The array of expanded tax breaks for investments in production machinery are the standouts in Industria 4.0, a new national strategic plan to modernize Italy’s manufacturing base which was included in Italy's 2017 budget law.
The current tax shield was extended for 2017, allowing businesses and professionals to mark-up the cost of acquiring operating assets by 40% to take deductions on depreciation charges.
What's new is the introduction of a so-called “hyper” tax shield allowing a mark-up of 250% but limited to goods that will “encourage the process of technological or digital transformation in line with Industria 4.0.”
The new regime pertains to just under 50 categories of goods. They must be new capital goods with delivery of the product acquired (or leased) by June 2018 and on the condition that by the end of 2017 “the related order is accepted by the seller and at least 20% of the cost of acquisition paid for”—according to a version of the text that's not yet definitive. The Ministry of Economic Development is currently attempting a last-ditch negotiation with the Treasury on a broader timeframe that would run through September of 2018.
Excluded from the shields are PR-related goods, which were assigned a depreciation coefficient of 6.5%; manufactured and construction goods, roads, railroads and tramways.
Starting in 2017, software products will also be eligible for this tax break, which is unusual since intangible assets are generally excluded. A company can access the tax shield up to 140% (a mark-up of 40%) if it is used for technological transformation as per Industria 4.0. Practically speaking, to take the break on software, companies and professionals must invest in Industria 4.0, through which they can benefit from the “hyper”-tax shield of 250% (mark-up of 150%).
On the other end of the spectrum, the auto industry is seeing a tightening up of measures already in effect. Vehicles and means of transport that are considered anything but capital equipment for business activity are excluded from the tax shield.So no more breaks for someone who buys a car and either keeps it or allows employees to use it.
As for the hyper-tax shield, the latest draft of the document includes 47 categories of admissible goods. There are still ongoing discussions, for example, on whether to include some investments related to the development of ultra-broadband that the Ministry of Economic Development would like to include.
For the moment, the list is split into four major areas: capital goods “that work to control systems that are computerized and/or managed through sensors and applications”; “systems for quality assurance and sustainability”; devices relating to man-machine interactions and to the ergonomics and safety of the workplace as per Industria 4.0.
The document includes a broad array of machine tools and systems to trace product quality, RFID systems, intelligent energy consumption solutions, equipment for added value, wearable devices, virtual reality devices, software data sharing via sensory networks or for 3D modeling and simulation.
On the fiscal front, it should be stressed that, according to the draft, the “super” and “hyper” tax shields do not pertain to payments and have no effect on the sector.
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