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As pandemic epicenter in Europe, the situation here in Italy is quite complicated. This article shares the Italian experience against the spread of the COVID-19 and briefly illustrates the main provisions introduced by the Italian government to strengthen the National Health Service and provide economic aid for families, workers and businesses to cope with the COVID-19 epidemiological emergency. Such measures have been included in the Law Decree issued on 17 March 2020, named 'Save Italy – Decree' ("Decree").
In April, the Government issued another Law Decree (“Liquidity Decree”), No. 23 of 8 April 2020, implementing a series of measures to suspend, postpone or shift tax payments and fulfilments, in addition to what already provided for in the previous Decree-Law no. 18 of March 17 2020, whose provisions remain valid, for those entitled, for the month of April 2020.
Below a summary of the main relevant tax provisions included in both decrees.
Executive Summary
On 17 March 2020 the Italian government enacted the Decree. It is divided into five headings covering: (i) provisions to strengthen the National Health Service; (ii) provisions to support employment; (iii) provisions to support financial needs through the banking system; (iv) fiscal provisions to support families and enterprises; (v) and further provisions. It injects €25 billion of cash into the system.
Among the different provisions, the main pillars are:
- Extension of special measures consisting of social shock absorbers throughout the country: in case of reduced or suspended business activity due to COVID-19, certain existing social shock absorbers will be funded and made available to qualifying employers, like “C.I.G.O.”, “Fondi di Solidarietà Bilaterali Alternativi” and “F.I.S.”. Each one of these social shock absorbers has specific requirements that will be implemented in the coming days by provisions issued at ministerial and regional level. In addition to the above, a special unemployment fund, known as “C.I.G.D.”, will be made available for employers who do not qualify for the above listed social shock absorbers.
- Tax provisions: (i) postponement of withholding tax payments, social security and welfare contributions and compulsory insurance premiums; (ii) postponement of tax and social security contributions payments and compliance deadlines and postponement of V.A.T. payments for certain taxpayers; (iii) employees bonus; (iv) tax credit for workplace sanitization costs; (v) tax credit for shops and stores; (vi) tax deduction for gifts in support of the COVID-19 epidemiological emergency; and (vii) postponement of the deadlines for payment of the debts administered by collection agents.
The following paragraphs analyze articles 55, 60-71, 83, 98 of the Decree in light of clarifications made in the Explanatory Statement (“Explanatory Statement”). If focuses primarily on tax provisions,
Before moving to the measures in detail, it’s important to point out that, notwithstanding the provisions of art. 2364, c. 2, and by art. 2478-bis of the Italian Civil Code, all companies will be allowed to call the ordinary general meeting for the approval of the financial statements within 180 days from the end of the financial year.
For limited companies and cooperative companies, the notice of call of the ordinary and extraordinary general meeting may provide, also by way of exceptions from the provisions of the by-laws, for digital voting or voting by mail and for the digital attendance at the meetings. Shareholders' meetings may take place entirely by telecommunication means guaranteeing the identification of the participants, their participation, and the exercise of the right to vote, without the need for the chairman, the secretary or the notary to be in the same place.
By way of derogation from art. 2479, c. 4, of the Italian Civil Code and any provisions of the by-laws, limited liability companies formed as S.r.l.’s may provide for voting by written consultation or by written consent.
The above provisions apply to the general meetings called by 31 July 2020 or by any later date while the state of emergency is in force.
Measures in Detail
Art. 55 - Financial measures to support enterprises
Article 55 of the Decree, is aimed at supporting businesses in terms of financial needs. It allows impaired certain deferred tax assets (“DTA’s”) arising through 31 December 2020 to be converted into refundable tax credits that can be used, without limitation for the payment of taxes, withholding taxes and social security contributions. These credits may be sold within a group or to third parties or by the tax authorities if a company has insufficient tax and contribution liabilities to absorb the full credit. The benefit is allowed even when the DTA’s are not actually booked in the financial statements,
The convertible DTA are those relating to (i) tax losses that can be carried forward pursuant to Article 84 of the Tax Code (DPR 917/1986) and (ii) the amount of notional interest expense deductions on the Allowance for Corporate Equity (“A.C.E.”) exceeding total net income and which at the date of the assignment of the receivables has not yet been deducted from or otherwise set against the taxable income.
The benefit deriving from the above components cannot exceed 20% of the face value of the receivables transferred. The latter can be considered for a maximum amount of €2 billion. The tax credit can be offset, without any limitation as to the amount, through the F24 Form or transferred or requested for refund.
The tax credit must be reported in the tax return and does not concur to the taxable basis for both corporate income tax and regional tax.
