27 JANUARY 2017

The 2017 Italian

Financial Law:
new fiscal, financial
and legal measures
in support of (new)
entrepreneurship
good justify its inclusion in the list of goods that are eligible
for the lighter fiscal regime, and that the good itself is inter-
SUPER-AMORTIZATION OF 250% ON connected with the company production management or
INDUSTRY 4.0 CAPITAL GOODS supply network systems.
Not only does the 2017 Financial Law extend to 2017 the
super-amortization of 140% already in effect in 2016, but it THE VAT GROUP
also introduces two new instruments to promote the digital Businesses undertaking an enterprise, art or profession, who
and technological transformation processes in line with the are located within national borders and are legally independ-
Industry 4.0 model: ent but strictly interconnected because of financial, economic
and organizational ties, can opt for the establishment of a
super amortization of 250% for investments in Industry
VAT group as a new and only subject liable for VAT.
4.0 capital goods made until 31 December 2017, or until
If the option is exercised between 1 January 2017 and 30
30 June 2018 under the condition that the related pur-
September 2017, it will produce effects starting from 1 Janu-
chase order is accepted by the supplier and that a down
ary 2018; if, instead, it is exercised between 1 October 2017
payment of at least 20% of the purchase price is made
and 31 December 2017, it will produce effects starting from 1
before 31 December 2017.
January 2019.
increased amortization for software as well: buyers of After exercise of the option, it is binding for three years and
capital goods that are amortizable with the 150% in-
is automatically renewed for each following year until revo-
crease who also invest in immaterial capital goods speci-
cation. The adherents to the group lose their own legal per-
fied in the Financial Law are entitled to amortize them
sonality for purposes of VAT (in this case, the group is con-
for an additional 40%.
sidered an ordinary taxable entity).
Intra-group sale of goods and supply of services will not be
In order to claim the benefits relating to the increase of fiscal
considered relevant for VAT application purposes. Active and
amortization on Industry 4.0 material and immaterial capi-
passive operations between a component of the VAT group
tal goods, a self-declaration affidavit must be presented by
and an external entity are considered carried out by the VAT
the legal representative.
group.
If the unit price of the purchased goods is higher than
500,000, tax law provides for a sworn technical estimate BENEFITS FOR INVESTMENTS IN
from an engineer or an industrial engineer enrolled in their
TECHNOLOGIES: THE NEW SABATINI ACT
respective professional associations, or from a licensed certi-
The deadline for the granting of loans issued by financial
fying institution certifying that the technical features of the
leasing entities and banks for the purchase of new machin-
ery, equipment and instrumentation by small and medium-
sized enterprises, pursuant to article 2(2) of the Legislative
Decree No. 69/2013, is extended to 31 December 2018.
Part of the allocated resources (20%) is meant to promote
innovation and efficiency of the entrepreneurial productive
sector, and thus the transition to what is known as digital
manufacturing, this meaning factory-new machinery, equip-
ment and instrumentation with the purpose of investing in
technology, including investments in big data, cloud compu-
ting, ultra wideband, cybersecurity, advanced robotics and
mechatronics, augmented reality, 4D manufacturing, radio
frequency identification (RFID), and garbage tracing and
weighing systems.
State benefits are thus granted with a 30% increase com-
pared to the maximum benefit provided for by the Legisla-
tive Decree No. 68/2013 to micro, small and medium-sized
