#ISVwebinars n°3: Italian Tax Law - Flavio Notari

ROMA

PADOVA

MILANO

VENEZIA

ROME

PADUA

MILAN

VERONA

Flavio Notari

INNOVATIVE STARTUPS

BRIEF GUIDE TO TAXATION

22

Italian Tax System on corporations

Summary

TOPICS

Basics of Corporate

Income Taxation(«IRES»)

Basics of ProductiveActivitiesTaxation(«IRAP»)

Basics of Value

Added Tax

(«VAT»)

Research and Development

Tax Credit

Patent Box

Some Tax

Incentives

available to

startups

33

Tax Standard Rates Notes

Corporate Income tax

IRES27,5%

Starting from 2017 the

rate will be reduced to

24%

Productive Activities

Taxation

IRAP

3,9%Plus increases settled by

the specific Region

Value Added Tax

VAT22%

With reduced rates (equal

to 10% or 4%) for specific

products

Italian Tax System on corporations

The rates

44

CORPORATE INCOME TAXATION

55

Corporate income tax is governed by the Income Tax Code («Testo unico delle

imposte sui redditi», Tuir), which was enacted by Presidential Decree 22 December

1986, no.917.

Corporate income tax

All income derived by corporations that carry on business activities is considered

“business income” and is subject to corporate income tax (IRES), pursuant to

article 83 of the Tuir.

66

Corporate income tax applies to resident and non-resident companies:

� Resident companies are taxed on their worldwide income but may elect to

exempt the income derived through foreign permanent establishments.

� Non-resident entities are subject to Italian tax only on Italian-source income.


77

A company is considered fiscally resident in

Italy if has, alternatively,

its registered office

(or legal seat)

place of effective

management

main business

purpose

in Italy for the greater part of the

fiscal year.


Residence

88

• Financial Statements «derivation» principle

• Adjustments

• Exemptions

• Depreciation and Amortization

• Rates


Taxable income

99

The taxable base is the worldwide income shown on the Income Statement prepared

for the relevant fiscal year according to company law rules and adjusted according to

the tax law provisions concerning business income.

The taxable period for corporate income tax purposes is the company’s fiscal year as

determined by law or the articles of association. If the fiscal year is not so

determined, or if it is longer than 2 years, the taxable period is the calendar year

(article 76 of the Tuir).

The principle of derivation indicates that the taxable income is determined starting

from the economic result (“Statutory Result”) derived from the approved Financial

Statements of the corporation.

The total taxable income, than, is determined by making to the Statutory Result of

the Financial Statements the increases and/or the decreases resulting from the

application of tax laws.


Derivation principle

1010

Business income is generally determined according to the accrual method, but there

are certain exceptions (e.g. dividends and directors’ fees).

The general rule is that, to be deductible for tax purposes, expenses must be

booked in the Income Statement of the relevant fiscal year, pursuant to article 109

of the Tuir.


Derivation principle

Cost and other negative items may be deducted if, and to the extent that, they

relate to the business activities or assets that generate gross proceeds or other

positive items that either (i) are included in taxable income or (ii) do not form part

of taxable income becouse they are excluded.

1111

Increases and Decreases are “adjustments” to the Statutory Result that have

essentially the functions of preventing misappropriations of taxable elements.


Adjustments

Decreases mean:

costs not ascribed to the Income Statement (for the fiscal year), but

deductible;

revenues ascribed to the Income Statement, but not taxable.

Increases mean:

costs ascribed to the Income Statement, but non-deductible;

revenues not ascribed to the Income Statement, but taxable.

1212

Statutory Result + / -

Increases and Decreases provided

by Tax Laws=

Taxable income * 27,5%

Taxes


1313

Costs and other negative items cannot be deducted if, and to the extent that, they

relate to business activities or assets that generate exempt income.


Positive Adjustments

• Compensation, in cash or in kind, paid to employees is deductible by thecompany, including the remuneration does not constitute taxable income forthe employee (e.g. small gifts).

