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Budget Law 2020: Main changes

The "Budget Law 2020" no. 160/2019 was published in the Official Gazette no. 304 of December 30, 2019, ordinary supplement no. 45/L. The main changes in tax matters are summarized below.

Stop of the increase of VAT rates

The reduced VAT rate of 10 per cent has been confirmed again for this year. The reduced rate should change from 10 to 12 per cent as of 2021 and the standard rate should change from 22 to 25 per cent as of 2021 and to 26.50 per cent as of 2022.

Reduction of the real estate flat tax (cedolare secca) on agreed rental fee contracts

The reduction from 15 to 10 per cent of the flat tax on real estate for contracts with agreed rent, is confirmed.

Extension of energy requalification deduction

The extension from December 31, 2019 to December 31, 2020 of the deadline is confirmed, by means of the adjustment to art. 14 DL no. 63/2013, within which the energy requalification interventions explained by art. 1, paragraphs 344 to 347, of the 2007 Finance Law Act must be carried out, allowing the deduction of 65-50 per cent.

This benefit is also due, regarding the expenses incurred during 2020, for all the purchase and installation of solar shading (art. 14, para. 2, letter b), micro-cogenerators to replace existing systems (art. 14, para. 2, letter b-bis) and, finally, winter air conditioning systems equipped with heat generators powered by combustible biomass (art. 14, para. 2-bis).

Extension of building recovery deduction

With regard to the recovery of the building stock, the extension from December 31, 2019 to December 31, 2020 of the deadline within which the expenses must be incurred, up to a maximum of Euro 96,000.00 (art. 16-bis, TUIR), was confirmed to take advantage of the 50 per cent deduction.

Industry investment tax credit 4.0

As of January 1, 2020, a tax credit is provided for companies investing in new tangible capital goods and new intangible capital goods as set out in Table B, Financial Act 2017.

This tax credit is recognized until December 31, 2020 or until June 30, 2021, if the relevant order is accepted by December 31, 2020 and advances are paid at least equal to 20 per cent of the purchase cost of the goods.

This benefit is granted to companies’ resident in Italy, including non-resident permanent establishments. On the other hand, it does not apply to companies in liquidation, bankruptcy, compulsory administrative liquidation, arrangement with creditors without business continuity, other insolvency proceedings pursuant to RD no. 267/42, Legislative Decree no. 14/2019 or other special laws or companies subject to disqualification sanctions pursuant to art. 9, para. 2, Legislative Decree no. 231/2001.

The amount of the tax credit due depends on the type of goods purchased.

With reference to the tangible assets listed in Table A, Financial Statements 2017, the tax credit is 40 per cent for investments up to Euro 2.5 million, while it is 20 per cent for investments starting from Euro 2.5 million up to Euro 10 million.

On the other hand, with reference to the intangible assets listed in Table B, 2017 Finance Law Act, the tax credit is 15 per cent of the cost, with a maximum eligible cost limit of Euro 700,000.00.

Finally, with regard to other assets other than those listed in Table A and B, the tax credit is limited to 6 per cent of the cost, within the maximum limit of eligible costs of Euro 2,000,000.00.

Building facade bonus

The new deduction of 90 per cent is confirmed for the expenses incurred in 2020 for building work on opaque facade structures, balconies, friezes, ornaments, including only cleaning or external painting work aimed at recovering or restoring the external facade of buildings located in zone A (old town centres) or B (totally or partially built) pursuant to Ministerial Decree no. 1444/68.

In order to take advantage of this benefit there is no upper limit on expenditure, however, the deduction due must be broken down into ten equal annual instalments.

Ace (Allowance for corporate equity) replacement

The abolition of the so-called MINI IRES (IRES rate 15 per cent) is confirmed regarding the taxation of reinvested profits (pursuant to art. 2, paragraphs 1 to 8, DL no. 34/2019).

At the same time, the ACE benefit is reintroduced as governed by Article 1, Legislative Decree No. 201/2011 and Article 1, paragraphs 549 to 552, of the 2017 Finance Law Act.

Remodulation of income deductible charges

The re-modulation of deductible charges based on the income of the taxpayer assumed net of the main dwelling and its appurtenances is confirmed. With the addition of the new paragraphs 3, 3-bis and 3-ter to art. 15 of the TUIR a deduction for the entire amount is basically provided if the total income of the taxpayer does not exceed 120,000.00 Euro, while if the total income exceeds 120,000.00 Euro the deduction will be due to the taxpayer for the part corresponding to the ratio between 240,000.00 Euro, decreased by the total income, and 120,000.00 Euro.

Fringe benefit company vehicles

The tax treatment regarding motor vehicles/motorcycles/mopeds given to employees in mixed use (both for business and private purposes) has been modified. Fringe Benefits will be taxed differently depending on when the contract is signed.

For contracts signed up to June 30, 2020, 30 per cent of the amount corresponding to the 15,000 km travelled, calculated based on the ACI mileage cost, is taxed.

For contracts signed from July 1, 2020 the percentage applicable to the 15,000 km mileage depends on the pollution class of the vehicle used.

In detail:

Up to 60 g/km of CO2 emissions the taxation is applicable at the rate of 25 per cent;
For CO2 emissions of more than 60 g/km up to 160 g/km taxation is applicable at the rate of 30 per cent;
For CO2 emissions of more than 160 g/km up to 190 g/km taxation is applicable at 40 per cent (to be increased to 50 per cent in 2021);
For CO2 emissions of more than 190 g/km the tax is applicable at 50 per cent (to be increased to 60 per cent in 2021).

Flat-rate scheme

Several changes to the flat-rate scheme have been confirmed, leading to a significant reduction in the number of persons eligible to join the scheme from 2020.

Among the most important changes is the reintroduction of the threshold of Euro 20,000.00, on labor costs, which until 2018 was set at Euro 5,000.00. It is again provided the ineligibility to joining the scheme for taxpayers who get income from employment above Euro 30,000.00. In addition, the use of electronic invoicing is encouraged by providing a one-year reduction to the assessment deadline for those who decide to issue their invoices in paperless format.

Local authority tax asseessments

Changes are envisaged on the taxes collected from local authorities. From January 1, 2020 the so-called executive assessment is introduced also for taxes collected from Local Authorities. It follows that both the notice of assessment and the related provision imposing the penalties must contain a request to comply within the deadline for the filing of the appeal, that the assessment received is directly enforceable and, in addition, the indication of the person who, after 60 days from the deadline for payment, will implement the collection of the amounts requested, also for the purposes of enforcement.

Therefore, for the above-mentioned acts, there is no more need to notify a payment note, to make it become enforceable: these acts will become directly enforceable after the deadline for lodging an appeal.

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