Art. 60 - Relief from time limits
Payments to public administrations that are due on 16 March 2020 are postponed until 20 March 2020 without the application of penalties and interest.
Article 61 - Postponement of payments of withholdings, social security and welfare contributions and premiums for compulsory insurance
For specific categories of taxpayers carrying out activities that are affected principally by the emergency as provided by the Decree, withholding payments, social security and welfare contributions and premiums for compulsory insurance are suspended for the period between 2 March and 30 April 2020. Business that can benefit from the suspension include those in the fields of entertainment, sports, restaurants, transport, and education. Payments will be due without penalties and interest by 31 May 2020 or split in five equal monthly payments starting from that date. Businesses entitled to this relief are also entitled to the deferment of V.A.T. payments that were due in March.
Art. 62 - Postponement of tax payments and compliance deadlines
Subject to certain exceptions, tax payments due between 8 March 2020 and 31 May 2020 are postponed. The revised due date for these payments is 30 June 2020. If made by that date, no penalty will be imposed. The postponement does not cover payments of regional and municipal surcharges
For the time being, the delivery and electronic filing of the statements of withholding tax related to 2019 remains on 31 March 2020 which already reflects an extended deadline.
For taxpayers carrying out a business, art, or professional activity having turnover not exceeding €2 million in the previous fiscal year, the following payments due between 8 March and 31 March 2020, are deferred:
- Withholding taxes pursuant to articles 23 and 24 of the Presidential Decree n. 600/1973, also relating to the regional and municipal charges, in relation to which the aforementioned subjects operate as a withholding agent.
- V.A.T.
- Social security and welfare contributions and premiums for compulsory insurance.
The deferred payments must be paid by 31 May 2020 or split into five equal monthly payments starting from that date. If payments are timely made, penalties and interest will not be imposed.
For taxpayers reporting revenues or fees not exceeding €400,000 in the previous tax period, the revenues and fees received in the period between the date of entry into force of the Decree and 31 March 2020 are not subject to withholding taxes pursuant to articles 25 and 25-bis of the Presidential Decree n. 600/1973, provided that in the prior month they did not bear any expense for employee compensation. Instead of withholding taxes, amounts due are to be paid directly by the taxpayer without the application of penalties and interest. Again, payment is due by 31 May 2020 or split into five equal monthly payments starting from that date.
Further specific exemptions are provided for taxpayers who are resident or operating in the Provinces of Bergamo, Cremona, Lodi or Piacenza.
Art. 63 - Bonus to employees
A bonus of €100, to be weighted by the number of working days carried out at the workplace in March 2020, is granted to employees with a total yearly income not exceeding €40,000.
The bonus is not included in the taxable base for direct tax purposes and will be paid automatically by the employer, starting with the month of April, and in any case within the terms provided for the adjustments.
Employers recover the incentive when filing an F24 Form.
Art. 64 - Tax credit for workplace sanitization costs
In order to encourage the sanitization of the workplace, as a preventive measure for the COVID-19 virus, a tax credit is introduced in favor of taxpayers carrying on business, art or professional activities. The tax credit for the 2020 is equal to 50% of the expenses incurred for sanitizing workplaces and work tools, capped at €20,000. The implementation of the tax credit is subject to the publication of an official decree. The credit has been expanded in the Liquidity Decree, which is discussed below.
Art. 65 - Tax credit for shops and stores
Article 65 of the Decree authorizes the grant of a tax credit in favor of all business operators to the extent of 60% of rental payments related to March 2020 for buildings falling under cadastral category C/1. The tax credit will be claimed when preparing an F24 form.
Art. 66 - Pro-COVID Donations
Donations made to support the measures against the spread of COVID-19 are deductible from the taxable basis for I.R.E.S. purposes, to the extent that they are made through foundations, associations, committees and entities. The same donations are deductible from the taxable basis for I.R.A.P. purposes in the fiscal year in which the payment is made. Deductions may be claimed against the gross tax of individuals for 30% of donations in support of the measures against the spread of COVID-19. The deduction is capped at €30,000.
Art. 67 - Suspension of the terms relating to the activity of the tax offices
In the period between 8 March and 31 May 2020, the terms and deadlines for tax offices and tax authorities are suspended with regard to the following activities:
- Liquidation, control, assessment, collection and litigation activities.
- Preparing answers to various ruling requests, including ordinary rulings, anti-avoidance rulings, new investment rulings, and collaborative compliance regime rulings. The deadlines for submitting supplementary documentation to the ruling requests are also suspended.
- Ruling requests may be filed electronically during the suspension period, but the time limit for a response by tax authorities begins 1 June 2020.
