Italy

20% for R&D; 10% for Technological Innovation, 15% for ecological transition and 4.0 technological innovation projects, 10% for Design for Design.

Compared to the previous regime, investments do not require a minimum expense to be eligible for tax credits. However, with the newly introduced measures, the tax credits’ maximum amount is now capped at €4 million for R&D projects and at €2 million for both for Innovation and Design ones.

The new method does not foresee an incremental calculation on a baseline. Rather, it is now based on a direct calculation on the total eligible costs in the fiscal year.

The new tax credit, by changing the calculation method, also encourages investment in skilled labour. In particular, it prizes qualified personnel with subordinate employment contract (or in a self-employment relationship with the
company) and, in particular, under-35s holding a PhD or a scientific degree. Furthermore, expenses relating to extra muros contracts with universities, research centres and innovative startups are also promoted.

Although no pre-approval is required, it is important that the company is able to provide in-depth technical and
financial documentation in case of a tax authority inspection.

The tax credit must be used, in equal annual instalments, throughout a three fiscal year period and will offset the payment of different types of taxes (e.g. corporate tax, social charges, local taxes, etc.).

If the available tax credit for a specific fiscal year is partially used (or is not used at all) by the claimant, the balance can be carried forward indefinitely.

For any issue related to the eligibility of expenses, Italian companies may submit a request to the tax authority. Similarly, for specific technical issues, companies may submit a request to the Ministry of Economic Development.

• Personnel directly employed in eligible projects (the cost within baseline’s calculation is increased to 150% for PhD
  under-35 at first permanent employment contract);
• Extra muros contracts for research or innovation (the cost within baseline’s calculation is increased to 150% for
  contracts with universities, research centers and innovative startups based in Italy);
• Depreciation and/or rental of tangible and intangible assets – the value can equate up to a maximum of 30% of
  personnel costs;
• Technical consulting from other companies (e.g. feasibility studies, testing, technical design, prototyping, etc.) – the
  value can equate up to a maximum amount equal to 20% of personnel costs (or for R&D activity, 20% of extra muros
  contracts’ cost);
• Purchase of materials, supplies and other similar products directly used in R&D activities – the value can equate
  up to a maximum amount equal to 30% of personnel costs or 30% of cost for extra muros contracts for research or
  innovation;
• For R&D activities, depreciation of Intellectual Property Rights – the value can equate up to a maximum amount of
  €1 million.

• Significant workload both for cost reporting and technical reporting;
• Activities must fall under the R&D definition of the Frascati Manual and the Technological Innovation definition of the Oslo Manual;
• The new tax credit regime is in force from 1st January 2021 to 31 December 2022 (although it is likely to be further extended in the near future but with lower rates);
• Companies are now required to certify the final technical report;
• The Ministry of Economic Development must be notified of the company’s use of tax credits;
• Both the Ministry of Economic Development and the tax authority can ask at any time for extensive technical or financial documentation connected to the tax credit.