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March 20, 2020
Italy enacts “Heal Italy” Decree to manage COVID-19
On 17 March 2020, Law Decree n. 18, dubbed “Heal Italy,” was published in the Italian Official Gazette and entered into force immediately (the Decree). The Decree introduces urgent economic measures to address the COVID-19 crisis with a budget of €25 billion as well as providing for stronger public guarantees for the bank system that, according to government forecasts, should result in an injection of new liquidity in the credit market for up to €340 billion. Additional measures should be released in the coming weeks.
The Decree provides for the deferral of a number of tax payments and tax filings as well as for the possibility to convert into tax credits Deferred Tax Assets (DTAs) associated with tax losses and other deferred deductions.
General deferral of tax payments
Payments of taxes and social security contributions originally due on 16 March were deferred to 20 March 2020 (a broader suspension may apply, see below).
General deferral of tax filings
For taxpayers having their tax domicile, registered office or place of business in Italy, tax filings (other than tax payments) originally due during the period between 8 March 2020 and 31 May 2020 are generally postponed to 30 June 2020. No penalties apply.
Deferral of payments for small enterprises
For professionals and enterprises having their fiscal domicile, registered office or place of business in Italy, whose turnover did not exceed €2 million in the fiscal year (FY) preceding the entry into force of the Decree, payments of Value-Added Tax (VAT) and withholding taxes (WHT) on employment and similar income and social security contributions originally due during the period between 8 March 2020 and 31 May 2020 are deferred. Such payments are now due by 31 May 2020 in full, or in five equal installments starting from May 2020. No penalties and interest apply.
Deferral of payments for taxpayers located in qualified areas
For taxpayers having their fiscal domicile, registered office or place of business in the Bergamo, Cremona, Lodi and Piacenza provinces, VAT payments originally due during the period between 8 March 2020 and 31 May 2020 are deferred irrespective of their turnover threshold. Such payments are due by 31 May 2020 in full, or in five equal installments starting from May 2020. No penalties and interest apply.
A specific deferral regime continues to apply for taxpayers having their fiscal domicile, registered office or place of business in one of the following municipalities (“red zone”): Bertonico, Casalpusterlengo, Castelgerundo, Castiglione D’Adda, Codogno, Fombio, Maleo, San Fiorano, Somaglia, Terranova dei Passerini, Vò.
Suspension of WHT applied to small taxpayers
Professionals and other qualifying taxpayers with a turnover not higher than €400,000 in the FY preceding the entry into force of the Decree are not subject to WHT for the income derived in the period between the entry into force of the Decree and 31 March 2020 if they did not bear employment expenses during February 2020 (this should be attested through a self-declaration).
WHT equivalent amounts are due directly by the mentioned taxpayers by 31 May 2020 in full, or in five equal installments starting from May 2020. No penalties and interest apply.
Deferral of payments for qualifying sectors
For taxpayers engaged in qualifying business sectors (e.g., tourism, sport, entertainment, art, culture, education, transport, food, non-profit) and having their tax domicile, registered office or place of business in Italy, payments of VAT due on March 2020 and WHT on employment and similar income and social security contributions originally due during the period between 8 March 2020 and 30 April 2020 (30 May 2020 for sports associations and clubs for WHT on employment income and social security contributions) are deferred.
The mentioned payments are due by 31 May 2020 (30 June 2020 for sports associations and the like for WHT on employment income and social security contributions) in full, or in five equal installments starting from May 2020 (30 June 2020 for sports associations and the like for WHT on employment income and social security contributions). No penalties and interest apply. No refund is available for payments that were already made.
Deferral of payments for the gaming sector
The payment of the Gaming Tax (prelievo erariale unico or “PREU”) originally due by 30 April 2020 is postponed to 29 May 2020 and can be executed in equal monthly installments plus legal interest (accruing on a daily basis). The first installment is due by 29 May 2020 and the subsequent ones by the end of any following months, with the last one due by 18 December 2020.