• Certain benefits in kind are deductible only in part or not deductible at all.

Employees’ remunerations

• Directors’ fees, including those paid in the form of participation to profits, are fully deductible on a cash basis (article 95 of the Tuir).Directors’ fees

1414



• Royalties paid for patents, trademarks, know-howand similar rights are deductible.Royalties

• Service and management fees are deductible.

Service and management

fees

• Research and development expenses aredeductible in the fiscal year in which they areincurred or in equal instalments in that year andthe 4 following years (article 108 of the Tuir).

Research and development

1515



•Advertising and other marketing expenses are deductible inthe fiscal year in which they were incurred or in equalinstalments in that year and in the following 4 years.

Advertising and marketing

•Entertainment expenses are deductible to the extent that theyare business related and reasonable. The expenses must beproperly documented and can be deducted only with limitsgiven by a certain percentages of the gross receipts.

Entertainment costs

•Dividends paid are not deductible.Dividends

1616

Excess interest expense is deductible at up to 30% of the gross operating margin

(interest deduction capacity) as reported in the financial statements.

Gross operating margin is defined as the difference between operating revenues and

expenses excluding depreciation of tangible and intangible assets and charges for

leased assets as stated in the profit and loss account for the year.

Net interest expense in excess of the yearly limitation is carried forward indefinitely.

• Generally, interest expense is fully taxdeductible up to the amount of interestincome.

Interests



1717

Net interest expense not deducted in previous years can be deducted in any future

fiscal year as long as total interest in that year does not exceed 30% of gross

operating margin.

If net interest expense is lower than the annual limit (i.e. 30% of gross operating

margin), this difference can be carried forward to increase the company’s interest

deduction capacity in future years.



1818

Dividends derived by resident companies from other resident companies or from

companies resident in countries other than “tax havens” are not included in the

corporate taxable base for 95% of their amount, pursuant to article 89 of the Tuir.

Conversely, no exemption applies to dividends paid by entities that are resident in

tax haven jurisdictions (unless those dividends derive from profits that were already

taxed under the Italian CFC rules).

The 5% portion that is taxable is included in the taxable income on a cash basis.


Exemption - Dividends

1919

Under the regime called participation exemption regime (PEx), capital gains realized

by Italian companies on sales of shareholdings are 95% exempt from IRES, pursuant

to article 87 of the Tuir.

PEx applies if all of the following conditions are met:

a) the shareholding was held uninterruptedly for at least 12 months prior to the

sale;

b) the investment was classified under financial fixed assets in the financial

statements relating to the first tax period of uninterrupted ownership;

c) the subsidiary is actually carrying on a commercial activity (e.g. investments in

companies mainly performing management of their own real estate are not

entitled to PEx benefits);

d) the majority of the subsidiary's income is not generated in a tax haven country or

one with a privileged tax regime.


Exemption – Capital Gains

2020

In order to qualify for the exemption, the subsidiary must carry on a real business

activity (active business test) in the 3 fiscal years preceding the year of the disposal

of the shares.

The active business test does not apply in the case of participated companies listed

on a stock exchange.

Companies the value of whose assets is mainly represented by real estate assets not

used in the business activity are deemed not to perform a business activity.


Exemption – Capital Gains

2121

Fixed assets other than financial assets may be depreciated (amortized in the case of

intangible assets) using the straight-line method. Depreciation (amortization) may be

taken in every fiscal year, regardless of whether the taxpayer incurred losses or

made profits.

Tax law contains precise criteria for both depreciation and amortization, which

differ substantially from those provided for civil law and accounting purposes.


Depreciation and Ammortization

Depreciation for accounting

Business assets must be depreciatedaccording to their residual utility

Depreciation for taxes

Business assets may be depreciatedonly according the straight line

method and the annual allowance isdetermined by applying the rates

set by the Ministry

2222

The legal owner is the person entitled to depreciate the assets, but there are some

exceptions (i.e. business’ lease or usufruct).

