On 21 March 2022, Italy’s Law Decree n. 21 was published in the Official Gazette and entered into force the following day (the Decree). While immediately in effect, the Decree will have to be converted (with potential changes) into ordinary law within 60 days from its publication to remain in force.
The Decree contains a new package of measures to help consumers and businesses deal with the recent increase of energy and fuel prices aggravated by the Ukraine crisis.
The Decree introduces a number of measures, including: (i) a 2022 extraordinary tax levy for energy businesses operating in Italy; and (ii) new and increased tax credits for energy expenditures.
Extraordinary levy for energy companies
A one-time 10% solidarity tax surcharge will apply for fiscal year 2022, under certain circumstances, to businesses carrying out any of the following activities in the Italian territory:
Production and/or sale of electricity, production and/or sale of methane gas, extraction and/or sale of natural gas as well as production, distribution and trade of oil products.
Import or purchase from other European Union countries of electricity, methane gas, natural gas and oil products for subsequent resale.
The 10% levy applies to taxpayers (Qualifying Businesses) reporting an increase in net-sales reported for Value Added Tax (VAT) purposes (Qualifying Balance) of at least €5 million in the period 1 October 2021 to 31 March 2022 as compared to the same period of the previous year (i.e., 1 October 2020 to 31 March 2021). The tax basis is represented by the Qualifying Balance. However, no tax is due if the Qualifying Balance is lower than 10%. The extraordinary tax is due by 30 June 2022.
The Qualifying Balance is computed as the difference between the amounts shown in the input and output invoices as reported in the quarterly VAT communications. For Qualifying Businesses participating in a VAT Group, reference is made to input and output invoices of the VAT Group reporting their respective tax code.
The tax is not deductible for corporate income tax (IRES) and regional tax on productive activities (IRAP).
In order to prevent undue repercussions on the final price of energy products, the Decree provides for a monitoring period between 1 April 2022 to 31 December 2022 through which Qualifying Businesses are required to notify by the end of each month to the Italian antitrust authority the average purchase, production and sale price of electricity, natural gas and methane gas as well as of oil products relating to the previous month.
Extraordinary tax credits for energy costs
Tax credit for electricity costs
Italian businesses equipped with electricity meters of at least 16.5 kW capacity (exception made for energy intensive companies as qualified by Ministerial Decree of 21 December 2017) may benefit from a one-off tax credit equal to 12% of the expenses incurred for energy purchased and consumed in the second quarter of 2022 provided that the relevant price, computed on the basis of the average referring to the first quarter of 2022 net of taxes and any aid, has undergone an increase in the cost per kWh greater than 30% of the corresponding average price for the same quarter of 2019.
Tax credit for gas costs
Italian businesses (exception made for natural gas intensive companies as qualified by Article 5 of Law Decree Law Decree n. 17 of 1 March 2022) may benefit from a tax credit equal to 20% of the expenses incurred for natural gas purchased and consumed in the second quarter of 2022 for uses other than thermoelectric ones, provide that natural gas price, computed based on the average referring to the first quarter of 2022, has undergone an increase in the cost per kWh greater than 30% of the corresponding average price for the same quarter of 2019.
Tax credits regime
The aforementioned tax credits can only be offset against other taxes and may be utilized concurrently with other tax credits applicable on the same costs.
Under specific conditions, the tax credits may be transferred to other enterprises or banks and other financial entities. In any of these cases, the transferor must obtain a “conformity check” released by qualifying intermediaries attesting the existence of the prerequisites that gave right to the tax credit.
Energy and natural gas intensive companies
The Decree also increases the tax credit rates introduced by Law Decree n. 17/2022 (so-called “Energy Decree”) for qualifying energy and natural gas intensive enterprises.
Specifically, the tax credit is increased as follows:
The 20% tax credit computed on expenses incurred for energy purchased and consumed in the second quarter of 2022 is raised to 25%.
The 15% tax credit on expenses incurred for the purchase of natural gas consumed in the second quarter of 2022 is raised to 20%.
Such tax credits can only be offset against other taxes and may be utilized concurrently with other tax credits applicable on the same costs.
For additional information with respect to this Alert, please contact the following:
Studio Legale Tributario, International Tax and Transaction Services, Milan
Simone De Giovanni
Studio Legale Tributario, International Tax and Transaction Services, Rome
Studio Legale Tributario, Business Tax Advisory, Rome
Studio Legale Tributario, Indirect Tax, Rome
Studio Legale Tributario, International Tax and Transaction Services, Bologna
Ernst & Young LLP (United Kingdom), Italian Tax Desk, London
Ernst & Young LLP (United States), Italian Tax Desk, New York
Maria Elena Passaretti
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.