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Italian Parliament Passes 2016 Budget

by Ulrika Lomas, Tax-News.com, Brussels

28 December 2015


The Italian Government has received parliamentary approval for the Stability (Budget) Law, which would eliminate the local property tax on primary residences in 2016. It also outlines plans for a corporate tax cut in 2017.

Following the cancellation of IMU (the local property tax) on prime residences in 2014, the removal of TASI (the tax on local general services) in 2016 at a cost of EUR3.5bn (USD3.8bn) will mean that TARI (the local tax on environmental and waste services) will be the only local tax remaining on primary residences.

IMU imposed on agricultural land, and on factory fixtures and fittings, would be repealed under the law, and landlords of residential properties leased under controlled rents will pay IMU and TASI reduced by 25 percent. The regional tax on production (IRAP) will also be cancelled for the agricultural and fishing sectors in 2016.

Other significant provisions in the Budget include an increased depreciation allowance of 140 percent, which is immediately available for purchases of machinery and equipment in the period to December 31, 2016. The law will also renew, for a further year, the 50 percent tax credit for expenses (including furniture and large domestic appliances) incurred in restructuring buildings and the 65 percent tax credit for energy-saving spending on properties.

The new Budget also outlines plans to lower the corporate income tax rate from 27.5 percent to 24 percent in 2017.

The Budget has been drawn up on the assumption that the European Commission will allow Italy increased budget flexibility due to migration-related issues.

The approved Budget confirms the removal of the safeguard clause in the 2015 Stability Law, which would otherwise have been activated from January 1, 2016.

That clause – drawn up previously to ensure Italy reached its fiscal goals – provided that the current 10 percent and 22 percent value added tax (VAT) rates would be increased by two percent in 2016. A further one percent hike would take place in 2017, and the headline VAT rate would be raised by a further 0.5 percent in 2018.

A revised safeguard clause has been included in the 2016 Stability Law, which would activate on January 1, 2017. This would activate if the EC does not approve the inflated fiscal deficit, or if the Government's spending review fails to yield sufficient results during 2016. The new clause combines all of the previous safeguard clause's VAT rate increases for 2016 and 2017 into a three percent hike to both rates in 2017, with a further one percent rise in the headline VAT rate in 2018.

TAGS: tax | European Commission | value added tax (VAT) | property tax | fiscal policy | law | budget | corporation tax | tax credits | tax rates | Italy | tax breaks | Europe

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