Generally, depreciation for tax purposes refers to a 12-month period. If the assets

are used only for part of the period or if the fiscal year is longer than 12 months,

depreciation must be adjusted accordingly.


Depreciation and Ammortization

2323

Tangible assets may be depreciated only according to the straight-line method; the

annual allowance for tax purposes is determined by applying the rates set by the

Ministry of Economy and Finance (i.e. Ministerial Decree December 31, 1998) to the

asset’s (unadjusted) tax basis (i.e. the original cost).


Depreciation

• Land is not depreciable since it is not considered subject to wear and tear.For other real estate assets, i.e. buildings, depreciation follows thegeneral rules provided for tangible property.

• The depreciable base is the (unadjusted) tax basis, i.e. cost increased bythe expenses ancillary to the purchase or construction of the asset.

• The rates range from 3% to 5%, according to the sector of activity.

Immovable property

• For plant, machinery and equipment depreciation follows the general rules provided for tangible properties.

• The depreciable base is the (unadjusted) tax basis, i.e. cost increased by the expenses ancillary to the purchase or construction of the asset.

• The rates range from 10% to 40%, according to the goods and the sector of activity.

Plant, machinery and

equipment

2424

Amortization of intangible assets is subject to specific rules, depending on the nature

of the asset.


Ammortization

• Trademarks may be amortized up to one eighteenthof their cost for each fiscal year.

• Patents and other intellectual property may beamortized up to one half of their cost (article 103 ofthe Tuir).

Trademarks and Patents

• Goodwill may be amortized only if it is recorded in thebalance sheet. Under company law, goodwill may berecorded in the balance sheet, with the approval ofthe statutory auditors (if any), only if it was acquiredfor consideration.

• Goodwill may be amortized only up to one eighteenthof its cost in each fiscal year.

Goodwill

2525

If a depreciable asset is sold, a capital gain (or loss) equal to the difference between

the consideration (sale price) received and the asset’s adjusted tax basis (i.e. cost

less depreciation) must be included in taxable income.

If the asset is disposed of without being sold (e.g. the asset is destroyed), the

remaining adjusted tax basis is deductible.

However, if an indemnity is received, the positive difference between the amount of

the indemnity and the remaining adjusted tax basis is a capital gain and must be

included in taxable income.


Disposal of an asset

2626


Rates

• The corporate income tax (IRES) rate is 27,5%,pursuant to article 77 of the Tuir.

• IRES rate will be reduced from 27,5% to 24%,effective for the fiscal year 2017.

Standard Rate

• A 6,5% applies to companies operating in the oil, gasor energy business.

• A special 4% surtax applies to Italian residentcorporations that are engaged in the explorationand treatment of hydrocarbons.

Surtaxes

2727

Corporate taxpayers may use their tax losses to offset the taxable income of

subsequent years only up to 80 per cent of the taxable income of any given year

(article 84 Tuir).

In other words, taxpayers are prevented from completely offsetting the taxable

income of a given year even if they have carried forward losses equal to or greater

than their taxable income.

The limitation does not apply to tax losses incurred in the first 3 years of business

activity, therefore those losses may be set off in full.


Losses carry forward

2828

•payment of the

residual balance of

previous year taxes

•first installment of the

IRES and is equal to 40%

of the tax due for the

previous fiscal year

June 16

• Annual tax return(Modello UNICO)

September 30 • second installment of

the IRES and is equalto 60% of the tax duefor the previous fiscalyear

November 30


Annual deadlines

2929

PRODUCTIVE ACTIVITIES

TAXATION

3030

IRAP is levied on companies, partnerships and individuals that carry on an

autonomously organized activity aimed at either the manufacturing/trading of

goods or the supplying of services.

Legislative Decree December 15, 1997, n.446 introduced and regulates the regional

tax on productive activities (IRAP).

