Incentives for businesses in Italy: what’s new

Recently, the Internal Revenue Service, during its hearing in the House and Senate, provided its input on the contents of the draft enabling legislation on the revision of the system of business incentives.

As highlighted by the Agency, both bills aim to pursue the objective of revising the system of business incentives to remove obstacles to the full deployment of the effectiveness of public intervention in support of the productive fabric.

The objectives of the new measures

The legislature aims to redelineate the regulatory framework for incentives through:

• Measures aimed at the rationalization of the system, such as the reorganization of existing facilitation measures, to be harmonized in a “code of incentives” simplification of administrative procedures and streamlining of bureaucratic burdens on businesses
• Encouraging the implementation of measures aimed at increasing the effectiveness of public intervention – implemented through incentive policies – in support of the economy regarding the needs of social, economic, and territorial cohesion.

The measures currently provided by the system to encourage investment

As verbatim reported by the Agency, the legal system provides several measures aimed at encouraging investment in the most economically disadvantaged areas, including but not limited to:

– the tax credit for investments in the Mezzogiorno

is established to support economic growth by encouraging investments destined for production facilities in the regions of the Mezzogiorno. Beneficiaries of the bonus are companies that acquire new capital goods (machinery, plant, and various equipment) destined for existing or existing production facilities in the territories mentioned above. To take advantage of the credit, a particular communication must be submitted to the Revenue Agency, and the bonus can be used, starting from the tax period in which the investment was made, only by offsetting.
The tax credit is equal to the following:

• 25 percent for large enterprises
• 35 percent for medium-sized enterprises
• 45 percent for small enterprises.

– The research and development bonus in the Mezzogiorno

is recognized until the end of 2023 for investment in research and development activities in favor of companies operating in Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia, and Sicily, to more effectively incentivize technological advancement of production processes and investment in research and development in the Mezzogiorno. This is an increase aimed at incentivizing technological advancement of production processes and direct investment in research and development of production facilities in the territories mentioned above.
For enterprises operating in the regions of the Mezzogiorno, the tax credit is payable to the extent of:

• 45 percent for small enterprises
• 35 percent for medium-sized enterprises
• 25 percent of large enterprises

– The investment bonus in SEZs (special economic zones)

is established to encourage the creation of conditions useful for the development of companies already operating in certain areas of the country and the establishment of new companies.
Entities falling within SEZs can benefit from several tax breaks and administrative simplifications. Specifically, for investments made in SEZs, the investment bonus in the Mezzogiorno is commensurate with the share of the total cost of capital goods acquired by the deadline of Dec. 31, 2023, up to a maximum limit, for each investment project, of 100 million euros, and is extended to the purchase of land and the acquisition, construction or expansion of real estate instrumental to the investments.

What’s new in Bills Nos. 571 and 607.

To provide uniform regulation of incentive measures having a fiscal character, the bills propose to introduce special provisions incorporating established principles concerning:

• The manner of use of tax incentives according to their different nature, providing, where appropriate, for the prohibition of reimbursement
• the tax treatment of the incentives, i.e., their non-competition in the formation of the taxable base for income tax and IRAP purposes and their irrelevance to determine the share of interest expense deductible from business income as well as the determination of the share of expenses and other negative components, other than interest expense, deductible from business income
• the possibility of cumulating two or more concessions
• the prohibition of the circulation of tax benefits, recognizing such a possibility only under certain conditions.