During the session of April 30, 2024, the Italian Council of Ministers, following the proposal of the Italian Minister of Economy and Finance, approved on a preliminary level a draft legislative decree which, in implementing Law no. 111 of 2023 (the enabling law on tax reform), proposes a broad review of the taxation regime of the income of individuals, companies, and entities, for Income tax (IRPEF and IRES) purposes.
Currently, the draft decree will have to be analysed by the competent parliamentary committees before its final approval. Below are the main new points reported in the press release.
Agricultural income
The decree modifies the rules on determining agricultural income. Currently, this income is related exclusively to agricultural activities carried out on the land. The new rules also include activities that do not focus on the direct exploitation of agricultural land, including those carried out in real estate, which fall within specific cadastral categories and within certain limits, and activities directed to the production of goods, including intangible goods, through cultivation, breeding, and forestry that contribute to the protection of the environment, within the limits of the consideration for the supply of goods registered or subject to registration for VAT purposes.
Employment income
The decree extends the list of items to be excluded in the determination of employment income: among these, the contributions and premiums paid by the employer for family members of employees who are dependent by these employees, including insurance, relating to the risk of non-self-sufficiency in the performance of daily acts, or relating to the risk of serious illness, will be excluded.
Moreover, while waiting for a substitute tax regime which will apply to the thirteenth month’s salary, the decree provides for the payment in January 2025 of an allowance of Euro 100 to employees that jointly satisfy the following conditions in 2024: (i) total income not exceeding Euro 28,000; (ii) non-separated spouse and at least one child (both being dependent on the taxpayer), or at least one dependent child, where the other parent is missing or has not recognised the child and the taxpayer is not married or, if married, has subsequently separated, or if there are adopted, fostered or affiliated children of the taxpayer alone and the taxpayer is not married or, if married, has subsequently separated; (iii) gross tax determined on income from employment (excluding pensions and similar), received by the employee, in excess of the amount of the deductions due.
Self-employment income
The decree introduces, as a general criterion for determining self-employment income, the principle of all-inclusiveness (similar to employees). In addition to social security and welfare contributions, sums received as reimbursement of expenses incurred in the performance of an assignment and charged to the client are also excluded from the calculation of income.
The regime of separate taxation is extended to capital gains deriving from the transfer for consideration of participations in associations, companies and entities, however referable to the professional artistic activity.
In addition, special rules are provided for with respect to the deductibility of expenses relating to intangible assets and items incurred in the exercise of the arts and professions.
Finally, the principle of tax neutrality is introduced for the reorganisation processes of professional firms.
Miscellaneous income
The decree provides that for land suitable for building use acquired through donation, the purchase price is deemed to be that incurred by the donor, increased by the donation tax as well as any other subsequent inherent costs. In addition, with regard to the sale of real estate acquired by donation no more than five years previously, the gift tax and any other subsequent inherent costs are also included in the purchase price, in analogy to what is currently provided for with regard to land acquired by inheritance.
Business income (Corporate Income Tax – IRES)
With respect to the determination of the taxable amount of resident companies and business entities, in order to adjust book values and tax values, the tax applicable is amended in respect of the following:
- contingent assets deriving from income, in cash or in kind, obtained by way of a contribution or gift, which may only contribute to the formation of income in the financial year in which they are received;
- the valuation of closing inventories of works, supplies and services;
- exchange rate differences.
With respect to corporate contributions carried out between resident subjects and in the exercise of business enterprises, the decree introduces the possibility for the transferee company, to opt, in the tax return relating to the fiscal year in which the contribution takes place, for the application of a substitute tax (to be paid in a single instalment and within a specific term) on the higher values attributed in the balance sheet to tangible and intangible fixed assets relating to the company received, and rules are introduced concerning the entry into force and the transitional regime connected to the new realignment provisions.
Finally, the loss carry-forward regime for the purposes of the Corporate Income Tax (IRES) base is modified.
DISCLAIMER: This article merely provides general information and does not constitute legal advice of any kind from Macchi di Cellere Gangemi which assumes no liability whatsoever for the content and correctness of the newsletter. The author or your contact in the firm will be happy to answer any questions you may have.