An IRAP taxable event is the regular conduct of an autonomously organized activity

aimed at either the manufacturing/trading of goods or the supplying of services.

Regional business tax

3131

IRAP is levied on the net value of production derived in each Italian Region, and the

way the taxable base is computed changes depending on the type of taxpayer and

on the type of activity carried out, so there are specific rules for companies, banks

and financial institutions, insurance companies, partnerships and sole

proprietorships.

If a taxpayer carries on its activity in more than one Italian Region, the taxpayer

must apportion the net value of production among the regions involved. An Italian

Region is allocated part of the taxpayer’s IRAP base only if the taxpayer conducts its

activity in that region for at least 3 months in a fiscal year through a factory, a

building site, an office or another fixed base therein.


Taxable income

3232

For commercial and manufacturing companies:


Taxable incomeIn

clu

de

din

th

e t

axa

ble

ba

se

Gross receipts from sales and services;

Increases in inventory;

Increases in the value of works in progress;

Increases in the value of internally developed business assets;

Certain capital gains; and

Other, miscellaneous proceeds.

No

tin

clu

de

d Certain capital gains

Extraordinary items of income

Interest received

De

du

ctib

le Cost of raw materials, goods and merchandise

Service fees

Rental payments

Depreciation of tangible assets

Amortization of intangible assets

Decreases in inventory

Other business costs

No

td

ed

uct

ible Certain capital losses

Amounts set aside to reserves and provisions

Interest payments

Municipal taxes

Extraordinary costs

3333

The following labor costs may be deducted:

� labor costs relating to fixed-term employees (effective as of the fiscal year

following the fiscal year current on 31 December 2014);

� social security contributions (deduction not applicable to certain utility

companies and companies operating in certain regulated sectors);

� costs of personnel engaged in research and development activities; premiums

paid for employees’ injury insurances;

� EUR 15,000 per year per employee with a permanent contract employed in

Abruzzi, Apulia, Basilicata, Calabria, Campania, Molise, Sardinia or Sicily,

increased to EUR 21,000 if the employee is a woman or under the age of 35; and

� EUR 15,000 for each new employee hired with a permanent contract if certain

conditions are met.


Deductions

3434

However, in relation to each employee, the above deductions cannot exceed the

actual labor costs (including social security contributions) borne by the employer

during the fiscal year.

Starting from the fiscal year following the fiscal year current on 31 December 2015,

IRAP persons that do not have employees are entitled to a tax credit equal to 10% of

the gross (i.e. pre-credit) IRAP due.

The tax credit may only be used to offset taxes and social security contributions due.


Deductions

3535


Rates

• The regional business tax (IRAP) rate is 3,9%, pursuant to article 15 Legislative Decree December 15, 1997, n.446 .

• Regional authorities may decrease or increase these rates by up to 0,92%.

Standard Rate

3636

•payment of the

residual balance of

previous year taxes

•first installment of the

IRAP and is equal to 40%

of the tax due for the

previous fiscal year

June 16

• Annual tax return(Modello IRAP)

September 30 • second installment of

the IRAP and is equalto 60% of the tax duefor the previous fiscalyear

November 30


Annual deadlines

3737

VALUE ADDED TAX

3838

VAT

Definition

The value added tax (“Imposta sul valore aggiunto”, IVA) is a general tax on

consumption in Italy.

The bulk of the VAT legislation is contained in Presidential Decree October 26, 1972

no.633 (hereinafter, “VAT Law”).

The Sixth Council Directive 77/388/EEC of 17 May 1977 on a uniform basis of

assessment was implemented in Italy by legislation that became effective on 1

January 1979. On 16 December 1991, the Council of Ministers adopted the Council

Directive 91/680/EEC of 16 December 1991, which supplemented the common

system of VAT and amended the Sixth Directive regarding the abolition of fiscal

frontiers within the European Union.

The 1993 changes affect the movement of goods between EU Member States only.

