From FY 2020, Italy benefits from renewed tax credit schemes based on a new calculation method
(from the incremental method used until FY 2019 to the volumetric calculation method). Tax credit
is extended not only to R&D projects but also to technological innovation/ecological transition and
design ones. The tax credit rates are in effect for FYs 2021 and 2022.
|Italy all Companies
|From FY2020 there are four different types of Tax Credit with different rates for expenses in R&D, Technological Innovation, Green & Digital Innovation and Design.|
||The 2020 Italian Budget Law (Legge di Bilancio 2020) introduced several changes to the existing tax credit regime: by way of example, a new calculation method (from incremental to volumetric) as well as two new tax credits to
encourage investments in technological innovation/ecological transition and design. The 2020 Budget law also reconfirmed tax credits for R&D expenses.The 2021 Italian Budget Law (Legge di Bilancio 2021) has renewed the tax credit on a two-year base – FYs 2021 and 2022 – and increased the rates applicable:
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
Although no pre-approval is required, it is important that the company is able to provide in-depth technical and
|Eligible Claim Period
||Companies can use the tax credit after the closure of the relevant fiscal year and upon the release of the statutory audit certification. It is mandatory to indicate the tax credit amount in the annual tax return.
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.
||The previous incremental regime has seen several changes between 2015 and 2019. These varied the tax credit’s rates from between 25% to 50% depending on the cost’s category.|
|Ease of Application
||Pre-approval is not required however companies must obtain a Statutory Audit Certification and are obliged to produce a technical report – signed by the R&D Manager and countersigned by the legal representative – describing the implemented projects.|
|Regulating Body Policies
||The Italian tax authority (Agenzia delle Entrate) regulates the process as well as being in charge of any enquiry.
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.
|Issues to Consider||