What you need to know about the Tax Credit for Southern Italy
Italy’s 2016 Stability Law introduced a tax credit for enterprises that purchase new capital assets for their production facilities located in Southern Italy (Campania, Apulia, Basilicata, Calabria, Sicily, Molise, Sardinia and Abruzzo), which was confirmed and extended by the 2020 Budget Law until 31 December 2020. Legislative Decree no. 243/2016 (the so-called “Southern Italy Legislative Decree”) made some modifications to the original regulations. Investments in machinery, systems and various equipment are eligible if destined to the establishment of a new production facility, an increase in production capacity of an existing facility, the diversification of production at a facility to produce products not previously manufactured, or a fundamental change in the overall production process of an existing facility; for large enterprises located in the areas defined by art. 107, par. 3, letter c) of the TFEU, such investments are eligible also if they are destined to the creation of a new business activity.
Excluded investments
Enterprises in financial difficulty and those operating in the following sectors: steel, coal, naval construction, synthetic fibres, transport and related infrastructure, energy production and distribution, energy infrastructure, credit, finance and insurance.
Enterprises operating in the production and sale of agricultural products, fishing and aquaculture sectors are entitled to the credit within the limits and conditions laid down by European legislation on state aid.
Cumulation and use of the tax credit
The tax credit:
- Is commensurate with the overall investment cost. For each project, the credit is granted up to a maximum of € 3 million for small enterprises, € 10 million for medium-sized enterprises and € 15 million for large enterprises;
- Can be cumulated with “de minimis” incentives and with other State aid within the limits of intensity or of the largest aid amount as permitted under EU legislation;
- For costs incurred after 1 March 2017, can be cumulated with the super-amortisation and hyper-amortisation and with the Sabatini-ter provision;
- Can only be used for offsetting purposes using the F24 form;
- Must be included in the income tax returns relative to the year of accrual and to the years during which it was used, and the annual usage limit of € 250,000 is not applicable.
Incentive amounts
The amount of the incentive is based on the size of the enterprise and (for investments from 1 March 2017) are defined as follows:
- For production facilities located in Basilicata, Calabria, Campania, Apulia, Sicily and Sardinia:
45% for small enterprises;
35% for medium-sized enterprises;
25% for large enterprises.
- For production facilities located in Abruzzo and Molise:
30% for small enterprises;
20% for medium-sized enterprises;
10% for large enterprises.
How to submit the communication
All interested entities are required to submit a specific communication to the Agenzia delle Entrate (Italian Revenue Agency), specifying the details of the eligible investments and the tax credit amount for which they are seeking authorisation.
If the assets for which the tax credit is granted do not become operational by the second tax year following that in which they were purchased or completed, the tax credit shall be recalculated to exclude from the eligible investments the cost of those assets that are not yet operational.
Furthermore, if by the fifth tax year from that in which they became operational, the assets are disposed of, sold to third parties, allocated for uses not related to the business activities or destined to production facilities other than that for which the incentive was granted, the tax credit shall be recalculated in order to exclude the cost of those assets from the eligible investments.
If, during the tax period in which one of the aforementioned situations occurred, other assets from the same category as those entitled to the tax credit are purchased, the tax credit shall be recalculated excluding the amount of the non-amortised cost of the eligible investments which exceeds the costs of the new acquisitions.
ELIGIBLE ENEL X PRODUCTS:
Heat pumps, photovoltaic systems, cogeneration, energy efficiency improvement solutions such as compressors, boilers, chillers, ORC units (heat recovery systems for generating electricity) and fluid pumps.
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