Italy: Stability Law for 2018 introduces measures for businesses

December 14, 2017

The new draft budget plan, the so-called 'Stability Law for 2018', launched in the past few weeks by the Italian government, defines the lines of public finance for next year and focuses on important fiscal and spending measures.

The Stability Law for 2018 will come into force in January and introduces measures and tax incentives for companies that are in the process of being approved. Below is an overview of the main measures.

Tax credit for training costs relating to Industry 4.0

With the new budget law, the Italian government puts the programme for industry in the foreground and continues to invest billions to extend the concept of Industry 4.0.

In particular, incentives for training costs in "activity 4.0" come to fruition for businesses through recognition that all companies which, starting from 2018, invest in innovative training earn a tax credit of 40% of the amounts incurred for expenses related to the sole cost of the employee for the period in which he/she is engaged in training activities pertaining to R&D projects.

Therefore, eligibility for the tax credit can only be obtained on the activities carried out to acquire or consolidate the knowledge of the technologies provided by the National Enterprise Plan 4.0 such as cybersecurity and big data, cloud and fog computing, robotics and internet of things and digital integration of business processes and similar.

The tax credit is recognised up to a maximum annual amount of €300,000 ($356,000) for each beneficiary.

Web tax on dematerialised assets

Waiting for an international consensus, Italy is going to introduce – starting from 2019 – a tax on fully dematerialised services offered by non-resident companies to resident persons in Italy, i.e. business to business and business to consumer.

The web tax will be 6% of revenues and will specifically affect revenues generated in Italy by digital multinationals, ranging from e-commerce to online advertising that use platforms and digital applications, have virtual stores and collect personal data. A decree of the Ministry of Finance will be delivered by April 30 2018 and is expected to clarify the activities that will be the subject to this new tax (e.g. border between sale of services vs. sale of goods).

In general terms, the envisaged mechanism provides that banks and financial intermediaries will act as tax substitutes, withholding 6% of the price paid by the client (service receiver) on behalf of the Italian tax administration, so paying directly to the service provider 94% of the amount due by the client. These provisions will apply only to those operators that will exceed specific thresholds in terms of number of transactions (1,500 transactions per semester) and overall value (not less than €1.5 million).

Extension of super-amortisation and hyper-amortisation to 2018

Along with the Industry 4.0 chapter, the 2018 fiscal incentive known as "super- amortisation" is re-confirmed, which is the third year of application, but at a rate decreased from 140% to 130%.

This incentive facilitates investments in new equipment, plant and machinery investments made by companies (including self-employed workers). The extension to investments made in 2018, providing for the possibility of receiving the goods to be delivered by June 30 2019, is subject to payment of a deposit of at least 20% of the amount of the asset by 2018.

It also prolongs the "hyper-amortisation" of 250% for high digitised assets, for purchases made in 2018 and with the obligation of a payment of a deposit of 20% and then get the goods delivered by 2019.

Likewise, hyper-amortisation of 140% of intangible assets has been extended to 2018. This measure aims to promote the technological and/or digital transformation processes in Industry 4.0, and essentially refers to the purchase of functional goods to digitise production processes and to favour technology and digital investments in the technological growth of enterprises.

New 2018 Sabatini Law for the purchase of instrumental goods

The 2018 Stability Law renews the "New Sabatini Law", a contribution from the Ministry of Finance to facilitate the purchase of new instrumental goods (tangible assets) aimed at covering interest on bank financing subscribed to buy instrumental goods. In particular, the measure refers to investments related to the purchase or lease of machinery, equipment, plant and equipment, hardware and software, and digital technologies. The scope is to facilitate companies to access business credit and increase the competitiveness of the country's productive system.

The investment must be no longer than five years, between €20,000 and €2 million. The Ministry of Finance contribution is 2.75% for ordinary investments, and rises to 3.575% for investments in digital technologies.

Next steps

The 2018 Stability Law approved by the government in the Council of Ministers on October 16 is currently being converted by Parliament and will be converted into Law by December 31 2017, together with the related Tax Decree (Tax Decree No. 148/2017, published in the official gazette on October 16 2017 and entering into force on the same date).

Even if the characteristics of the most relevant provisions seem to be already on-track, amendments to the current provisions presented and brand new initiatives are still possible to the initial draft presented by the government. Accordingly, the definitive impact of the measures under discussion may be first weighted only once the final version has been converted into law and the relating implementation decree is approved in the forthcoming months.