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Innovative ACE: summary of the rules, application and open issues

published on 29 November 2021 | reading time approx. 4 minutes

Among the most interesting news in recent months is Article 19 of DL 73 of 5 May 2021 (Decreto Sostegni-bis) converted into Law no. 106 of 23 July 2021, which introduced the enhancement of the ACE (Aid to Economic Growth, so-called Super ACE or innovative ACE), on a transitional basis and only for increases in assets recognised in 2021.

The tax relief in question allows for the possibility of benefiting from an increased coefficient of remuneration on the increases in assets realized in 2021, set at 15 per cent, with respect to that provided under the ordinary ACE of 1,3 per cent. The innovative scope of the provision in question is, however, limited only to increases eligible for tax relief up to a maximum of five million Euro.

Subjective scope

With regard to the beneficiaries, it is assumed, by way of interpretation, that they can be identified with those who are ordinarily entitled to benefit from the ACE relief referred to in Article 1 of Decree Law 201 of 2011. However, the text of the regulations does not clarify this point and does not provide for any reasons that may prevent the beneficiaries from benefiting from the ACE relief, for example, related to the type of business or any size requirements.

Temporal scope

The Super ACE relief applies only to the tax period following the one in progress on 31 December 2020:

for solar entities it is therefore the tax year 2021;
for parties with a “straddling” fiscal year, the eligible period will be 2021/2022.

Basis for calculating the relief

The basis for calculating the Super ACE is the increase in shareholders' equity compared to that existing at the end of the previous tax period (ACE basis at 31 December 2020 or at the end of the 2020/2021 financial year).

Significant increases

In this sense, recalling the provisions of the implementing provisions on ordinary ACE in the Ministerial Decree of 3 August 2017, they are relevant as capital increases:

contributions in cash made by shareholders;
waivers of claims;
the profits to be allocated to reserves with the sole exclusion of unavailable reserves and as such also revaluation reserves, at least until the revalued assets are realised.

Revaluation reserves

With regard to the inclusion, in the basis of calculation of the Super ACE, of the revaluation reserves, also in the face of the umpteenth regulatory silence, in doctrine the possibility of calculating such reserves has been evaluated only where:

have been formed by 31 December 2020 (the resolution approving the financial statements in which the revaluation is carried out is relevant in this sense);
the realisation of the revalued assets takes place in the same financial year 2021.

Otherwise, the reserve will remain in the state of unavailability and in fact cannot be calculated in the calculation of the innovative ACE.

On the other hand, with regard to the reserves formed before 2020, it would not be reasonable to include them in the list of increases relevant for the purposes of the enhanced tax benefit because they were formed when the benefit was not yet in force. In any case, clarifications from the Revenue Agency are hoped for on this point.

Non-application of annual adjustment

Distancing itself from the provisions regarding ordinary ACE, Article 19, paragraph 2 of Decree Law 73/2021, with reference to innovative ACE, does not provide for the pro rata temporis calculation of the increases in capital realised. Therefore, by express reference to the law, they will be counted from the first day of the tax period even if made at the end of the year.

The ordinary facility is in fact further strengthened.

Maximum limit of increase to be facilitated

However, it is necessary to recall the limit, already mentioned above, within which you can benefit from this provision of favor, that is, the five million euro of increases facilitated. Any contribution in excess of this threshold will be facilitated on the basis of the ordinary ACE provisions (at a rate of 1,3 per cent).

Unresolved issues

In this regard, situations of particular complexity could arise where there are several payments made at different times during the year, such that the total amount exceeds five million euro. The excess amount will necessarily be regulated by the ordinary ACE rules, with doubts about the application of the pro rata temporis and where this is applicable, to which of the different payments should be calculated.

Another aspect of absolute uncertainty concerns the application of the anti-avoidance provisions contained in Article 10 of the Ministerial Decree of 3 August 2017, which were established in order to prevent, within corporate groups, the demultiplying effects of the benefit. It is considered reasonable to recall, also in the new regulations, this anti-abuse rule.

Therefore, in the absence of a prior ACE base, any consideration received for intra-group transactions, such as the acquisition or increase of shareholdings in subsidiaries, as well as the acquisition of companies or business units already belonging to group entities, would be deducted from the tax base of the innovative ACE. Thus, for example, if a company of the group benefits from a capital increase and consequently transfers it entirely to one of its subsidiaries, the benefit will be counted only for the beneficiary subsidiary and not for the parent company.

The case in which the parent company has a previous ACE base is different, and for this reason the doctrine considers that the consideration originating from transactions declared as elusive must be deducted from the previous ACE base.

Thus, the tax base of the innovative ACE would continue to be facilitated in its entire amount. Another unresolved question concerns the maximum limit of five million euro in the total increases that can be facilitated, if the contributions are made by the holding company (for example for 50 million Euro) and subsequently transferred to the sub-holding (for 45 million Euro) and to the various subsidiaries (5 million Euro each) in a chain logic of capitalization.

In this case, in fact, all the companies of the group would benefit from a taxable base for the calculation of the Super ACE within the limits of the aforesaid five million. However, the majority interpretation would consider this to be reasonable, since in such cases there would be no avoidance or multiplication of the benefit.

Eligibility for the tax benefit

It is in any case left to the discretion of the individual beneficiary to decide:

whether to benefit from the Super ACE according to the ordinary rules and therefore in the form of tax-free income reducing the IRPEF or IRES taxable base;
whether to request its conversion into a tax credit, calculated by applying the IRPEF or IRES rates to the 2021 notional yield.

Use to reduce taxable income

The tax savings would be achieved by directly reducing the taxable income in the tax return, materializing at the time of payment of the balance of income taxes for 2021. If the same taxable income is not available, it could be considered to apply, also within the Super ACE, the carry forward of the surplus.

Use in the form of a tax credit

The conversion into a tax credit allows for early use by:

use in compensation in the F24 form without any limit on the amount;
reimbursement request;
transfer to a third party who can:
- use it in the same way and within the same terms as those provided for the transferor;
- give it up further.

Prior communication to the Revenue Agency

If one opts for the conversion of the innovative ACE into a tax credit, it will be necessary to submit a specific prior communication to the Revenue Agency in accordance with the procedures and terms that have been defined in Measure number 238235 of 17 September 2021.

This communication can be transmitted electronically starting from 20 November 2021 until the deadline for submitting the tax return for the tax period following 31 December 2020. Within 30 days from the transmission, the Agency will communicate whether or not the credit is due.

In any case, without prejudice to the prior notification to the Revenue Agency and to the above timing, the tax credit can be used from the following day:

to the one in which the cash payment is made;
to the one in which the waiver of credit by the shareholders takes place;
the resolution in which it is decided to allocate all or part of the profit to reserves.

Recovery of the advantage

Paragraphs 4 and 5 of Article 19 regulate a specific mechanism for recovering the benefit (so-called recapture).

This operates automatically when there is a reduction in equity, not caused by operating losses, in the two tax periods after 2021.

In particular, the benefit must be reimbursed in all cases of distribution of assets to shareholders for any reason. Therefore, the legal theory is that the reversal must take place both when the distribution concerns reserves that have benefited from the Super ACE, and in cases of distribution of reserves formed in previous tax periods and facilitated with ordinary ACE.

It is, however, possible to avoid repayment of the relief by offsetting reductions in assets with payments of at least the same amount.

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