February 28 2014
On December 27 2013 Parliament approved the Stability Law 2014. The law includes a number of significant measures affecting individual and corporate taxpayers.
Since December 31 2011, Italian companies(1) and Italian branches of foreign companies have been allowed to deduct an amount equal to the notional return on invested capital (NRIC) from their taxable income for the purposes of both income tax and corporation tax.
For the 2011, 2012 and 2013 tax years, the NRIC rate used to calculate the income deduction was 3%. The Stability Law sets the NRIC rates for the 2014, 2015 and 2016 tax years at 4%, 4.5% and 4.75%, respectively.
A new opportunity has been introduced for Italian companies to step up the tax cost of tangible and intangible assets(2) and participations booked in their financial statements as of December 31 2012.
The step-up, which can be undertaken by Italian companies and entities subject to corporate tax, must take place in (and be included in the financial statements for) the year following that in progress on December 31 2011, and must include all assets belonging to the same asset class.
Under the revaluation rules, companies that have not adopted the International Accounting Standards can step up the category of assets selected by paying a 'substitute tax' of corporate tax, regional tax and any additional tax. The substitute tax rate is 16% for depreciable assets and 12% for non-depreciable assets. Payment of the tax is due in three annual instalments of equal amounts (with the first payment due by June 16 2014).
The equity reserve created as a result of the revaluation is ordinarily taxable on its distribution, unless an additional 10% substitute tax is paid.
This increase in tax basis will allow for higher deductible depreciation as of January 1 2016 and capital gains on the sale as of January 1 2017.
The tax step-up optional regime for goodwill, trademarks and other intellectual property booked in consolidated financial statements following corporate reorganisations was made permanent as of the 2012 tax year.
The 16% substitute tax applicable to the amount of the step-up must be paid in a single instalment by the deadline for payment of the corporate income tax balance for the fiscal year in which the transaction was carried out.
Payments under finance lease agreements concluded from January 2014 are now deductible over a period no shorter than half of the allowed tax depreciation period for the underlying asset (previously, two-thirds of the tax depreciation period was allowed). Deductibility of immovable property is allowed for a period of no less than 12 years (instead of two-thirds of the depreciation period as was previously provided, with a minimum term of 11 years or 18 years, depending on the circumstances).
The period of deductibility for finance leases of vehicles has not changed.
For further information on this topic please contact Marco Abramo Lanza, Simona Zangrandi or Franco Pozzi at Studio Legale Tributario Biscozzi Nobili by telephone (+39 02 763 6931), fax (+39 02 780 146) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Studio Legale Tributario Biscozzi Nobili website can be accessed at www.slta.it.
(1) That is, joint stock companies, public or private bodies and individual enterprises, non-limited partnerships and limited partnerships, subject to certain conditions.
(2) Immovable property held as stock for resale cannot be revalued.
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