The Italian tax authority during 2018 issued guidance to clarify application of the existing tax rule of Research and Development (R&D) tax credit for eligible Italian companies and Italian permanent establishments of foreign companies investing in (R&D). The credit is available from the fiscal year in progress on 31 December 2014 and up to the fiscal year in progress on 31 December 2020.
The guidance also included the eligibility of software development costs and on the application of the tax credit in the event of business restructurings.
-The tax credit is capped at EUR 20 million per beneficiary and is granted on condition that the total investment in R&D in each fiscal year amounts to at least EUR 30,000.
-The total R&D expenditure must exceed the average R&D investment made in the three fiscal years prior to that in progress on 31 December 2015. The tax credit is calculated as 50% of the increase in expenditure.
-For foreign investors,in the case of companies incorporated for less than three fiscal years, the average R&D investment to be considered in determining the total increase in expenditure is calculated over the periods since incorporation. In the case of a NewCo incorporated after 1 January 2015, the tax credit is calculated on 100% of the investments in R&D.