enterprises investing in the foregoing innovations.
NOVELTIES FOR INNOVATIVE
START UP COMPANIES AND SMES
Enhancement of benefits for investments in innovative start-
up companies and SMEs
The 2017 Italian Financial Law enhances fiscal incentives for
entities investing in share capital of innovative start-up com-
panies and SMEs:
for individual income tax (IRPEF) purposes, starting
from 2017, the maximum deductible investment in inno-
vative start-up companies is raised to 1,000,000;
for individual (IRPEF) as well as corporate (IRES) in-
come tax purposes, the minimum period required to
keep the investment in order to receive the benefit is
increased to three years;
tax credit rate for investors raises to 30% of the total
investment.
At the same time, the 2017 Italian Financial Law extends tax
benefits already in place for innovative start-up companies
(pursuant to art. 29 of the Legislative Decree No. 179/2012)
to all innovative SMEs, by removing the condition which al-
lowed access to such benefits only upon the mandatory
presentation of a development plan for products, services, or
processes, which are entirely new or considerably improved
compared to the state of the art of the relevant field.
Re-financing of self-entrepreneurship and innovative start-up
companies
Several incentives destined to self-entrepreneurship have
been introduced with the objective of supporting the estab-
lishment of small businesses, entirely or predominantly
owned by young individuals or women, or for business de-
velopment. In this view, benefits consisting in no-interest
loans for a maximum of eight years covering up to 75% of
total expenses are being granted.
The authorized budget for the foregoing enterprises is
47,5 million for the year 2017 and 47,5 million for the year
2018; the following amounts have also been allocated for
the same purpose:
one third of the financial resources available in the re-
volving fund established for self-entrepreneurship and
self-employment; as well as
returns on financing issued by the national Agency for
the attraction of investment and business development.
In order to support the establishment and development of
innovative start up companies, the allowance of the Fund
for sustainable growth is increased by 47,5 million for the
year 2017 and 47,5 million for the year 2018, to be used
to provide benefits for business plans featuring considera-
ble technological content and/or aimed at the development
of goods or services in the field of digital economy.
Establishment of innovative start-up companies
The 2017 Italian Financial Law introduces new measures
simplifying the incorporation of innovative start-up compa-
nies. In particular, deeds of incorporation can now be
2 signed with the advanced authenticated electronic signa-
ture, in addition to the digital signature; the deed of incor-
poration is also exonerated from the related stamp duty
and administrative fees.
Overture of the equity crowdfunding to all SMEs
The 2017 Italian Financial Law extends the framework con-
cerning on-line collection of capital (equity crowdfund-
ing), until now exclusively applied to innovative start-up
companies and innovative SMEs, to all small and medium-
sized businesses, as well as to investment organisms of
collective savings or other corporate entities that mainly
invest in SMEs, therefore eliminating the restrictive re-
quirement of technological innovativeness.
years of new businesses, as long as the following condi-
tions are met:
the transferring and receiving companies must have
the same business year;
ownership at the end of the tax period during which
the fiscal losses are transferred must amount to 20%;
the predominant area of activity of the transferring
company must not be real estate;
the entire amount of fiscal losses must be transferred;
the transfer must be completed by the closing date for
filing the related income tax return.

