The Italian Government recently approved  the “patent box”, a tax relief system for the incomes deriving from the exploitation of industrial property.

This could be a good news. Around 6 months ago we campaigned for the approval of an Italian patent box to boost competitiveness and create better conditions for the foreign investments.

 However, based on the text of the law currently circulated we should be cautiously optimistic.

 Section 7 of the draft law, entitled “Tax credit for research and development activities” extends the tax credit “to the acquisition, combination, organization and use of the existing capacities  of scientific, technologic and commercial nature to produce plans, projects and designs for modified or improved  products, processes and services”  and “to the production and test of products, processes and services, provided that they are not used  or transformed  for industrial applications or business purposes”.

The new system would therefore not have the tax advantage for the incomes deriving from the exploitation of industrial property, which represents the most streaking feature of the patent box: instead the measure follows the guidance of the well-known tax advantages  for investments in R&D as outlined in Italian legislation.

 In some senses, this outcome would be better than nothing. Mechanisms intended to facilitate the direct and indirect production activity of innovative products service are always welcomed. That said, the Italian legislator would have lost a great opportunity to incentivize innovation.