfers performed after 30 September 2016 and before 30 September The related instalments of substitute tax are payable by 30 November 2017 and 16 June 2018 respectively. Local taxes Freeze on regional and municipal tax rates (paragraph 42) The suspension of regional laws and municipal resolutions concerning taxes and surtaxes has been extended until However, some exceptions exist in relation to the health sector, refuse taxes and the fee for the occupation of public spaces. The increase in the TASI rate, approved by municipalities for 2016, has also been confirmed for

6 Increases in TASI already imposed for 2016 following a resolution passed by a municipal council have also been confirmed for Indirect taxes VAT Group (article 1, paragraphs 24-31) The Budget Law has introduced group VAT with effect from 1 January 2018, exercising the right expressly granted to EU Member States by Directive 2006/112/EC concerning value added tax. A new Title V-bis has therefore been added to Presidential Decree no. 633, which includes articles 70-bis to 70-duodecies. On one hand, the new rule means that internal transactions within the VAT group are not relevant for VAT purposes while, on the other, the transactions performed by or between entities belonging to the VAT group shall refer to the group itself. More specifically, this means all entities that are legally independent but that are closely linked by financial, economic and organisational relationships, and are established within the same Member State, can be considered a single taxable person for VAT purposes. Subjective requirements and restrictions Article 70-bis regulates the subjective requirements for eligibility for the group rules. More specifically, taxable persons that are based in Italy and carry on a business activity, art or profession may establish a VAT group, provided the necessary financial, economic and organisational requirements (laid down in article 70-ter) are met. The financial requirement is met when a situation of indirect or direct control, pursuant to art. 2359, par. 1, no. 1) of the Italian Civil Code, exists from at least 1 July of the previous calendar year, or when the participants in the VAT group are directly or indirectly controlled by the same entity, provided it is resident in Italy or in another State with which Italy has entered into an agreement that ensures the effective exchange of information. As far as the economic requirement is concerned, this is considered met when a similar, complementary or inter-dependent activity is performed, or in any case one that wholly or largely benefits one or more of these. Finally, in terms of organisation, the requirement is met when there is legal or effective coordination between the decision-making bodies of the companies, even if performed by another subject. The existence of the financial requirement leads one to presume that the economic and organisational requirements are also met. Therefore, to demonstrate that the economic and organisational requirements are not met, it is necessary to file an advance request for a ruling in accordance with art. 11, par. 1, lett. b), Law no. 212/2000 (Taxpayers' Statute). The following may not participate in a VAT group: premises and permanent establishments situated abroad; companies whose business is subject to court-ordered seizure (pursuant to art. 670 of the Code of Civil Procedure); in the event of a number of companies, the rule applies if even only one of these is under seizure; companies subject to insolvency proceedings which, as specified at the time of a parliamentary review, are those listed in article 70-decies, par. 3, third section. In order to determine the start date of the insolvency proceedings preventing a company's admission into a VAT group, the rule makes reference to: the effective date of the provision ordering the seizure, the date of the judgement declaring the bankruptcy, the date of the decree approving the arrangement with creditors, the date of the provision ordering the receivership, the date of the decree ordering the extraordinary administration procedure for large companies in trouble or the date of the meeting resolution for ordinary liquidations. companies that have gone into liquidation. Setting-up of a VAT group A VAT group is set up after all the taxable persons belonging to it (that meet the legal requirements and are based in Italy) have exercised the option. To exercise the option, a specific declaration (see article 70-duodecies, par. 5) must be filed online by the group's representative. The option is binding for three years and is renewed automatically every year unless it is revoked. If the declaration is filed between 1 January and 30 September, the option will be valid from the following year. Otherwise, if the declaration is filed between 1 October and 31 December, the option will take effect from the second year after the year it is filed. 5