No specific indication is provided in relation to the tax settlement procedures. So far, Tax Offices are respecting the regular deadlines without taking into account the suspension period and discussions with taxpayers is made remotely by phone or e-mail.
Art. 68 – Postponement of the deadlines for payment of the debts administered by the Collection Agent
The deadlines for payment of sums due in the period between 8 March and 31 May in relation to collection notices, tax assessments that are already final, assessment notices issued by the Customs Agency and other local authorities, and I.N.P.S. assessment notices are deferred to 30 June 2020.
Payment of sums due under pending voluntary settlements of the tax bills (so-called Rottamazione ter) are deferred to 31 May 2020. This covers installments otherwise due between 28 February 2020 and 31 March 2020.
Art. 69 - Postponement of the payments in the gaming sector
The deadline for the payment of the single tax collection on gaming machines, slot machines, and video lottery terminals, and the concession fee expiring on 30 April daily interest at the legal rate. The first instalment is due not later than 29 May 2020 and the subsequent instalments by the last day of the month. The last instalment is due not later than 18 December 2020.
Art. 70 - Strengthening of the Customs and Monopolies Agency
For the year 2020, the resources allocated to the remuneration of overtime work for the staff of the Customs and Monopolies Agency is increased by €8 million. This reflects the increase in activities at ports, airports and customs points.
Art. 71 – Publicity for waiver of postponements
Article 71 of the Decree allows taxpayers who voluntarily waive the postponements provided for by the Decree to request that their decision will be published on the institutional website of the Ministry of Economy and Finance, in order to gain an advantage in terms of their reputation in the public eye.
Art. 83 - Tax disputes
The Decree extends the official postponement of the hearings scheduled for the period of 9 March - 15 April 2020. The delay was introduced with Legislative Decree 11/2020 of 8 March 2020. The period for filing a brief or document related to the tax proceedings between 9 March and 15 April 2020 is also postponed. Finally, the deadline to bring an appeal before the first-level tax court and to reach compromises is also suspended during the period 9 March and 15 April. A clarification is need in respect to the ongoing settlement procedure.
Art. 98 – Printing Industry
The Decree provides for a tax credit that may be claimed for advertising investments through press, television and radio broadcast. The amount of the credit is 30% of the value of the investments. Previously, the credit was 75% of the incremental increase in advertising investments. The provision is valid for the period 2020-2022.
Liquidity Decree: the measures in detail
Art. 18 - Suspension of payments due in April and May 2020
V.A.T., withholding taxes on employment income, social security and welfare contributions payments due in April and May 2020 are suspended for taxpayers that (i) reported revenue (including fees) for 2019 that did not exceed €50 million and (ii) encounter a reduction in turnover or fees of at least 33% when comparing March and April 2020 with March and April 2019. For taxpayers having revenue in 2019 exceeding €50 million, the withholding taxes and contributions are suspended if the year-to year reduction in turnover or fees exceeds 50% for the same two-month period. Similar relief applies to taxpayers whose activity began after 31 March 2019.
The suspended payments are due by 30 June 2020, in a single installment or in five equal monthly instalments beginning on that date. Neither penalties nor interest is due for the suspension of payments.
Art. 19 - Withholding tax deferral for self-employed workers
Compensations received during the period beginning 17 March 2020 and ending 31 May 2020 by self-employed individuals who do not employ others and whose revenues or compensation in the last fiscal year did not exceed €400,000 are not subject to withholding tax, provided that client invoices expressly excludes an entry for withholding tax.
The tax must be declared and paid by the self-employed individual. Payment is due by 31 July 2020 in a single installment or in five equal monthly instalments beginning on that date. Neither penalties nor interest is due for the suspension of payments.
Art. 20 - Advance payments for I.R.E.S., I.R.P.E.F. and I.R.A.P.
Underpayments of advance instalment payments of personal and corporate income tax and regional tax on productive activities (I.R.P.E.F., I.R.E.S. and I.R.A.P.) will not be subject to interest or penalties, provided that the underpayments are not greater than 20% of the amount ultimately due. This applies only for fiscal year 2020.
Art. 21 - Suspension of payments to public administrations
All payments to public administrations (including V.A.T. payments, withholding tax payments and social security and welfare contributions) expiring on 16 March 2020, can be executed late. If fully paid by 16 April 2020, neither penalties nor interest will be due. Otherwise penalties and interest will be imposed.
Art. 30 - Tax credit for the purchase of protective equipment in the workplace
The tax credit granted under the Save Italy Decree for 50% of expenses incurred to sanitize work environments is expanded to cover expenses incurred for work tools and for the purchase of personal protective equipment and other safety equipment to protect workers.