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Italy Proposes Tax-Cutting 2016 Budget

by Ulrika Lomas, Brussels

16 October 2015

During its October 15 meeting, the Italian Cabinet approved the draft 2016 Stability (Budget) Law, which includes proposals for property and corporate tax cuts.

As previously announced by Italy's Premier Matteo Renzi, the proposals include the elimination of local property and service taxes on primary residences in 2016. Also included are proposals for the repeal of the property tax and the regional tax on production for the agricultural sector. The property tax on factory fixtures and fittings would also be repealed.

The proposals run contrary to an earlier recommendation from the European Commission that Italy should shift its heavy tax burdens on labor and capital onto property and consumption.

However, the new Budget confirms that the corporate tax rate will be cut from 27.5 percent to 24 percent in 2017. The Government may seek approval from the Commission for a more relaxed fiscal stance to enable it to phase in this cut starting in 2016, by cutting the rate to 26 percent.

The current EUR15,000 (USD17,030) annual income threshold for access to the 15 percent fixed tax regime available for self-employed individuals is to be raised by EUR10,000, with a higher increase for professionals to EUR30,000. The five percent fixed rate available for start-ups is to be available for their first five years of operations (rather than the present three years).

Employees and pensioners who have a separate business will be allowed access to the fixed rate, as long as their annual wages and/or pensions do not exceed EUR30,000.

Other measures in the Budget include increased depreciation of 140 percent for machinery and equipment purchased in the period from October 15, 2015, to December 31, 2016. The tax break will cover all types of productive investments, including computer purchases.

The 50 percent tax credit for expenses incurred in restructuring buildings is to be extended for a further year to end-2016, and its availability for related purchases of furniture and large domestic appliances has also been reconfirmed. The 65 percent tax credit for energy-saving spending on properties will be similarly renewed.

Finally, the Cabinet confirmed that the existing legislative "safeguard clauses" will be "totally deactivated." These clauses would have meant compulsory increases to fuel excise taxes and to value added tax rates from the beginning of next year.

TAGS: individuals | tax | investment | business | European Commission | property tax | law | real-estate | employees | retirement | corporation tax | tax credits | professionals | self-employment | legislation | tax rates | Italy | tax breaks | individual income tax | business investment | Europe

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