7 The revocation of the option, which applies for all the companies belonging to a VAT group, is also effective from the following year if it is filed between 1 January and 30 September, whilst, for declarations filed between 1 October and 31 December, the revocation will take effect from the second year after it was filed. Effects of participating in a VAT group As mentioned above, by exercising the option, companies belonging to a VAT group lose their subjective autonomy with regards to value added tax and a new taxable person is created (the VAT group), which acts like any taxable person and is subject to all VAT regulations and specific implementation provisions. Consequently, intra-group transfers of goods and supplies of services are not considered VAT-relevant, whilst sales made by a member of the VAT group to a subject outside the group are considered to have been performed by the VAT group. Likewise, purchases made by a company belonging to a VAT group from a subject outside the group are considered to have been made by the VAT group. As regards any deductible excess tax emerging from the annual tax return for the year before the first year of participation in the VAT group, this is not transferred to the group itself: a refund of the amount may be requested even in the absence of the specific conditions laid down by article 30 of Presidential Decree no. 633 of 1972, or it may be offset. VAT on changes in the taxable base or the tax (paragraph 567) The Budget Law has brought back the rule stating that the issuing of a VAT credit note and the exercising of the related right to deduct the tax corresponding to reductions may take place, in the event of non-payment due to insolvency proceedings, only once these procedures have been unsuccessfully concluded. Article 26 of Presidential Decree no. 633 of 1972 (VAT Decree) has been amended accordingly. Other changes Reduction in excise duty on beer (paragraph 48) With effect from 1 January 2017, the excise duty on beer has been reduced from Euro 3,04 to Euro 3,02 per hectolitre and degree Plato. Measures to combat tax avoidance and evasion (paragraphs ) The Budget Law has introduced a series of amendments to both the regulations governing the movement of products subject to duty suspension arrangements and those governing tax warehouses for energy products, with the aim of combatting evasion of excise duty. The amendments include the introduction of paragraph 15-bis to article 6 TUA, which regulates the methods of movement of goods subject to duty suspension arrangements (i.e. before the duty is paid). This rule states that tankers and lighters used to transport products under duty suspension arrangements must be equipped with systems to track locations and measure the amounts unloaded. The terms and procedures for applying this rule will be laid down by the Director of the Customs and Monopolies Agency. With reference to registered consignees, that is to say persons who are not the owners of tax warehouses and who are authorised to receive products that are subject to duty suspension arrangements, the Law specifies that the authorisation is granted based on the activity the subjects carry out at their own warehouse. They must also keep and account for products subject to duty suspension arrangement separately from those subject to excise duty. Furthermore, the rule governing tax warehouses for energy products has also been rewritten (article 23 of the TUA). With effect from 2020, more stringent rules will apply for the issuing of licences and authorisations to manage warehouses. Crowdfunding for SMEs (paragraph 70) The possibility of applying for equity crowdfunding has been extended to SMEs. More specifically, in the regulations on online portals for collecting risk capital set forth in Legislative Decree 58/98, the reference to innovative start-ups and SMEs has been replaced with the term SME in general. This means enterprises with less than 250 employees and annual turnover of less than Euro 50 million or a balance sheet total lower than Euro 43 million. 6

8 SMEs may now therefore raise finance of their own via online portals authorised by Consob. Following an online investment, each investor acquires a holding in the capital of the enterprise, with all the related rights over assets and administrative rights. Fieldfisher - Studio Associato Servizi Professionali Integrati is available to provide further information and clarification with regard to this matter and also regarding to the application of the rules and regulations under review. 7

9 Contacts Milan - Headquarters Via della Moscova, Milano Tel Fax info.italy@fieldfisher.com Rome Via Barberini, Roma Tel Fax Turin Corso Matteotti, Torino Tel Fax Venice Viale Ancona, Mestre (VE) Tel Fax Fieldfisher - Studio Associato Servizi Professionali Integrati Fieldfisher - Studio Associato Servizi Professionali Integrati is a leading Italian professional services firm offering legal, tax and labour law consultancy. With more than 170 professionals and offices in Milan, Rome, Turin and Venice, the Firm offers highlevel professional consultancy, integrating varied professional experience with sector specialisations. The Firm's strategy is to focus on the highest-standard specialisations in the different areas of law, whilst maintaining an interdisciplinary spirit of teamwork amongst its professionals. This approach enables us to provide clients with timely responses aimed at resolving specific problems. The Firm is a member of Fieldfisher - one of the top 10 global networks - and a privileged partner of F2A which provides Human Resource and Finance & Administration services in outsourcing. Fieldfisher in the world Fieldfisher is a European law firm with market leading practices in many of the world's most dynamic sectors characterized by a forward-thinking organisation with a particular focus on technology, finance & financial services and energy & natural resources. A growing European network of offices supports an international client base alongside our Silicon Valley and Shanghai teams. Among clients it count social media sites and high street coffee chains as well as pharmaceutical, life sciences and medical devices companies, energy suppliers, banks and government departments. Clients choose to work with Fieldfisher because we deliver commercial, pragmatic and innovative solutions through our exceptional legal expertise and experience, on time and on budget. The network has more than 570 lawyers spread over 13 locations, all providing highly commercial advice based on an in-depth understanding of our clients' needs. The offices are in Brussels, Düsseldorf, Hamburg, London, Manchester, Milan, Munich, Paris, Rome, Shanghai, Silicon Valley, Turin and Venice. This publication is not a substitute for detailed advice on specific transactions and should not be taken as providing legal advice on any of the topics discussed. Copyright Fieldfisher LLP All rights reserved. Fieldfisher LLP is a limited liability partnership registered in England and Wales with registered number OC318472, which is regulated by the Solicitors Regulation Authority. A list of members and their professional qualifications is available for inspection at its registered office, Riverbank House, 2 Swan Lane, London, EC4R 3TT. We use the word partner to refer to a member of Fieldfisher LLP, or an employee or consultant with equivalent standing and qualifications. 8