Tax credit for investment in machinery (Industry 4.0)

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2020 Italian Budget Law and the tax credit

(Art. 1, paragraph from 184 to 197, Law nr. 160/19)

The 2020 Italian Budget Law introduced two different tax credits for the investments in “Industry 4.0” assets.

What’s the point?

To support and boost companies which invest in new assets, both tangible and intangible, geared to the technological and digital transformation of the production processes. It is reserved for production plants located within the national boundaries.

Benefits:

For the investments in highly technological capital goods (11 December 2016, nr. 232 – so called former hyper depreciation) you are awarded a tax credit amounting to:

  • 40% of the cost for the investment portion up to Eur 2,5 million
  • 20% of the cost for the investment portion exceeding Eur 2,5 million and up to the overall limit of the ceiling of Eur 10 million.

For the investment in intangible capital assets functional to the 4.0 transformation processes (11 December 2016, nr. 232, as amended by art. 1, paragraph 32, Law 27 December 2017, n. 205 – so called former hyper depreciation) you are awarded a tax credit amounting to:

  • 15% of the cost within the maximum limit of admissible costs of Eur 700.000. The benefit comprises also the costs for services obtained through cloud computing solutions for the attributable portion.

For investments in other capital goods (former super depreciation), other than those included in the abovementioned Annex A, you are awarded a tax credit amounting to:

  • 6% within the maximum limit of admissible costs of Eur 2 million.
torches and consumables for Hypertherm plasma cutting machines

The tax credit can only be used as an offset in five equal annual installments, reduced to three for investments in intangible assets, from the year following that in which the interconnection of the goods listed in Annex A and B occurred or, for the other goods, that in which they were put into use.

The tax credit may be combined with other benefits regarding the same costs within the maximum limit of the cost incurred.

Who can claim  the tax credit?

Any company active within the territory of the State, including the permanent establishment of non-resident subjects, notwithstanding their juridical nature, business sector, size, accounting regime and income determination scheme for tax purposes.

The 6% tax credit for investment in capital goods is also granted to the self-employed and professionals.

Companies being wound up voluntarily, subject to bankruptcy, compulsory winding up, agreement among the creditors without continuity of the business or other insolvency procedures are not entitled to the benefit.

In addition, those companies subject to interdiction orders pursuant to art. 9, paragraph 2, Legislative Decree 8 June 2001, 231 are not entitled to claim.

The enjoyment of the benefit is subject to the compliance with the provisions regarding health and safety in the workplace and to due payment of the employees’ social security and health-care contributions

NOTE: The enjoyment of the benefit is subject to the compliance with the provisions regarding health and safety in the workplace and to due payment of the employees’ social security and health-care contributions.

Will have to be clarified whether the existence of such condition (which is not required to enjoy the so-called hyper depreciation) shall be required, other than for the year in which the cost in borne, also for those in which the tax credit is used.

How do you get access to the tax credit?

The credit applies to the investments made after 1 January 2020 and until 31 December 2020, or by 30 June 2021, provided that the order placed has been accepted by the purchaser within 2020 and 20% of the purchasing cost has been paid.

Regarding intangible assets and highly technological goods, the company is required to provide a simple technical report drafted by an engineer or an industrial expert registered in their respective professional registers or a certificate of conformity issued by an accredited body, showing that the goods have the technical features set out by, respectively, Annexes A and B and are interconnected to the corporate production management systems or to the supply network.

For the goods whose unit cost in lower than Eur 300.000,  a declaration by the legal representative is enough.

Companies intending to take advantage of the tax credit must make a communication to the Ministry of Economic Development. The notice, its content, the modalities and terms of such communication shall be established by a specific departmental decree. The notice is required for the sole purpose of acquiring the information to monitor the performance, spreading and effectiveness of the tax concession.

Download HERE the full document drafted by SEAC Group

Tax credit – industry 4.0

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