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Italian Patent Box To Be Implemented

by Ulrika Lomas, Tax-News.com, Brussels

03 August 2015


The decree to implement Italy's "patent box" has been signed by Minister of the Economy and Finance Pier Carlo Padoan and Minister of Economic Development Federica Guidi and should be gazetted shortly.

The patent box will offer a preferential tax regime in 2015 for income derived from the use or licensing of qualifying intangible assets (such as patents, trademarks, processes, and other intellectual property) that are linked to research and development (R&D) activities carried out in Italy.

Under the optional scheme, businesses will be able to exclude 50 percent of their income derived from such assets from income taxes (either corporate or individual) and the regional tax on production.

Once a business opts into the regime, the option will be irrevocable and have a duration of five years. For the first two years of its operation, the income exclusion will amount to 30 percent in the first year, 40 percent in the second year, and reach 50 percent from the third year.

Based on current corporate tax rates, the scheme will result in an overall corporate tax rate that will reach as low as 15.7 percent, for eligible income, from as early as 2017.

If Premier Matteo Renzi is successful in reducing Italy's total corporate tax rate to 24 percent in 2017, as recently avowed, the lowest available patent box rate would then be cut to 12 percent.

In addition, implementation of the restructured R&D tax credit, which was also included in the 2015 Stability Law, was gazetted on July 29. The tax credit is applied with effect from a business's fiscal year following that in course on December 31, 2014. It is intended to be in effect until the fiscal year in course on December 31, 2019.

The new 25 percent tax credit, capped at EUR5m (USD5.5m), will be granted on the value of the qualifying R&D expenditure that is above the average expenditure incurred in the previous three fiscal years, subject to a minimum of EUR30,000.

Padoan welcomed the confirmation that the two measures are to be implemented. "Innovation is essential if the country's economy is to grow and create high-quality jobs," he said. "It is a challenge that businesses are called upon to confront with the Government's help."

TAGS: tax | business | trademarks | patents | intellectual property | corporation tax | tax credits | licensing | transfer pricing | tax rates | Italy | tax breaks | trade | research and development

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