Deferral of collection
Payments originally due during the period between 8 March and 31 May 2020 arising from a variety of collection deeds such as tax bills, tax assessment notices, bills issued by Social Security Contributions Authorities etc. are postponed to 30 June 2020. The Decree also provides for a deferral of the installments due according to certain Tax Amnesty Programs introduced in the past years.
Conversion of DTAs into tax credits1
The Decree entitles companies (mainly banks and financial institutions) willing to dispose of Non-Performing-Loans and Unlikely-To-Pay-Exposures by 31 December 2020 to claim a partial conversion into a tax credit of the existing, although possibly unrecognized, Deferred Tax Assets (DTAs) associated with: (i) tax losses carried forward; and (ii) excess notional interest deduction carried forward.
Suspension of tax authorities activities
The ordinary terms for tax audits, tax assessments, tax collection and tax litigation are suspended from 8 March 2020 to 31 May 2020.
The suspension applies also to:
Extension of the statute of limitations
The ordinary statute of limitations for FY 2015 (which should have expired on 31 December 2020) is extended by two additional years, with the result that tax authorities will be able to audit FY 2015 until 31 December 2022.
Tax court hearings are postponed to 15 April 2020 and the terms for filing any appeals before tax courts of first instance and other procedures are suspended until 15 April 2020.
Tax credit for workspace and work instrument sanitation
The Decree provides a tax credit for FY 2020 equal to 50% of the expenses sustained by enterprises for the sanitation of workspaces and work instruments. Each taxpayer can claim a maximum credit of €20,000. The overall government budget for this measure is capped at €50 million for FY 2020.
Tax credit for retail spaces
The Decree provides for a tax credit equal to 60% of the rental fee paid in March 2020 for retail spaces (i.e., C/1 cadastral category). The tax credit is only available to offset other taxes and cannot be claimed by enterprises operating in the so called “essential activities” such as pharmacies and food shops.
Donations – deductibility for corporate income tax
Italian entities subject to corporate income tax are allowed to deduct for both corporate income tax (imposta sul reddito delle societa’ or “IRES”) and regional tax on productive activities (imposta sulle attivita’ produttive or “IRAP”) any donations made in favor of the State, regions, local entities, public bodies or institutions, foundations and non-profit organizations.
The deduction of such expenses for IRAP purposes is allowed under a cash basis principle.
The donation made by individuals and by non-commercial entities can be offset against the income tax due for an amount equal to 30% of the relevant expense up to €30,000.
Tax credit for advertising expenses
A tax credit equal to 30% of the incremental advertising expenses made in FY 2020 via press, television and radio broadcast is introduced. Such tax credit is recognized within a maximum limit to be determined by the Italian Government and is subject to the relevant European Union limits.
Extension of terms for approving 2019 financial statements
The Decree has introduced specific provisions allowing companies to call the ordinary shareholders’ meeting to approve the 2019 financial statements within 180 days of the end of the financial year as oppose to 120 days. As a consequence, all company meetings for the approval of the 2019 financial statements may be called by 28 June 2020. Also, the Decree generally allows all members to attend the shareholders’ meeting by means of telecommunications, also in exception to the provisions of the by-laws.
1. See EY Global Tax Alert, Italian NPLs and UTPs: Conversion into tax credits of Deferred Tax Assets associated with tax losses carried forward and other deferred deductions, dated 18 March 2020.
For additional information with respect to this Alert, please contact the following:
Studio Legale Tributario, Milan
Studio Legale Tributario, Financial Services Office, Milan
Studio Legale Tributario, Rome
Studio Legale Tributario, Bologna
Studio Legale Tributario, Florence
Studio Legale Tributario, Torino
Studio Legale Tributario, Treviso
Studio Legale Tributario, Verona
Ernst & Young LLP (United Kingdom), Italian Tax Desk, London
Ernst & Young LLP (United States), Italian Tax Desk, New York