The movement of goods between EU Member States and non-EU Member States are

still treated as imports and exports.

3939

A transaction is subject to VAT in Italy only if it is deemed to take place in Italy.

VAT

Mechanism

VAT is levied on the supply of goods and services made in the undertakings of an

enterprise or an artistic or professional activity.

A VAT invoice must be issued for all taxable transactions (for which an invoice is

required) at the time the transaction takes place.

4040

Under article 4 of the VAT Law, undertaking an enterprise means habitually (but not

necessarily exclusively) carrying on any of the activities listed in either article 2135

of the Civil Code (i.e. agricultural activities) or in article 2195 of the Civil Code (i.e.

commercial activities), regardless of whether these activities are organized in the

form of an enterprise as defined for business law purposes.

Undertaking an enterprise also includes carrying on activities for the purpose of

providing services other than those indicated in article 2195 of the Civil Code, but

only if the activities are organized in the form of an enterprise as defined for

business law purposes.

VAT

Scope

4141

Corporations, limited liability companies, partnerships limited by shares,

commercial partnerships (business partnerships), other commercial entities and

foreign companies are always deemed as persons that undertake an enterprise.

However, the following activities do not constitute an enterprise for VAT purposes

even if carried out by the previously mentioned entities:

� the holding by a company of residential real estate and certain movable assets

(e.g. ships, aircraft and motor vehicles for private use, sport or recreational

centers) if the shareholders can use the property and the assets for no

consideration or for a consideration below market value; and

� the holding of participations or securities as fixed assets that are not otherwise

connected with the company’s business where the sole purpose is the receipt of

dividends and interest, without the exercise of any financial or investment

activity.

VAT

Scope

4242

VAT

Mechanism

The following transactions are taxable:

� The supply of goods and services in Italy for consideration by an entrepreneur in

the course of a business;

� The intra-community acquisition of goods in Italy by an entrepreneur in the

course of a business;

� The intra-community acquisition in Italy of new means of transport by any

person;

� The import of goods from outside the European Union into Italy.

Supplies of goods: all transfers for consideration of the ownership or other

right in rem in tangible assets

Supplies of services: services performed under certain

enumerated contracts or under an obligation to do, not to do,

or permit something

4343

VAT

Mechanism

Only goods and services supplied within the territory of the State of Italy are

subject to VAT.

Pla

ceo

fta

xati

on

>>

go

od

s

The place of supply forgoods is considered to bewhere the goods arelocated at the time ofsupply.

Pla

ceo

fta

xati

on

>>

serv

ice

s

Services are deemed to besupplied within Italy if:

- The services are providedto taxable personsestablished within Italy;

- The services are providedto final consumers bytaxable persons establishedwithin Italy.

4444

VAT is applied on an accrual basis.

VAT

Mechanism

• The supplier owes thetax to the tax authoritieswhen he issues aninvoice and not at thetime he receivespayment.

• The supplier is entitledto a credit for the VATshown on his ownsuppliers' invoices, or forthe VAT paid on imports,regarding any goods andservices he has acquiredfor his business needs.

• The buyer is entitled tothe VAT credit at thetime he receives theinvoice from his supplierand not at the time hemakes payment.

This VAT mechanism means that the actual tax

burden is only borne by the end user, who has

no right to recover the VAT he has paid.

4545

The taxable amount of goods and services supplied is the gross consideration

received, excluding the VAT itself (article 13 of the VAT Law).

The taxable amount may be increased by the value of costs directly connected with

the supply, e.g. insurance and transportation costs, commissions.

In the case of a taxable self-supply of goods by an entrepreneur, the taxable amount

is their fair market value.

In the case of imported goods, the taxable amount is the c.i.f. value (i.e. value is the

price paid for the goods plus the cost of transportation, loading, unloading,

handling, insurance, and associated costs) of the goods plus customs duties,

excluding VAT.

