A draft law to promote the transfer of companies’ headquarters to the metropolitan area of Milan has been filed to the Italian Chamber of Deputies, including a package of measures and incentives, also from a tax perspective. Such draft law comes further to already-in-force measures to enhance tax certainty and attract investments, with the aim to put the city of Milan in the position to collect some of the post-Brexit legacy.
The national measures
Both the already-in-force measures and the proposed ones are far from constituting a comprehensive tax reform that will reduce the effective tax rate. However, they represent a trend reversal compared to the (even recent) past practice.
The recently introduced provisions on legal certainty and steadiness of tax rules are of great significance, especially considering that such values are often more important than low tax rates. More specifically, the cooperative compliance regime and the advance tax ruling on new investments represent the symbols of an attempt to smooth the relationship between taxpayers and Tax Authorities toward an overall system aimed at providing certainty of taxation levels.
In this regard, the chance to cooperate and “agree” with the tax authorities on the applicable tax treatment, thus reducing tax risks, is undoubtedly a winning card. Additional measures have been introduced with respect to corporations, such as patent box (providing for tax benefits connected with the property of intangibles), allowance for corporate equity (incentives for equity injections in the share capital of corporations), “hyper” and “super”-depreciation (iperammortamento and superammortamento), regulations concerning innovative start-ups, IRI (corporate tax rate on individual business income) and the reduction of the overall corporate tax rate to 24%. Those measures, although not included in a comprehensive tax reform, shall be considered extremely favorable.
The “Human Capital”
An additional set of provisions has been introduced to attract highly valuable “human capital” in Italy. More specifically, three main streams of measures have been set forth to enhance the economic, scientific and technological development of Italy: (a) incentives for individuals moving their fiscal residency to Italy ( “new residents”, special visa for investors, highly qualified workers’ regime); (b) favorable measures for corporate welfare (that provide benefits both for corporations and employees) and (c) tax treatment of carried interest (to be considered in some cases as capital income). Individuals moving their tax residency in Italy bring expertise and know-how which is deeply needed by Italian companies, entities and cultural institutions. Moreover, the number of Italian enterprises open to hire newly transferred individuals is large (note that tax incentives applies also to self-employed professionals).
Proposal for Milan
Following this path the law proposal Atto Camera 4456 (first signatory Maurizio Bernardo, president of the Finance Committee in the Italian Chamber of Deputies) aims at introducing a set of new tax provisions. The objective is the “growth of the national economy through the enhancement of the investments and the establishment of enterprises in the Metropolitan City of Milan”.
Companies moving to Italy and establishing their headquarters in the Milan metropolitan area would benefit from:
- Reduction of regional tax on productive activities (IRAP)- provided that beneficiaries hire at least 50 workers under permanent employment contracts;
- Tax reduction at the level of employees with reference to some fringe benefits (children’s school, household, insurance, journeys from and towards the country of origin);
- Favorable rules for the deductibility of interest exceeding the EBITDA threshold;
- Tax benefits for new real estate investments (registration, mortgage and cadastral taxes applicable at fixed amount, provided that the investment includes the hiring of personnel);
- Withholding tax lowered to 1.20% on dividends paid to companies resident in non-EU countries exchanging tax information with Italy (this is an extension of the regime already applicable to EU countries);
- Free access to cooperative compliance regime and to advance tax ruling on new investments, regardless of dimension requirements and amount of the eligible investment.
The initiative may combine with the transfer to Milan of EU Agencies (like the European Agency for the Evaluation of Medicinal Products) and the boost of the financial trading venue (already bound to the London one), in connection with the suggested abolition of the Italian Tobin Tax.
Would the new rules comply with EU State aid law? It should be considered that sectoral measures are common in tax law. In other words, the proposal fits in a law branch which normally establishes sectoral rules for separated categories of subjects. Moreover, the initiative will not introduce a general tax abatement. Rather, it will provide tax incentives compliant with EU provisions and limitations. Great attention is placed on Italy and Milan: it could be wise to seize the moment.
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