Italy business support guidance

The Italian Government approved Law Decree No. 18/2020 which introduces economic measures to help citizens and businesses amidst the coronavirus emergency (the “Covid 19 Decree”). The Covid 19 Decree entered into force on 17 March.

Tax

The Covid 19 Decree includes a package of measures to support businesses including:

• Transformation into tax credits of deferred tax assets
• Tax credit for shops and stores
• Tax credit for workplace sanitization costs
• Postponement of tax compliance deadlines and tax and social security contributions payments
• Tax measures applicable to certain categories of business
• Postponement of the deadlines to pay debts administered by the collection agent
• Tax deduction for gift in relation to the Covid-19 emergency

Transformation into tax credits of deferred tax assets

To support financial liquidity, the Covid 19- Decree provides that companies which intend to transfer bad debts by 31 December 2020 are entitled to transform into tax credits the deferred tax assets (“DTA”) relating to:

• tax losses carried forward; and
• the excess of notional yield under Allowance for Corporate Equity (so called ACE) carried forward.

The portion of DTA convertible into tax credits is limited to 20% of the nominal value of the bad debts transferred which, in any case, cannot exceed EUR 2 billion (on aggregate group basis). Bad debts are debts which are expired by more than ninety days from the relevant payment date. Tax credits resulting from the transformation of DTA may be used to offset taxes and social security contributions. Tax credits are not subject to corporate income tax and regional tax on business activities.

The benefit is subject to the payment of an annual fee of a 1.5%.

Tax credit for shops and stores

Companies may benefit from a 60% tax credit for the lease rent related to March 2020 for buildings falling under cadastral category C/1 (i.e. shops and stores). The tax credit is not allowed to companies carrying out business listed in Annexes 1 and 2 of the Decree of the President of the Council of Ministers of 11 March 2020 (e.g., supermarkets, pharmacies, para-pharmacies, etc.). The tax credit may be used to offset taxes and social security contributions pursuant to article 17 of Legislative Decree No. 241 of 9 July 1997. No claim for a refund is admitted.

Tax credit for workplace sanitization costs

Companies may benefit from a 50% tax credit for the costs incurred with the aim to sanitize the workplaces and business tools. The tax credit is recognized up to a maximum of EUR 20,000. Implementing measures will be issued by the Minister of Economic Development.

Postponement of tax compliance deadlines and tax and social security contributions payments

To aid the cash flow for businesses in the short-term, for companies having their tax domicile, registered office or place of business in Italy, tax compliance deadlines expiring from 8 March 2020 to 31 May 2020 are postponed to 30 June 2020.

Self-assessment payments falling due between 8 March and 31 March 2020 concerning VAT, withholding tax, and social security contributions and compulsory insurance premiums are suspended for individuals and legal entities with residence, registered offices, or operational headquarters in Italy and that have revenues not exceeding EUR 2 million in the previous tax period. Those payments must, however, be paid in a single instalment by 31 May 2020 (with the possibility of paying in up to five equal months instalments).

Tax measures applicable to specific businesses

The Covid 19 Decree introduced several tax measures to protect specific sectors from a potentially huge decline in revenues due to the decrease in demand in this period. The new rules apply to certain categories of business (e.g., tourism-oriented businesses, travel agencies, caterers, theatres, museum, sport) in Italy, which will see certain tax deadlines suspended from 3 to 30 April and in particular with reference to:

• payments of withholding tax relating to employee income; and
• payments of social security contributions and compulsory insurance premiums.

These payments must, however, be paid in a single instalment by 31 May 2020 (with the possibility of paying in up to five equal months instalments).

Suspension of the Italian tax authority’s activities

The Covid 19 Decree provides that deadlines for all activities related to settlements, assessments, tax audits, tax collection and tax litigation carried out by the Italian tax authority are suspended from 8 March to 31 May 2020. This measure has the consequence that tax assessments shall be extended by two years (by way of example, tax assessments related to fiscal year 2015 will be extended up to 31 December 2022).

Moreover, deadlines to reply to tax rulings are suspended from 8 March to 31 May 2020. The time limit to reply begins to run from the first day of the month following the end of the period of suspension (i.e. 1 June 2020).

