On 29 December 2018, the Italian Parliament approved the 2019 Budget Law no. 145 of 2018 published on the Official Gazette of 31 December 2018. The Budget contains a number of measures related to tax incentives, including changes to the research and development (R&D) tax credit rules that may limit the amount of the credit and the extension of “hyper depreciation” to 2019.
In addition, a reduced tax rate is introduced for profits reinvested to acquire new assets or to increase employment, the notional interest deduction (ACE) is abolished and, in a measure not included in the draft budget law, the tax credit for training under the “National Industry 4.0” plan is extended in the enacted budget law.
Reduced CIT Rate
In certain cases, a 15% corporate tax rate (instead of 24% standard rate) may be applied to profits reinvested in the acquisition of new assets or to increase employment. The investments must be made in production facilities located in Italy.
The amount of profits eligible for the reduced tax rate each year regarding investments in the acquisition of new assets is equal to the depreciation on new tangible assets up to the overall increase in the cost of all tangible assets.
Tax credit for R&D
The 2019 Budget Law amends the R&D credit by dropping the general applicable rate from 50% to 25%. Starting from 2019, while the tax credit will be applied generally in the amount of 25%, a 50% rate is applied only to expenses incurred with respect to R&D contracts signed with research organizations and universities, SMEs and innovative start-ups as well as expenses for employees directly hired to carry out R&D activities.
The highest annual amount of the tax credit granted to each company will be €10 million instead of the previous €20 million. The 2019 Budget Law introduces the obligation, starting from FY 2018, to certify qualifying expenses for the purposes of calculating the benefit.
Tax credit for training
The tax credit for training under the Industry 4.0 plan has been extended to the 2019 fiscal year with some changes (previously limited to 2018).
Previously, the credit was 40% of the expense of training employees on Industry 4.0-related topics. The maximum credit limit is EUR 300,000 per year and has been modified based on the size of the company according to the EU definitions of small and medium-sized enterprises (SMEs) in EU recommendation 2003/361):
- 50% of eligible costs for small businesses, with a maximum credit of EUR 300,000 per year;
- 40% of eligible costs for medium-sized companies, with a maximum credit of EUR 300,000 per year; and
- 30% of eligible costs for large companies, with a maximum credit of EUR 200,000 per year.
