The Council of Ministers, in session no. 136/2016, approved the State Budget Bill for the 2017 financial year and the three-year period 2017-2019. This measure introduces significant structural changes for the Italian manufacturing industry. To understand how these new rates and incentives can foster the growth of your business, discover our tax consulting and strategic planning services. The full press release and details of the meeting can be found directly on the official website of the Italian Government – Palazzo Chigi .
As stated in the press release:
This is an economic policy measure aimed at supporting growth and strengthening basic services available to all citizens (security, health, education) and specific measures to support the most vulnerable social groups who have suffered the most from the crisis of recent years. The measure is worth €27 billion.
It consists of a budget bill and a decree law containing particularly urgent measures, including the initiation of the process of closing Equitalia.
The 2017 Budget Law addresses the following areas:
TAXATION FOR BUSINESSES AND CORPORATIONS
• IRES: the reduction of IRES from 27.5% to 24%, already established in the 2016 Stability Law, is confirmed.
• New developments in agriculture : for the three-year period 2017-2019, the so-called “agricultural IRPEF” is abolished, meaning land and agricultural income does not contribute to the IRPEF tax base of direct farmers and professional agricultural entrepreneurs. A tax exemption is also envisaged for farmers under 40.
• IRI: the introduction of the so-called IRI, or corporate income tax, is planned. The new tax mechanism will be based on the elimination of the progressive nature of the IRPEF for sole proprietorships and partners in partnerships who opt to keep their income within the business rather than withdraw it. In practice, entrepreneurs or partners in partnerships who choose to reinvest the income generated in the tax year, without withdrawing it, will be taxed at a flat rate of 24% instead of the proportional rate applied for personal income tax. The result, in this case, will be that businesses and partnerships will be taxed at the same rate regardless of their legal status.
• Cash basis: to encourage economic recovery, the cash basis taxation criterion is also envisaged. In addition to the already well-known “cash VAT” criterion, all businesses with simplified accounting (sole proprietorships and partnerships) are now given the option of paying taxes according to the so-called cash basis, already commonly used for professionals and those practicing arts and professions.
• Super-depreciation: the 140% super-depreciation incentive mechanism for the purchase of capital goods is confirmed for the whole of 2017, and the 250% hyper-depreciation incentive mechanism has been introduced for the purchase of capital goods and intangible assets (software) that are functional to the technological and digital transformation of the company (the 2017 version of the super-depreciation should leave much more room for the delivery time of the goods, expected until September 2018, but will also require, in order to benefit, the payment of at least 20% of the purchase price).
• “ New Sabatini”: the extension of the so-called “New Sabatini” is also expected, as well as support measures for innovative start-ups.
• R&D tax credit: the incentive measure relating to the tax credit granted to companies that invest in Research and Development costs is also expected to be strengthened. The planned strengthening consists of increasing the tax credit amount from the current 25% to 50%, as well as increasing the maximum tax credit limit available each year.
• Sector studies: a significant innovation in the 2017 Budget Law is the transformation of sector studies from a tool for assessing taxpayers to “compliance indicators,” meaning they become a tool for collaboration with the tax authorities.
TAX FOR PRIVATE INDIVIDUALS
• Voluntary disclosure bis: the new Voluntary disclosure bis for the repatriation of capital held abroad is relaunched. The mechanism is the same as that adopted in 2016. The affected years will be those relating to the period 2010-2015, with the same procedures already established by the first voluntary disclosure. However, a 35% levy is expected on credits and 15% on debits not justified by the taxpayer.
• RAI License Fee: The annual RAI license fee owed by Italian families for privately owning a television set has been reduced further. It has gone from €100 in 2016 to €90 in 2017. This represents a further reduction following the one this year compared to 2015 (when the fee was set at €113). The changes introduced by the 2016 Stability Law regarding the collection methods (charging residential electricity bills) and the procedures for obtaining exemptions in the event of a claim remain in place.
• Extension of eco-bonuses and renovationsThe 65% tax deduction for energy efficiency upgrades has been extended for five years (2017–2021), and the 50% tax deduction for building renovations has also been extended for another year. Therefore, the return to the 36% tax deduction for both tax breaks for 2017 has been averted. Additional incentives are available, specifically for energy efficiency upgrades. Thus, if the work involves the building’s exterior, the deduction increases to 75% if the work is aimed at improving the building’s energy efficiency in both winter and summer (or 70% if the work affects more than 25% of the entire condominium building’s surface area).
• Earthquake Bonus: To incentivize interventions aimed at improving the seismic performance of buildings, a tax deduction of 50% of the expenditure has been available since 2017 (increasable to 70% or 80% depending on the risk class being addressed). The benefit (applicable to a maximum expenditure limit of €96,000) can apply to properties (residential and industrial facilities) located in areas declared as having a high earthquake probability. Currently, expenses incurred between January 1, 2017, and December 31, 2020, will be eligible for the tax relief.
However, whether the ecobonus is extended, renovation costs, or the earthquake bonus are covered, the tax deduction will be applied in 10 equal annual installments. A special decree provides for the “elimination” of
Equitalia
, in favor of direct collection by the Revenue Agency. This is accompanied by the so-called “scrapping” of tax rolls.
This does not mean the complete cancellation of taxpayers’ debts, but rather a discount on interest and late payments due to Equitalia for debt collection on behalf of creditor entities. Taxes and penalties remain due.