The Legislative Decree no. 221 of 29 October 2016 (hereinafter the "Decree") has been prepared in the light of implementation of the order to the Government to revise tax incentives and social security contributions in favor of shipping companies, established by the art. 24 of the Law no. 122/2016 providing for rules for the fulfillment of Italy's obligations as a EU 's member.
The measures introduced by the Decree are particularly aimed at the reorganization (i) of tax regime - ordinary and optional - (see Articles 4, 6 and 7 of the Decree) for shipping companies which carry out business by the vessels registered in the so-called "International Register" (introduced and regulated by the Law Decree no. 30 December 1997), (ii) of social security incentives (see Article 5 of the Decree) both for ship owners and crew, (iii) of relative discipline concerning the composition of crews of "ro-ro" vessels registered in the International Register (see articles 2 and 3 of the Decree) and the conditions for the release of temporary passes (see article 1 of the Decree).
With these measures, in accordance with the fundamental principles of the European Union, the objectives of the Decree are the following: (i) to establish a more competitive system that would encourage the investments to the nautical sector; (ii) to improve growth, occupation and preservation of the national fleet.
It should be mentioned that the effectiveness of such measures is subject to the prior approval of the European Commission and a transitional period of 18 months was conceived in order to notify all interested persons and to give time to the nautical industry to adapt the measures, if authorized by the Commission.
1. Tax measures
1.1 Amendments to the "ordinary optional" tax regime provided
The article 4 of the Decree extended tax benefits (in terms of (i) tax credit, (ii) reduction of the tax base of the Individual income tax - IRPEF- or corporate income tax - IRES-, (iii) social security contribution exemption) regulated by articles 4 and 6 of the Law Decree n.457/1997 also to the "ro-ro" and "ro-ro pax" ships registered in the International Register which are employed for commercial traffic between ports belonging to the national territory (continental or insular) even after or before a journey from or to another State.
In particular, the following tax benefits will appy:
(i) tax credit, provided that during all the period covered by the payment of withholding tax on income of the crew members, only Italian or EU crew was on board.
Please note that pursuant to the paragraph 1 of the article 4 of the Decree Law 457/1997, tax credit is recognized to shipping companies which carry out business activity by vessels registered in the so-called "International Register” for an amount equal to the withholding tax amount paid for the crew members engaged in the vessels registered in the International Register. Such amount should be considered for the withholdings payments purposes.
(ii) reduction of IRPEF and IRES tax base, provided that only Italian or EU crew was on board.
Please note that, pursuant to paragraph 2 of art. 4 of the Law Decree n.457/1997, such tax benefit implies a 80% reduction of IRES and IRPEF tax base and also an exemption from paying the Regional Tax on Productive Activities ("IRAP").
(iii) exemption from social security contributions for crew, provided that only Italian or EU crew was on board.
Please note that pursuant to paragraph 1 of Article 6 of the Decree 457/1997 shipping companies have not pay social security contributions that generally are due on income paid to the employees engaged on vessels registered in the International Register. Social security contributions due by the same employees are not due.
1.2 Amendments to the optional regime under the Italian tax Act ("Tonnage tax")
1.2.1 Option for the "tonnage tax" and "remission in bonis"
Starting from FY 2017 (for the "calendar" entity), article 6 of the Decree provides that, the option for "tonnage tax" regime shall be automatically renewed for other ten years at the expiry date. Should the option has not be renewed, it has to be revoked at the end of the ten years, according to the procedures and the deadlines provided for the communication of the option, i.e. when the yearly corporate income tax return is filed.
In such respect, please note that the tonnage tax regime has to be opted by filled in a specific section ("QUADRO OP") of the corporate income tax return of the (the so called "Modello UNICO") referred to the tax period in which the tax regime would be opted.
Moreover, under article 6 at stake should the option be not executed in the relevant tax return, the so-called "Remission in bonis" (introduced with the art. 2 par. 1 of the Decree no. 16/2012) may be allowed. Accordingly, it is possible to opt for the tonnage tax regime (i) by filling in the Quadro OP of the first useful tax return and (ii) by paying a penalty of 250.
1.2.2 Subjects not included in the "tonnage tax" regime
Finally article 7 of the Decree states that the tonnage tax regime cannot be applied for the "ro-ro" and "ro-ro pax" ships registered in the International Register registered in the International Register which are employed for commercial traffic between ports belonging to the national territory (continental or insular) even after or before a journey from or to another State.
2 Other measures
2.1 "Ro-ro" vessels crew composition
Paragraph 5 of art. 1 of Law no. 30/1998 specifies the limits within which vessels registered in the International Register may perform coastal navigation. Under article 2 of the Decree such possibility was extended to the "ro-ro" and "ro-ro pax" vessels provided that only Italian or EU crew was on board.
By way of analogy, article 2 of the Law no.30/1998 that allows Italian Flag ships to engage also foreign personnel crew notwithstanding article 318 of Naval Code, was amended. In such respect, under article 3 of the Decree "ro-ro" and "ro-ro pax" vessels engaged in coastal navigation cannot engage personnel crew by means of trade-union agreemets.
2.2 Temporary pass release
Paragraph 1 of article 152 of Naval Code was amended by Article 1 of the Decree. According such new law provision, should the declaration of the port authority certifying the nationality be not released, the duration of temporary pass shall not exceed 60 days; furthermore, the temporary pass may be renewed after obtaining a certificate of cancellation from foreign Ship Registers.