Postponement of the deadlines to pay debts administered by the collection agent

The Covid 19 Decree provides the postponement of deadlines concerning tax payment notices (cartelle di pagamento), assessment notices falling between 8 March 2020 and 31 May 2020 are suspended. However, these payments must be made in a single instalment by 30 June 2020. Moreover, deadlines concerning tax payment with reference to pending voluntary settlement of tax bills procedure (rottamazione-ter) are extended up to 31 May 2020.

Tax deduction for gift in relation to the Covid-19 emergency

To encourage gift to manage the Covid-19 emergency, the Covid 19 Decree provides that individuals and non-commercial entities may benefit from a tax deduction of 30% up to a maximum of EUR 30,000 for gifts made in 2020. Gifts must be made in favour of the State, regions, local authorities, bodies or foundations and associations legally recognized as non-profit making. Tax deduction applies with reference to gifts made in cash or in kind.

Employment

(A) Temporary lay-offs

Possibility to implement temporary layoffs for companies whose businesses are currently affected by COVID-19 emergency:

• Reason: COVID-19 emergency (i.e. suspension/reduction of work due to COVID-19).
• Eligible employers: companies in all sectors (different temporary layoffs have been introduced by the decree, depending on the sector in which a company operates).
• Maximum suspension/reduction in work: 9 weeks (between 23 February and 31 August 2020).
• Eligible employees must have been employed since at least 23 February 2020, also on a temporary basis.
• Union procedure: local trade union involvement is generally required.
• Requests are submitted to the regional authorities or to local National Security Contributions Authority (INPS), depending on the sector in which the company operates.
• Benefits: employees receive an allowance of approximately EUR 1,200, which is paid by the state.

(B) Redundancies

Employers may not carry out individual dismissals for justified objective reasons or begin collective dismissal procedures from 17 March to 16 May 2020. Any pending procedures that began after 23 February are also suspended.

(C) Leave and other aid

As schools have closed, working parents (including foster parents) can take an extraordinary leave of 15 days in 2020, with these days being taken continuously or split into multiple periods, to take care of children up to 12 years of age or who have serious disabilities (regardless of age), receiving an amount that is up to 50% of their salary.

Parents (including foster parents) with children 12–16 can take off from work for as long as schools are closed on unpaid leave. They cannot be made redundant for the entire leave period.

(D) Security protocols within companies

On 14 March 2020, employer and trade union organisations, at the Italian government’s invitation, signed the “Shared protocol containing measures to combat and contain the spread of Covid-19 in the workplace”, which must be guaranteed in all companies. For more information on the 13 points addressed in the protocol, please see our article here.

Financial support measures for SMEs

The Italian government has decreed, in favour of SMEs, an automatic temporary standstill of certain loan facilities granted by banks, financial intermediaries and other entities which are permitted to lend in Italy.

In particular, Article 56 of the Covid 19 Decree decrees that:

A) drawn and undrawn uncommitted facilities and factoring facilities cannot be cancelled (in whole or in part) before 30 September 2020;

B) the repayment of non-amortising loans which were due to be repaid before 30 September 2020 are automatically extended to 30 September 2020 (together with any accessory rights) with the same conditions; and

C) the repayment of instalments of amortising mortgage and other loan facilities and leasing facilities which were due to be repaid before 30 September 2020 are automatically extended to 30 September 2020 (together with any accessory rights) and the instalments are to be spread over the remaining life of the relevant loan or leasing facility (in a way which must ensure there are no additional obligations on both parties); the relevant SME has the right to request the suspension of only principal.

Such standstill will cover the period from 29 February 2020 to 30 September 2020 and can be obtained through a self-certification of the relevant SME which must declare that it has suffered a temporary lack of liquidity as a direct consequence of the Covid-19 pandemic. Additionally, in order to benefit from the financial support measures, the relevant SME must have its registered office in Italy and its debt exposure must not be classified as impaired (esposizione debitoria deteriorata) as of 17 March 2020.

Upon request of the financing entity (which must indicate its aggregate exposure), it may benefit from a guarantee of up to 33% of its exposure to the SMEs which have benefited from the standstill described above. This guarantee is provided by the SME Guarantee Fund, which has been granted an additional EUR 1.73 billion to this end.

¹Under art.106 of law decree n.385 of 1 September 1993.
²No mention is made of notes or bonds.
³Established under art.2, comma 100, letter a) of law 23 December 1996, n.662.