Italian government adopts additional tax measures to manage COVID-19

The Italian Government issued Law Decree No. 23 of 8 April 2020 (Decree 23/2020) to support companies and individuals most affected by the coronavirus emergency. These tax measures are in addition to those introduced by Law Decree No. 18 of 17 March 2020 (Decree 18/2020).

Decree 23/2020 applies to the entire Italian territory and includes a variety of measures to support businesses including:

• tax benefits;
• extensions on tax deadlines and payments; and
• suspension of tax hearings and proceedings.

In addition, Decree 23/2020 amended the tax regime of the dividends paid by foreign participated entities to Italian non-commercial partnerships (società semplici).

Tax benefits

• Supply, free of charge, of drugs “for compassionate use” are facilitated in order to facilitate their supply by pharmaceutical companies. For VAT purposes, the supply of these goods is equated to their destruction: VAT is not charged on the supply of goods, but the supply gives rise to a right to deduct them for VAT purposes. With regard to direct taxation, the value of the medicinal products does not contribute to the company’s revenues.
• The tax credit of 50% of costs incurred to sanitise workplaces and devices as per Decree 18/2020 is also extended to costs incurred to purchase personal protective equipment (eg surgical masks, glasses). The tax credit can be up to €20,000 (the maximum amount for this incentive in 2020 is €50m).

Extensions on tax deadlines and payments

• Self-assessment payments falling due between April and May concerning: (i) VAT, (ii) withholding tax, and (iii) social security contributions and compulsory insurance premiums are suspended for individuals and entities who have their residence, registered office, or operational headquarters in the Italian territory and accrued revenues of no more than €50m in the previous fiscal year. This extension applies provided that there was a decrease in turnover of at least 33% in March and April compared to the same period in the previous year¹. If revenues exceed €50m, the suspension applies provided that turnover decreased by at least 50% with reference to the same periods. Payments due must, however, be paid by 30 June 2020 (with the possibility of paying in up to five equal months instalments starting June 2020, with no application of penalties or interest)².
• No withholding tax on income from self-employment applies to revenue and remuneration received between 17 March 2020 and 31 May 2020 by taxpayers with making no more than €400,000 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). Such withholding taxes must, however, be paid by the taxpayers by 31 July 2020 (with the possibility of paying in up to five equal months instalments starting 31 July 2020, with no application of penalties or interest).
• No penalties and interest apply to taxpayers who determine the advance payments for IRPEF, IRES and IRAP purposes under the forecasting method (metodo previsionale) to the extent such payments are not lower than 80% of the amount that would have been due based on the results of the tax return of the current fiscal year.
• Deadlines for payments to public administrations expiring on 16 March 2020 are extended to 16 April 2020, with no application of penalties or interest.
• The deadline to provide the Italian tax authority with the form for each employee that shows remuneration, withholding tax, and tax deductions applied (certificazione unica) is extended to 30 April 2020.

Suspension of tax hearings and tax proceedings

• Hearings concerning tax proceedings pending before all judicial offices are suspended until 11 May 2020.
• Deadlines to complete any steps concerning tax proceedings (eg applicable deadline to file an appeal) are suspended until 11 May 2020.

Amendments in the tax regime of dividends distributed to Italian partnerships

• With the aim to resolve some interpretative doubts, Decree 23/2020 intervenes on the taxation of dividends distributed to Italian non-commercial partnerships (società semplici) by providing that also dividends distributed by non-Italian resident entities are taxable in the hands of the Italian partners (according to their relevant tax regimes) on a tax transparency basis (look-through approach) at the time they are paid to the partnership. As an exception, dividends distributed by foreign entities subject to low-tax regimes are generally included in the non-commercial partnership taxable income for their full amount. The amended tax regime applies in principle to dividends distributed from 1° January 2020. However, the tax regime in force before 2018 (ie partial inclusion of the dividends distributed on substantial and non-substantial shareholdings in the taxable income of non-commercial partnerships) still applies to dividend distributions paid out of profits accrued up to 31 December 2019 and resolved by 31 December 2022.

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

¹Self-assessment payments concerning VAT are suspended regardless of the turnover thresholds for taxpayers with their residence, registered office, or operational headquarters in certain areas of Italy (ie, Bergamo, Cremona, Lodi and Piacenza). The measure applies if there is a decrease in turnover of at least 33%.
²The suspension of self-assessment payments applies unconditionally to economic operators whose business started after 31 March 2019 and non-commercial entities.