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12 December 2017 Italy introduces amending provisions to patent box regime The Italian Government has issued an additional Decree (the Decree) providing amendments to the Italian Patent Box regime.1 The amendments are based on the recent legislative changes enacted to correct the existing differences between the Italian rules and the Organisation for Economic Co-operation and Development (OECD) recommendations set forth under Base Erosion and Profit Shifting (BEPS) Action 5 and to align the domestic provisions to the OECD standards.
The Patent Box regime is an elective regime granting a 50% exemption (reduced to 30% for 2015 and 40% for 2016) from corporate income tax and regional tax on income derived from the direct exploitation, licensing or disposal of qualifying intellectual property (IP). The regime is eligible for taxpayers who perform research and development (R&D) activities and is characterized by a five year lock-in period. The election is renewable. A ruling is mandatory in the case of internal use of any qualifying IP while it may be elected in the case of royalty income derived in intercompany transactions. The option for the regime and the associated ruling (if any) must be filed before the end of the relevant fiscal year (FY). As of the date of the ruling filing, taxpayers have 120 days to file supporting documentation.2 The Patent Box regime initially established by the Italian rules also included trademarks. Such provision was deemed not to be in line with OECD's commonly adopted standards, which expressly excluded trademarks from the list of eligible intangible assets. The abovementioned misalignment has been corrected with Law Decree no. 50/2017, which aligned the domestic Patent Box rules with international best practices. The Decree,3 which includes implementing instructions related to the Patent Box, reflects the noted changes. According to the grandfathering provisions, the exercise of the option related to trademarks is valid for five FYs, and shall not in any case exceed 30 June 2021. Such option is non-renewable. Starting from the third FY following the FY at 31 December 2014, and for each of the FYs in which the option is valid, taxpayers opting for trademarks, in addition to the eligible IP and related eligible income, must report in the tax return the foreign jurisdictions of residency for:
The related companies that pay consideration to the taxpayer for the exploitation of its trademarks With reference to the last point, two entities are considered as related parties if:
The Italian Revenue Agency communicates to the tax authorities of the countries, in the BEPS framework, with an exchange of information agreement in place with Italy, the name of each Italian taxpayer whose Patent Box option also includes trademarks. 1. For an overview of the main Patent Box provisions, see EY Global Tax Alert, Italy issues implementing decree on Patent Box regime, dated 10 August 2015. 2. See EY Global Tax Alert, Italy issues additional clarifications on Patent Box regime, dated 8 April 2016. 3. According to the Decree, the option can be exercised on the income arising from the exploitation of the following IPs: (a) software protected by copyright; (b) industrial patents; (c) designs and models capable for legal protection; (d) processes, formula and information related to experiences acquired on the industrial, commercial or scientific fields capable for legal protection; (e) two or more intellectual properties among those listed from point (a) to point (d), linked by a complementarity bond.
Document ID: 2017-5022 |