VAT

Taxable base

4646

VAT

Rates

• 22%

• 24% effective for the year 2018.Standard Rate

• 10%

• 13% effective for the year 2017.Reduced Rate

• 4%Special Reduced Rate

• 0%

• if there is sufficient evidence that the goods were transported outside Italy, and the supplier and the purchaser are registered to perform intra-UE transactions

Exports and intra-Community supplies

4747

Any person who starts a business or professional activity in Italy, or establishes a

fixed establishment in Italy, must register with the competent office of the Italian

tax authorities within 30 days (article 35 of the VAT Law).

The tax authorities then issue a VAT registration number which should be indicated

in all of the taxable person’s documents that relate to VAT.

With effect from 1 January 2015, entrepreneurs in Italy supplying electronic

services in various EU Member States have the option to apply for a mini one-stop

shop (MOSS) system to avoid the need for registration in each of the Member

States separately.

Under the MOSS system, entrepreneurs that supply telecommunications,

broadcasting and e-services (TBE services) to consumers in Member States in which

they do not have an establishment may account for the VAT due on those supplies

via a web portal in the Member State of establishment.

VAT

Registration

4848

Taxable persons must issue invoices to their customers, either in a paper form or by

electronic means, at the time of supply.

Invoices must be issued by the 15th day of the month following the month in which

the goods are supplied or the services performed in the case of:

� supplies of goods delivered together with documents of transport; and

� intra-Community supplies.

VAT

Invoicing

4949

The invoice must be issued in two original copies and contain the following

information:

� the date of the supply;

� the number of the invoice;

� the name and address of the supplier and of the customer;

� the VAT number of the supplier and of the customer or of his tax representative

in Italy;

� a description of the goods or services supplied;

� the quantity of the goods supplied;

� the consideration and any information necessary to determine the VAT tax base;

� the applicable VAT rate (or the applicable section of the law for exempt or zero-

rated supplies) and the VAT base;

� the amount of VAT due; and

� an indication of the applicable law provisions.

VAT

Invoicing

5050

VAT

Invoice example

5151

VAT

Invoice example

1. the date of

the supply;

2. the number of

the invoice

3. the name and

address of the

customer;

4. the name and

address of the

supplier

5. description of the

goods or services

supplied

6. quantity of the

goods supplied

7. consideration and

any information

necessary to

determine the VAT

tax base

8. the applicable VAT

rate

9. the amount of VAT

due

10. an indication of

the applicable law

provisions

5252

• Annual VAT return

February 28

• Annual communication al transactions (Spesometro)

April 10• Annual communication

of the transactions performed with entities having their residence or operating in a black list county or territory

April 20

VAT

Annual returns

5353

• Monthly VAT liquidation

Each month, 16

• Monthly communication of the transactions performed with other EU entities (ModelloIntrastat) *

Each month, 25

VAT

Periodic returns and payments

* on a quarterly basis by entities who accrued, in the

previous 4 quarters and for each category of

transactions, an overall amount not higher than

50,000 euros in each quarter.

5454

RESEARCH AND DEVELOPMENT

TAX CREDIT

5555

R&D tax credit

The tax credit is available to all enterprises,

regardless of their legal form, the industry in which

they operate and the accounting system adopted.

Article 3 of Law Decree December 23, 2013, n.145

provides for a tax credit for R&D expenses available

from the fiscal year that was ongoing on 31

December 2015 to the fiscal year that is ongoing on

31 December 2019 (2015 to 2019 for enterprises

that follow the calendar year).

The Ministry of Economy and Finance set forth the

implementing rules in the Ministerial Decree of May

27, 2015.

