Clarifications on the COVID-19 Italy Tax Relief Measures

The Italian Government has issued a number of special tax-related measures amidst the spread of COVID-19, to relieve the tax burden on corporate taxpayers and individuals due to declining revenues and difficulty in making tax payments in an uncertain economic context, namely:

1. Ministerial Decree of 24 February 2020 (Decree 2020), whereby tax compliance deadlines and tax payments are suspended in specific areas of the Italian territory (Affected Territories)¹
2. Law Decree No. 9 of 2 March 2020² (Decree 9/2020), whereby special tax measures concerning tax compliance and tax payments were introduced and apply to: (a) the Affected Territories, and (b) the entire Italian territory.
3. Law Decree No. 18 of 17 March 2020 (Decree 18/2020) which introduces other economic measures to encourage the economic recovery of individuals and entities and apply to the entire Italian territory.

In addition, on 27 March 2020, the Ministry of Economic and Finance provided further clarifications on the measures adopted through Decree No. 18/2020, providing responses in the FAQ section on the Ministry's website.

Tax measures that apply to the Affected Territories

The Decree 2020 applies to individuals and entities with residence, registered offices, or operational headquarters in the Affected Territories as at 21 February 2020, with the following tax measures being adopted:

• Deadlines to meet tax compliance obligations and pay taxes (e.g. periodic VAT settlement communications concerning Q4 2019 and VAT balance payments) from between 21 February 2020 and 31 March 2020 are suspended. However, these payments must be made by 31 May 2020 (with the possibility of paying in up to five equal months installments).
• Withholding agents are not required to apply withholding taxes, mainly relating to employee income, from 21 February 2020 to 31 March 2020.
• Deadlines to pay social security contributions and compulsory insurance premiums and due between 23 February 2020 and 30 April 2020 are extended until 1 May 2020 (with the possibility of paying in up to five equal months installments).
• The deadline to pay chamber of commerce registration duties is extended up to 31 May 2020.

Italy-level tax measures

Decree 9/2020 introduced tax measures that apply to the entire Italian territory, namely:

• The deadline to provide the Italian tax authorities with the form for each employee that shows remuneration, withholding tax, and tax deductions applied (certificazione unica) is extended to 31 March 2020.
• The deadline for third parties (eg banks, insurance companies, social security institutions, universities) to provide the Italian tax authorities with data to be included in taxpayers’ pre-completed tax returns is extended to 31 March 2020.
• Pre-completed tax returns will be available to taxpayers on the Italian tax authority’s website on 5 May 2020.
• Pre-completed tax returns (730 form) must be filed with Italian tax authorities by 30 September 2020.

The FAQ published by the Ministry of Economic and Finance confirmed such deadlines excluding subsequent extension.

Decree 9/2020 also provided specific tax measures to protect the tourist sector from a potentially huge decline in revenues due to decreased travel in this period. The new rules apply to tourism-oriented businesses, travel agencies, and tour operators in Italy³, which will see certain tax deadlines suspended from 3 to 30 April and in particular with reference to:

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

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

In addition, Decree 18/2020 implemented the following further economic measures to provide incentives for companies in managing the COVID-19 emergency:

Tax benefits

• Enterprises may benefit from a 60% tax credit for the lease rent related to March 2020 for buildings falling under cadastral category C/1 (ie 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 (eg, 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 in refund is admitted. The FAQ published by the Ministry of Economic and Finance clarified that (i) tenants must carry out economic activities of selling goods and services to the public not falling within those identified as essential and (ii) the tax credit applies to shops and stores leases only, excluding leases of going concerns and agreements providing for broader services.

• 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: (i) 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 2bn (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%.

• 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 (the maximum amount for this incentive in 2020 is Eur 50m).

• Individuals and non-commercial entities may benefit from a tax deduction of 30% up to a maximum of Eur 30,000 for gifts (in cash or in kind) made in 2020 in favor of the State, regions, local authorities, bodies or foundations and associations legally recognized as non-profit-making.

Extension of tax assessment periods and tax deadlines

• 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. However, tax assessment periods elapsing on 2020 are extended by two years⁴.

• Deadlines to meet tax compliance obligations from 8 March 2020 to 31 May 2020 (eg the filing of 2020 VAT tax return)⁵ are suspended. These tax compliance obligations must, however, be made in a single installment by 30 June 2020 The suspension does not apply with reference to the obligations related to e-invoice, as these refers to commercial obligations between parties.

• Deadlines to reply to tax rulings are suspended from 8 March to 31 May 2020. Time limit to reply begins to run from the first day of the month following the end of the period of suspension (ie 1° June 2020).

• 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 installment by 30 June 2020.

• Deadlines concerning tax payment with reference to pending voluntary settlement of tax bills procedure (rottamazione-ter) are extended up to 31 May 2020.

• Self-assessment payments falling due between 8 March and 31 March 2020 concerning: (i) VAT, (ii) withholding tax, and (iii) social security contributions and compulsory insurance premiums are suspended for individuals and entities with residence, registered offices, or operational headquarters in Italy and that have revenues not exceeding Eur 2m in the previous tax period⁶. These payments must, however, be paid by 31 May 2020 (with the possibility of paying in up to five equal months installments).

• No withholding taxes on income from self-employment applies to revenue and remuneration received in the period between the date of entry into force of the decree and 3 March 2020, for taxpayers with revenues not exceeding Eur 400,000.00 in the previous tax period. This benefit is conditional on the fact that, in the previous month, taxpayers did not incur expenses for employees (or equivalent). The amount of withholding tax must, however, be paid directly by the taxpayers by 31 May 2020 (with the possibility of paying in up to five equal months installments).

Suspension of tax hearings and tax proceedings

• Hearings regarding tax proceedings pending from 9 March 2020 until 15 April 2020 before all judicial offices are suspended.

• Deadlines to complete any steps concerning tax proceedings (eg deadline to file an appeal) are suspended from 9 March until 15 April 2020.

See our Coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.

¹ Under Prime Minister Decree of 1 March 2020, the areas involved are: (i) Bertonico; (ii) Casalpusterlengo; (iii) Castelgerundo; (iv) Castiglione D'Adda; (v) Codogno; (vi) Fombio; (vii) Maleo; (viii) San Fiorano; (ix) Somaglia; (x) Terranova dei Passerini in Lombardy, and (xi) Vò Euganeo in Veneto.

² Decree 9/2020 must be converted into law by the Italian Parliament within 60 days of the date of its publication in the Official Gazette of the Republic of Italy.

³ Law Decree No. 18/2020 extended the tax benefits to other categories of business as well (eg caterers, theatres, museum, sport).

⁴ By way of example, tax assessments related to fiscal year 2015 will be extended up to 31 December 2022.

⁵ The suspension does not apply with reference to the obligations related to e-invoice, as these refers to commercial obligations between parties.

⁶ Self-assessment payments concerning VAT are suspended regardless of the amount of revenues for taxpayers with residence, registered offices, or operational headquarters in certain areas of Italy (ie, Bergamo, Cremona, Lodi and Piacenza).