Tax incentives and “Industry 4.0”: what’s behind the Budget Law 2017
Client Alert Special edition
On September 21st, 2016, the Italian Ministry of Economic Development,
presented the “Industrial National Plan 4.0” for 2017-2020 years (“Industry
4.0”). That Plan was developed along the guidelines set out under the “Industry
4.0” issued by the European Parliament in September 2015. The Italian
Industry 4.0 Plan, in particular, addresses an ambitious industrial
technological revolution through research and infrastructure funding and
through the use of smart machines, inter-connected and connected to internet.
To this end, the Industry 4.0 Plan aims at increasing the tax incentives on
investments made by companies with respect to new assets and technologies
deployed for the improvement of connection between physical and digital
systems, complex analyses of big data and real-time settings.
In this framework, the Italian government promoted also the digitalization not
only with respect to the industry manufacturing chain as whole but also with
respect to specific fields such as Agrifood, Bio-based economy and Electricity
saving. To this end, for instance, the Italian government developed robust
programs to support the investments in technologies made by the companies
on agricultural and food fields.
Recently, the Italian government approved the Law no. 232, dated December
11, 2016 (hereinafter “Budget Law”) setting out a number of tax incentives for
investments consistent with the Industry 4.0 Plan.
This alert focus on the increased depreciation of the notional purchase cost of
certain tangibles and intangibles for corporate income tax purposes (IRES) as
well as on the tax incentives connected with the R&D.
1. THE INCREASED DEPRECIATION FOR TANGIBLES
The Budget Law introduced a beneficial regime whereby an eligible company
may increase the ordinary tax depreciation rate applicable for IRES purposes
with respect to qualifying assets. Under the regime, the amortization of the
cost suffered by any eligible companies raise (i) up to 250% for new tangibles
(so called “Hyper-depreciation”); (ii) up to 140% for intangibles (such as
software and development/system integration) correlated with an investment
on tangibles (so called “Super-depreciation”).
The regime applies to any purchases made by January 1st 2017 and within
December 31st 2017. However, the regime applies also on any purchases
made until June 30 2018 if, within December 31st 2017, both the relevant
purchase is approved by the seller and the eligible company has made any
advance payments (minimum 20% of the purchase).
1.2 Incentives for Hi-Tech assets
The Hyper-depreciation allows any eligible companies to increase up to 150%,
for the purposes of the depreciation, the cost incurred for Hi-Tech assets
(article 1 (9) of the Budget Law). Accordingly, company is entitled to depreciate
up to 250% of that cost.
Assets qualifying for the regime
In order to apply for the regime the eligible company must purchase any new
“capital assets” (“beni strumentali”) among those listed into the appendix
“Allegato A” of the Budget Law (hereto enclosed for ease of your reference)
which involve a technological and/or digital upgrade of the company
production chain under the “Industry 4.0” Plan. In principle, one or more of the
following elements characterize a qualifying asset:
(i) It works under a computer systems and/or is governed by sensors and
(ii) It ensures quality and sustainability;
(iii) It enables a human-machine interaction device and improve
ergonomics and security in the workplace.
Additionally, the asset sub (i) must embed:
a) certain compulsory technical specifications: the regime does not
apply even if just one of such specifications is missing;
b) at least two of the additional specifications listed into the “Allegato A”
in order to make it either similar or incorporated to cyber-physical systems.
Nine technology drivers
Chart 1 - Source: Ministry of Economic Development
1.3 Incentives for intangibles correlated with an investment on
tangibles entitled to the Hyper-depreciation
Any company eligible for the Hyper-depreciation regime may benefit of an
additional increase of the ordinary depreciation rate applicable to intangible
assets for IRES proposes. To this extent, any eligible companies are entitled
to depreciate up to 140% of the cost suffered for acquiring intangibles
(recognized as “capital assets”) which are listed into the appendix “Allegato B”
of the Budget Law (hereto enclosed for ease of your reference).
This regime is recognized upon the acquisition of new intangible assets (such
as software, systems, platforms and applications) correlated with investments
in tangibles falling under the “Industry 4.0” Plan.
1.4 The documentation required
The tax beneficial regime applies under the condition that the eligible company
provides the following documentation:
a declaration undersigned by the legal representative, in
accordance with DPR no. 445/2000, stating that the qualifying asset (i)
meets all the technical specifications provided by the relevant law, and
(ii) is inter-connected either with the manufacturing chain or the supply
an appraisal by a certified professional engineer or industrial expert if
the acquisition cost of each assets is higher than 500.000,00 euro.
The documentation must be prepared: (i) within the fiscal year in which the
asset is activated into the business process; or (ii) within the fiscal year in
which the asset is inter-connected either with the production chain or the
In such a latter case, the regime may be benefit starting from the fiscal year in
which the inter-connection takes place.
The “inter-connection” meaning should be clarified shortly by the Italian tax
1.5 Asset excluded from the regime
buildings and constructions
assets with a depreciation rate lower than 6.5%
1.6 Pre-payment of taxes
Any taxes to be paid in advance for FY 2017 should be calculated taking into
account the amount of taxes that should have been due in the absence of the
2. THE REVAMP OF THE SUPER-DEPRECIATION
The super-depreciation – originally introduced by the Budget Law 2016 – and
applicable to new “capital assets” not included within the “Industry 4.0” has
been extended by the Budget Law for FY2017 (art. 1 par. 8).
Particularly, under the measure provided for corporations and professionals
carrying out investments in new tangible, the acquisition cost is notionally
increased by 40% for the determination of tax depreciation and lease fee for
corporate income tax purposes (IRES).