The tax authorities issued Circular Letter No. 5/E of

16 March 2016 providing official guidance.

5656

R&D tax credit

The following activities are eligible for the R&D tax credit:

� basic research, i.e. experimental or theoretical work undertaken primarily to

acquire new knowledge of the underlying foundation of phenomena and

observable facts, without any particular application or use in view;

� applied research, i.e. inquiry aimed at developing or improving products,

processes and services;

� experimental development, i.e. systematic work, drawing on existing knowledge,

which is directed to producing plans, projects or formulas for new materials,

products, devices or services;

� manufacturing and testing of products, processes and services, provided that

they are not used for commercial purposes or industrial application.

R&D Activities

5757

R&D tax credit

The ordinary or periodic changes made to products, production lines, manufacturing

processes, existing services and other operations in progress, even if such changes

represent improvements are not deemed to be research and development activities.

R&D Activities

5858

R&D tax credit

R&D Activities

Qualifying R&D expenses, whether capitalized or not, must be directly connected

with any of the eligible R&D activities listed above. In particular, qualifying R&D

expenses include:

•wages and salaries (including social security contributions) for highly skilled personnel engaged in eligible R&D activities, as well as remuneration paid to third party professionals who perform their R&D services at the taxpayer’s premises;

•depreciation of laboratory equipment (items of equipment that cost less than EUR 2,000, net of VAT, are excluded), as well as financial leasing fees (excluding the interest component);

•fees for research outsourced to universities, research institutes and unrelated enterprises, including start-up companies, provided that such enterprises are eitherresident or established in an EEA Member State included in the white list;

•fees paid to purchase or to in-license patents and know-how.

5959

R&D tax credit

Amounts

The tax credit is equal to:

� 25% of the qualifying R&D expenses under numbers (2) and (4) over the yearly

average of such qualifying R&D expenditures that the enterprise has incurred in

the 3 fiscal years preceding the fiscal year as at 31 December 2015.

If the enterprise has been operating for less than 3 years, the average is

computed taking into account the shorter period of operation. The average is 0

for enterprises set up after 31 December 2015;

� 50% of the qualifying R&D expenses under numbers (1) and (3) over the yearly

average of such qualifying R&D expenditures that the enterprise has incurred in

the 3 fiscal years preceding the fiscal year as at 31 December 2015.

If the enterprise has been operating for less than 3 years, the average is

computed taking into account the shorter period of operation. The average is 0

for enterprises established after 31 December 2015.

6060

R&D tax credit

Amounts

The tax credit is available only provided that in a given fiscal year the aggregate

amount of the eligible R&D expenses is higher than the yearly average of the

qualifying R&D expenditures that the enterprise has incurred in the 3 fiscal years

preceding the fiscal year as at 31 December 2015.

Moreover, the tax credit is available only if the enterprise incurs at least 30,000

euros of qualifying R&D expenses in a fiscal year.

The tax credit can be directly reported and claimed in the corporate income tax

return relating to the fiscal year in which the R&D expenses have been incurred,

without the need of submitting any specific application to the tax authorities.

The amount of the tax credit is not included in taxable income, nor does it increase

the IRAP taxable base.

The tax credit can only be offset against other taxes and social security contributions.

6161

PATENT BOX

6262

Intangibles that qualify under the Italian patent box regime are:

� patents;

� processes;

� formulas;

� designs;

� models that can be legally protected;

� copyrighted software;

� any other kind of know-how that can be legally protected (qualifying intellectual

property, IP).

Article 1 (37-45) of the Law December

23, 2014, n.190, as amended by article

5 of the Law Decree January 23, 2015,

n.3, enacted a new optional patent box

regime in Italy.

Patent Box

Regime

6363

Foster the placement in Italy of intangibleassets currently held abroad by Italian orforeign companies;

Encourage the maintenance of intangibleassets in Italy, avoiding their relocationabroad; and

Promote the investments in research anddevelopment activities.

Patent Box

Purposes

6464

The election for the patent box regime requires that the taxpayer either:

• carries out the R&D activities aimed at developing, maintaining or improving the

qualifying IP itself; or

• outsources these activities to universities, research institutions (or equivalent

entities) or unrelated companies.

