Tax credit transfers, invoice discounts: How do they work?

Aside from introducing the 110% Superbonus for certain energy upgrading and earthquake-proofing work on existing buildings, the Relaunch Decree also extends the opportunity to transfer tax credits to third parties and reintroduces the invoice discount mechanism

Published on 29 September 2020

Tax credit transfer and invoice discount for energy upgrades

Tax credit transfers and the invoice discount mechanism as alternatives to direct use of tax deductions

Anyone entitled to the 110% Superbonus, the Eco-Sismabonus at standard rates, the Facades Bonus or the Renovations Bonus can take advantage of the tax credit directly and claw back the credit built up over the following years. However, the Relaunch Decree also offers another highly advantageous alternative: the possibility of using it as a tax credit transfer or taking the contribution in the form of a discount on the sum due for expenses incurred in the years 2020 and 2021. These should relate to architectural heritage restoration work, energy efficiency, earthquake-proofing measures, the renovation or restoration of the facades of existing buildings, the installation of photovoltaic systems and the installation of charging columns for electric vehicles. 

The tax credit transfer offers the beneficiary the option of taking the deduction for this type of work or passing it on to the supplier or others. Until the Relaunch Decree came into being, the credit could only be given to a business directly connected with carrying out the subsidised work, with the exception of those on so-called “insufficient earnings” who were also entitled to transfer the credit to banks and financial institutions. Under the Relaunch Decree, however, such limitations have been removed, and everyone can benefit from the tax credit transfer. 

The invoice discount mechanism, however, is a reduction in the sum due  to suppliers that have carried out work and clawed back from them in the form of a tax credit which, in its turn, can be passed on to others. 

To give an example, let us take the case of 30,000 euro of work required to install thermal cladding on a building with a 110% subsidy under the conditions required to access the Superbonus. The beneficiary of the deduction can decide to pay the full amount and claw back the tax credit of 33,000 euro over the following five years, using it to offset tax up to an amount of 6,600 euro annually. Or they may opt to transfer the credit or use the invoice discount and have the work done at no cost, without having to wait five years to claw back the resulting credit. This is a genuine revolution for citizens’ pockets, for the building sector as a whole and, no less importantly, for the environment.

But how can one take advantage of the tax credit or the invoice discount mechanism? First and foremost, you must make a specific online application to the Italian Tax Office between October 15, 2020 and March 16 of the year after the one in which the expenses that qualify for the deduction were incurred.  You can then exercise your option at any stage in the works, which cannot number more than two for every overall project and must reference at least 30% of the project.  After you have applied to the Tax Office electronically, you will receive a receipt within five days declaring that the application has either been accepted or rejected with the reasons for the latter. If you do not send the application in the time and in the ways required by the Tax Office, it will fail.

The provisions published by the Tax Office make it clear that credit will appear in the beneficiary’s online tax office account and can be used by assignees and suppliers from the 10th day of the month after the application was received but not before January 1st of the year after the expenses were incurred. 

Furthermore, to opt for the invoice discount or to transfer a tax credit regarding work benefiting from the 110% Superbonus, you will need to obtain an official seal of approval in support of the figures in the documentation, which attests that the requirements for the tax deduction have been fulfilled.  

The tax credit transfer and the invoice discount thus offer an extraordinary opportunity to make buildings safer and more efficient whilst immediately reducing or entirely eliminating the expenses involved instead of directly using tax credits.  

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