The measure is applicable to new assets purchased: (i) until 31 December
2017; or (ii) until 30 June 2018 if - as of 31 December 2017 – assuming that
the purchase order of the new asset has been accepted by the seller and 20%
of the sale price has been already paid.
In order to identify the time when the asset is considered purchased – and
accordingly whether or not it falls under the tax benefit period – the Italian
Revenues Agency clarified that the reference has to be made to the accrual
basis rules provided by article 109 of the Italian tax Code (Ministerial Ruling
26.5.2016 n. 23, § 3).
Therefore, the asset is considered purchased when it is delivered or sent, or
should the dispatch, or when the ownership is transferred if it precedes the
delivery or the dispatch of the asset.
Cars and vehicles excluded
Differently from the previous measure provided by the Budget Law 2016, cars
and vehicles partially deductible for IRES and IRPEF purposes (ex art. 164,
par. 1, letters b) and b-bis) of the Italian Income Tax Code) are excluded from
super-depreciation. In details, they refer to (i) vehicles used by companies and
professionals (20% of their costs are deductible); (ii) agents vehicles (80% of
their costs are deductible); (iii) vehicles allowed to employees for mixed use
(70% of their costs are deductible).
In the light of the above, only vehicles and car used for business purposes (ex
art. 164, par.1, letter a) of the Italian tax Code) can benefit of the increasing of
40% for FY 2017.
Pre-payment of taxes
See par. 1.6 above.
3. THE OTHER TAX MEASURES SUPPORTING
3.1 Research and development tax credit
3.1.1 The amendments introduced by the Budget Law
Extension and enhancement of the research and development (R&D) tax
credit ex article 3, Law Decree 145/2013 were contained in the measures
introduced the Budget Law 2017.
The benefit allows resident companies performing qualified R&D activities to
benefit from a tax credit calculated on sustained qualified expenditures (if
higher than €30,000) in a percentage amount (please refer to point a) of the
exceeding qualified expenditures in a given FY in respect of the average of
the three previous FYs (2012-2014).
The changes introduced as from 1 January 2017 by the Budget Law are
summarized as follows:
a tax credit is increased to 50% for all types of R&D expenses admitted;
b the annual cap also is increased to EUR 20 million per year for each
c tax credit is extended through 31 December 2020;
d as for the staff expenses qualified for the tax credit, the condition the
“highly qualified” staff (as required by the previous legislation) is no
e the benefit may also apply to resident companies and Italian
permanent establishments of non resident companies that carry out
R&D activities through contracts with entities that are resident for tax
purposes in EU/European Economic Area (EEA) countries or in other
countries and territories that allow an adequate exchange of
information with Italy.
As for the point e, the tax credit has been extended by the Budget
Law 2017 also to subjects (resident companies and Italian permanent
establishments of nonresident companies) performing R&D activities
commissioned by third parties that are resident or established for tax
purposes in (i) EU, or (ii) European Economic Area (EEA) countries
or (iii) in any other countries and territories that allow an adequate
exchange of information with Italy.
This change had been made in order to support R&D activities within
Italian territory that are commissioned often by foreign entities.
3.1.2 Compatibility between the R&D tax credit and the EU funding
The Italian tax authority clarified (please refer to the Resolution n. 12 released
by the Italian Revenues Agency on 26 January 2017) that R&D tax credit can
be combined with an EU funding on R&D expenses. In details, should a
company incur R&D expenses for which an EU funding have been obtained,
the same company is allowed to calculate the R&D tax credit if the total amount
of the both benefits (R&D tax credit and EU funding) is not higher than the
amount of the R&D qualified expenses incurred by the company.
Italian tax authority specified that the test have to be performed on the
expenses directly connected to both the R&D tax credit and the EU funding
(the so-called direct expenses). Moreover, specific operative instructions have
been issued and in particular the recipient company of both the tax credit and
EU funding shall:
identify all the relevant expenses for the R&D tax credit calculation
purposes considering also the amount qualifying for the EU funding
calculate the potential tax credit;
verify that the amount of the EU funding for the R&D expenses and the
tax credit amount is not higher than the total amount of the R&D
expenses incurred in the fiscal year for which the both benefits are
3.2 The other tax measures
The other tax measures introduced by 2017 Budget Law are:
30% Tax deductions: for investments in innovative startups and SMEs
up to certain threshold (EUR 1,8 million for corporations);
extension, strengthening and qualification for “Industry 4.0” of Sabatiniter
Benefits deriving from the Patent Box regime can be combined with the
above measures. Such optional tax regime grants a partial exemption (as to
40% in 2016 and 50% from 2017 onwards) from corporation tax (“IRES”) and
regional production tax (“IRAP”) for income deriving from the direct or indirect
exploitation of certain intangible assets (e.g. industrial patents, design,
WHY DE BERTI JACCHIA FRANCHINI FORLANI
De Berti Jacchia Franchini Forlani (“DBJ”) can act as a professional partner,
with a robust expertise on tax and legal matters, for companies intending to
explore and identify tax and legal opportunities established by the “Industry
4.0 Plan” in their business. In details, DBJ offers our tax expertise, analysis
and strategical skills to:
Map out the investments for accessing to the tax benefit
support for creating “Industry 4.0” projects;
define the actions in order to
- identify assets entitled for the Hyper-depreciation and Superdepreciation
- drafting of the technical, legal and tax documentation for achieving
the tax benefits;
- R&D tax credit analysis and certification;
- Maximize the tax benefits of the funding of the investments (e.g.
interest deduction withholding taxes, equity injection and ACE
- Maximize the tax benefit of the investments made in the previous
This document provide only general information for clients and professional contacts of De Berti Jacchia
Franchini Forlani. It does not constitute legal advice, nor does it purport to be comprehensive; accordingly,
it should not be relied upon as such.