The election is valid for 5 fiscal years and cannot be revoked. The election can be

renewed.

The election can be made on specific qualifying IPs only. In other words, it is not

necessary to apply for the patent box regime with respect to all the eligible

intangible assets held by the taxpayer.

Patent Box

Discipline

6565

Patent Box

Exemptions

Under the patent box regime, income arising from:

� licensing the qualifying IP to third parties and related parties (i.e. royalties), net of

the direct and indirect costs related to the qualifying IP; and

� directly using the qualifying IP (i.e. the value of the qualifying IP embedded into

the sale price of goods and services),

were 30% exempt from IRES in 2015.

The exemption is raised to 40% in 2016, and will be fully phased in starting from

2017 reaching the standard rate of 50%.

The same exemption will be available for IRAP purposes.

6666

IRAP TAX INCENTIVES TO

STARTUPS

6767

The IRAP refund provided by Lazio Region is reserved to startups which:

a) have recorded in the appropriate special section of the register of Economic

Development Ministry;

b) having at least a place of business in Lazio;

c) have carried out IRAP payments for the first two fiscal years without having

already obtained by other administrations the return of the amount paid.

The refund can be total or partial and concerns the IRAP paid for the first two fiscal

years.

IRAP Incentives

Lazio Region IRAP tax refund

6868

Campania Region approved a contribution for the development of innovative

processes for a maximum value of 100% of the IRAP due for the fiscal years 2016,

2017, 2018.

The contribution is reserved to startups having the registered office or at least one

operating office in Campania.

IRAP Incentives

Campania Region IRAP contributions

6969

PUBLIC INCENTIVES TO

STARTUPS

7070

Public Incentives to Start-Up

Region by Region 1/3

Region Scope

Lombardia Project «Intraprendo»: 30 millions Euros for new enterpreneurial

businesses

Lazio 6.2 millions Euros available from public venture capital to

support SMEs’ and Start-up’s Equity

Campania 1 billion Euros for the next 7 years to invest in research and

innovation projects

Sicilia Project «SelfiEmployment»: 58 millions Euros for entepreneurs

under-35

Veneto A callalways opened to support start-up and SMEs (admissible

expenses: from 20.000 to 100.000 Euros)

Emilia Romagna 6 millions Euros to support the launch and the stabilization of

start-up

Piemonte 8,5 millions Euros allocated for the years 2014-2020 to start-up

7171



Region Incentive

Toscana Facilitated loans and vouchers (4 millions Euros initially available)

for services for innovation’s advice and support

Calabria 4 millions Euros for SMEs operating in the Region

Sardegna 10 millions Euros of equity to directly invest in start-up

Liguria 3 millions Euros of EU fund for the launch and development of

start-up

Marche Allocated 12 millions Euros for start-up (8 already available)

Abruzzo 13 millions Euros allocated for hiring researchers and to support

applied research activities

Friuli Venezia-

Giulia

In the next months 45 millions Euros available to be allocated for

innovation and research activities

7272



Region Incentive

Puglia «Nidi» project: 54 millions Euros for new enterprises

Valle D’Aosta «Fabbrica Intelligente» project: 1 million Euros reserved to

industrial research and experimental studies of start-up

Basilicata 8 millions Euros for start-up and spin-off and 15 millions Euros

for SMEs’ investments

Molise Loans for 25.000 Euros each reserved to start-up

Trentino Alto-

Adige

80.000 Euros allocated for new enterprises

Umbria 2 millions Euros reserved to start-up and innovative SMEs for the

year 2016

Flavio Notari, Prof. Dott.

[email protected]

00196 Rome

Via Flaminia, 135

Tel. +39 06 8091 3201

www.legalitax.it

ROME - PADUA - MILAN - VERONA

Date post:	15-Apr-2017
Category:	Small Business & Entrepreneurship
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#ISVwebinars n°3: Italian Tax Law - Flavio Notari

Small Business & Entrepreneurship