RESEARCH AND DEVELOPMENT BONUS:

INNOVATIONS
Tax credit for investments in research and development
activities is now extended to 31 December 2020.
The amount of the tax credit, with an upper limit of 20
million per recipient, has been raised from 25% to 50% for
all additional expenses suffered compared to the average
investment of the same nature made in the three fiscal
years prior to the one ongoing as of 31 December 2015.

ALLOWANCE FOR CORPORATE EQUITY (ACE)

Under an ACE, companies are able to deduct a notional
interest rate on equity. The applicable rates for the calcula-
tion of the defined yield for 2017 and 2018 are settled, re-
spectively, at 2.3% and 2.7%.
INTRODUCTION OF A BUSINESS INCOME TAX
(IRI) FOR INDIVIDUAL ENTREPRENEURS AND
PARTNERSHIPS IN ORDINARY ACCOUNTING
REGIME
Italian Income Tax Law (TUIR) is amended by the addition
of a new article (55-bis), providing for a new corporate
income tax (IRI) for individual entrepreneurs and partner-
ships in ordinary accounting regime. The option for IRIs
tax regime lasts for five tax periods and is renewable.
Corporate incomes, which are not distributed by individual
enterprises or partnerships, to which ordinary regulation is
applied, are not regarded as a part of the overall income of
the relevant person and are subject to separate taxation
(as IRI) at a rate of 24% starting from 1 January 2017.
FISCAL LOSSES OF NEWLY ESTABLISHED
BUSINESSES OWNED BY PUBLICLY LISTED
COMPANIES
Companies whose shares are traded in a regulated marked
or in a multilateral trading facility are allowed to use the
fiscal losses of their subsidiaries related to the first three
3
INVESTOR VISA THE NEW
RESIDENCY PERMIT FOR FOREIGN INVESTORS
The 2017 Italian Financial Law introduces, starting from
2017, an important innovation to the Consolidated Law on
Immigration (TUI) concerning foreign, and specifically ex-
tra-EU, investors who intend to invest, operate and obtain
a residence permit in Italy.
In sum, extra-EU citizens are now given the possibility of
obtaining residency permits in Italy based on investments
in government bonds, equity of Italian corporations and/or
start-up companies, or following a donation in support of
an Italian project of public interest (culture, art, scientific
research, etc.).
An authorization to reside in Italy may thus be obtained
upon the condition of an investment of at least 2 million
in state bonds, or 1 million in equity representing the cap-
ital of a company incorporated and operating in Italy
The required amount drops to 500,000 for investments
in the capital of an innovative start-up company, duly reg-
istered in the appropriate section of the Companies Regis-
ter. The permit may be granted, alternatively, upon a phil-
anthropic donation of at least 1 million.
The residency permit will be initially valid for two years,
but it can be renewed for an additional period of three
years. Family members of the investor will also be allowed
to entry and residence.
This novelty heralds new organizational prospects for those
citizens of the world who plan on investing, operating and
living in Italy.
OPTION FOR A SUBSTITUTE TAX ON FOREIGN
INCOMES GAINED BY INDIVIDUALS SHIFTING
THEIR FISCAL RESIDENCE TO ITALY
Starting from 2017, under certain conditions, individuals
who move their fiscal residence to Italy can pay a substitute
tax calculated with a flat rate ( 100,000 for each fiscal
year) on foreign income.
The option for the substitute tax, which may also be ex-
tended to one or more family members who meet certain
conditions (in this case, the substitute tax shrinks to
25,000 per family member) can be revoked and always
ceases to produce effects 15 years after the first fiscal year
under the option. When the regime is repealed or expires, it
may not be chosen again.
Income obtained in one or more foreign countries can be
exonerated from the application of the substitute tax.
The option may be exercised only after receiving positive
response upon submission of a specific request directed to
Italian Tax Authorities.
The election is granted only if individuals have not been
resident in Italy for tax purposes for a period of at least 9
fiscal years of the 10 preceding the period of validity of the
option.
VAT CREDIT NOTES
In case of invoices which have been issued to entities that
are subject to insolvency proceedings, or are involved in
debt-restructuring agreements, or have agreed on a repay-
ment plan in accordance with specific rules, the issuance of
a VAT credit note to detract VAT depends on the unsatis-
factory pursuit of insolvency proceedings, from which the
reduction of the taxable income stems from.
TAX STEP UP OF LAND AND PARTICIPATIONS
The rate of the substitute tax for tax step up of land and
participations is the same one set for 2016 (8%).
STEP UP OF BUSINESS ASSETS
With the exception of real estate assets the production or
exchange of which constitutes the purpose of the business
activity, resident corporations, entities and resident trusts
that carry out commercial activity (and which are not IAS-
Adopters) can step up business assets for fiscal purposes at
a rate of 16% (amortizable assets) and 12% (non-
amortizable assets).
Assets must be of the same homogenous category as well
as equity included in the financial year ongoing as of 31 De-
cember 2015, and are still present in the financial balance
sheet following the one in which the step up takes place.
The surplus of the appreciation can be relieved by means of
payment of a 10% substitute tax.
Concerning real estate exclusively, the higher values record-
ed in balance sheets are taken into account for fiscal pur-
poses starting from the tax period ongoing as of 1 Decem-
ber 2018.
TRANSFER OF ASSETS TO SHAREHOLDERS
The preferential tax regime for transfers of assets to share-
holders set by the 2016 Italian Financial Law can be extend-
ed to transfers taking place between 30 September 2016
and 30 September 2017 as well.
CONTACTS
LCA Law Firm
info@lcalex.it