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Italy Plans Further Tax Measures To Promote Economic Recovery

by Ulrika Lomas, Tax-News.com, Brussels

19 December 2013


On December 13, the Government approved a decree to put into effect a package of measures designed to attract foreign investment into Italy and to improve the country's general business environment, together with further proposed measures allied to the 2014 Budget that is currently under parliamentary consideration.

In addition to an increase in the availability of mortgages and loans for business, particularly for small firms and small- and medium-sized enterprises (SMEs), the decree confirms a 50 percent tax credit for additional spending on research and development in the three years from 2014 to 2016.

The amount of the tax credit will not exceed EUR2.5m (USD3.4m) per business, with a total overall budget of EUR200m per year. Financing for this measure is to be allocated from European Union funds.

The decree also notes that the Italian Revenue Agency is to set up an office dedicated to providing certainty of tax treatment to foreign investors, principally through the application by the Agency of five-year tax rulings with foreign companies.

Further measures adopted by the Government, following their proposal by the Minister of Economic Development Flavio Zanonato, contained additional policies to promote an economic recovery.

For example, to reinforce the provision of finance to SMEs, interest on their medium and long term borrowings is to be subject to lower withholding tax rates. It is hoped that funding will be found for the cancellation on such borrowings of the normal 20 percent withholding by simplifying and rationalizing the present concessions provided. The incentive will be concentrated on companies formed not more than six months previously, and the majority of whose shareholders are persons aged between 18 and 35, or are women.

To counteract the perceived crisis in the publishing sector, the existing tax credit is also to be extended temporarily, while a tax deduction will be made available for the purchase of books (not online).

Finally, and in order to promote the diffusion of internet connection services, it is proposed that there will be 65 percent tax deduction, with a maximum of EUR20,000, for suppliers of fixed or mobile digital networks for SMEs.

TAGS: tax | business | tax credits | internet | small and medium-sized enterprises (SME) | tax rates | withholding tax | Italy | services | research and development | Europe

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