Global Tax Alert | 28 June 2013

Italian government approves urgent measures for economic growth

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Background

Law decree n. 69/2013 was published in the Italian Official Gazette n. 144 on 21 June 2013 and came into effect on 22 June 2013. The decree, Decreto del Fare (Decree for Action), aims at resolving long-standing issues that are considered to have held back economic growth in Italy over the past few years. The main tax measures include:

  • Amendments to the Corporate Income Tax (IRES) surcharge applicable to entities operating in the energy sector (Robin Hood Tax);
  • Deferment of the application and of the deadline for the payment of the Financial Transaction Tax;
  • amendments to the joint tax liability applicable to procurements and subcontracts of works and services; and
  • Amendments to the taxpayer’s liabilities collection procedures.

The Parliament has 60 days to pass any amendment and convert the Decree into ordinary law. Future Alerts will cover legislative developments.

Amendments to the Corporate Income Tax surcharge for energy companies

Italian tax law provides for a Corporate Income Tax surcharge (better known as the Robin Hood Tax) which generally applies to oil, gas and energy companies.

The Robin Hood Tax – originally imposed at a rate of 6.5% and subsequently increased to 10.5% for the limited period from fiscal year 2011 to fiscal year 2013 – applies to Italian resident companies (as well as permanent establishments of non-resident entities) operating in specific energy sectors1 with (i) revenues over €10million and (ii) taxable income over €1million.

The decree (Article 5, paragraph 1) modified the original threshold providing for the application of the Robin Hood Tax to “energy” entities with revenues over €3million and taxable income over €300,000.

Deferment of the application and of the deadline for the payment of the Financial Transaction Tax (FTT)

The Italian FTT regime was introduced as of 1 March 2013 for equity transactions and 1 July 2013 for equity derivatives. The tax applies, in principle, on the transaction value at a rate of 0.20% (0.22% for fiscal year 2013), reduced to 0.10% (0.12% for fiscal year 2013) if the transfer occurs in a regulated market; while for derivatives based on shares or other equity financial instruments, the FTT applies on flat basis the amount of which could vary depending on the kind of instrument and value of the contract (i.e., €200 should in principle be the highest tax).2

According to the prior version of the law, the FTT due on equity transactions occurring prior to June 2013 should have been paid by 16 July; while further to the amendments introduced by the Decreto del Fare, the FTT on transactions having occurred from 1 March 2013 up to 30 September 2013 will be due by 16 October 2013.

Furthermore, the decree has deferred the FTT liability of transactions on derivatives based on shares or other equity financial instruments to 1 September 2013 (instead of 1 July 2013). Also, the payment will be due by 16 October 2013.

Amendments to the joint tax liability regime applicable to contractors and subcontractors

The decree has de facto excluded the existence of a joint tax liability between principals and subcontractors with respect to VAT payments arising from subcontracted activities/services.

As a result, the Italian legislator has now restricted the joint tax liability of principals and subcontractors exclusively to labor and social security withholding tax obligations.

Amendments on taxpayer’s liabilities collection procedures

The decree introduced important measures with respect to the collection procedures of assessed taxpayer’s liabilities.

In particular, it has been provided that, where taxpayers (corporate and individuals) are, for reasons unrelated to their own responsibilities, in a proven difficulty and serious economic situation due to economic crisis, assessed tax liabilities may be due in a 120 monthly installments, instead of 75 monthly installments.

This extension applies to the extent the Tax Collector Agent ascertains at the level of the taxpayer both the effective economic inability to be compliant with the ordinary installments plan and the solvency with respect to the new installments plan. Such “benefit” would, in any case, be terminated if the taxpayer would fail to pay eight installments within the agreed plan (previously the law provided for termination in case of two subsequent missed payments).

Postponement of the Italian VAT rate increase

On 26 June 2013, the Italian Council of Ministers enacted a decree postponing until 1 October 2013, the increase of the Italian VAT rate to 22%.

Under Law n. 228/2012 on Urgent Measures for Financial Stabilization, the standard VAT rate was to increase from 21% to 22% as of 1 July 2013.

Other measures counterbalancing the lower revenues (approx. of €1 billion) triggered by the VAT increase postponement have been included in the decree such as:

  • A consumption tax of 58.5% (of selling price to consumers) imposed on electronic cigarettes and on other tobacco substitute goods;

  • An increase in the percentage of the second advance installment due by November 2013 (for the fiscal year 2014) of personal and corporate income taxes. The overall amount of the installments will represent respectively 100% (instead of 99%) and 101% (instead of 100%) of the taxes due for the previous fiscal year; and
  • An increase in the percentage of the advance payments of withholding taxes due by banks and financial institutions on interest on deposit and bank accounts.

The decree will enter into force the day after its publication in the Official Gazette and should then be approved by the Parliament within 60 days in order to be converted into Law.

During the conversion procedure, the Parliament could decide to further postpone the increase of the Italian standard VAT rate and to approve different measures to counterbalance the lower VAT revenues.

Future Alerts will cover the conversion procedure developments.

Endnotes

1. According to Law n. 133/2008, as amended by the Law 148/2011, CIT surcharge applies to entities “operating in the following areas:

a) Research and exploitation of liquid and gas hydrocarbons;

b) Oil refining, production and trading of oil, gasoline, lubricants, liquefied gas of petrol and natural gas;

c) Production, transmission, dispatching, distribution or trading of electricity;

c-bis) Transportation and distribution of natural gas.”

Further to the amendments introduced by the Law 148/2011, renewable energy companies – expressly excluded in the original version of the Law n. 133/2008 – have been embraced within the scope of the Robin Hood Tax.

2. For more information, see the Ernst & Young FSO Tax Alert, Italian FTT, dated December 2012 and the Ernst & Young International Tax Alert, Italy approves FY2013 Budget Law, dated January 2013.

For additional information with respect to this Alert, please contact the following:

Ernst & Young, Studio Legale Tributario, Italy
  • Domenico Borzumato
    +39 02 8514 503
    domenico.borzumato@it.ey.com
  • Marco Magenta
    +39 02 8514 529
    marco.magenta@it.ey.com
  • Mario Ferrol
    +39 335 122 9904
    mario.ferrol@it.ey.com
Ernst & Young, LLP, Italy Tax Desk, New York
  • Emiliano Zanotti
    +1 212 773 6911
    emiliano.zanotti@ey.com
  • Andrea De Nigris
    +1 212 773 0478
    andrea.denigris@ey.com
  • Aldo Bono
    +1 212 773 3216
    baldassare.bono@ey.com

EYG no. CM3577