As part of the € 13 billions to be invested by the Italian Government in the Industrial Internet of Things (the so called Industry 4.0), the tax discounts are the backbone of plan.
I had already mentioned in a previous article about the very interesting plan of the Italian Government on the Industry 4.0. With the budget law now approved, it is possible to better understand the scope of the tax benefits that can be obtained. And this is an interesting contribution from my tax colleagues Christian Montinari and Benedetta Lunghi on the topic which I integrated following the issue of the relevant guidelines by the Italian Ministry of the Economic Development (the “MISE Guidelines“).
Current tax benefits are improved
What is it?
The price of acquisition of new instrumental assets bought between 15 October 2015 and 31 December 2016 is increased by 40% for tax purposes. This increase (named “superammortamento“) affects the amortisation deduction only from a tax point of view, resulting in a higher amortisation deduction. While in the balance sheet the new asset is booked at its historical value (without 40% increase).
The increase of 40% of the tax amortisation price of new instrumental assets is extended also to the new assets purchased:
- either until 31 December 2017;
- or until 30 June 2018 if – as of 31 December 2017 – the purchase order of the new asset has been accepted by the seller and 20% of the sale price has been already paid.
When does it apply?
The tax advantage is applicable for all the new instrumental assets including industrial equipment and machinery in general, except for:
- buildings and constructions;
- assets with an amortisation rate lower than 6.5%; and
- all the specific assets included in a specific list annexed to the Budget Law.
The new tax benefits for Industrial Internet of Things investments
What is it?
The budget law provides for a new tax amortisation advantage aiming at supporting the current trend of automation and data exchange in the Industry 4.0 or Industrial Internet of Things.
The price of acquisition of new high technological assets listed in an annex to the budget law purchased
- either by 31 December 2017;
- or by 30 June 2018 if – as of 31 December 2017 – the purchase order of the new asset has been accepted by the seller and 20% of the sale price has been already paid
is increased by 150%, with the consequence that the total amortisation effect is of 250%. This increase (named “iperammortamento“) affects the amortisation deduction only from a tax point of view, while again in the balance sheet the new assets are booked at their historical values.
When does it apply?
The above mentioned annex includes the following main areas of eligible assets:
- assets activated, controlled and/or managed by computer systems;
- assets aiming at assessing product quality and sustainability; and
- specific devices aiming at increasing the human-machine interaction and the health and safety of the workplace.
In order to support the companies involved in the Industry 4.0 investments, the price of acquisition of new intangible assets included in an annex to the budget law is increased by 40%. This increase, again, affects the amortisation deduction only from a tax point of view, while in the Balance Sheet the new assets are booked at their historical values.
It is interesting that, according to the MISE Guidelines,
- in case of purchase of Industry 4.0 product with an embedded software, the tax discount applies to the whole purchase price of the product; and
- the “iperammortamento” applies only to purchases performed from the 1st of January 2017 to the end of 2017 and therefore companies shall hurry up to carry out such investments.
How to exploit such tax benefit?
Companies willing to benefit from the tax advantages related to the Industry 4.0 have to file:
- either, if the purchase price of each asset is lower than € 500,000, a statutory declaration in lieu of an oath;
- or, if the purchase price of each asset is higher than € 500,000, a technical valuation conducted by an engineer or an industrial expert that shall provide that:
- the assets are eligible for the tax amortisation benefit since they are included in the mentioned annexes; and
- the assets are “interconnected” to the production management system or to the supply chain.
The “interconnection” of the Industrial Internet of Things good with the production management system or the supply chain referred above is meant to happen, according to the MISE Guidelines, is considered present when
- there is an exchange of information with internal and external systems through a link based on documented specifications and
- the asset is univocally identified in order to recognise the source of information through for instance the IP address.
This is a very interesting opportunity, but – in order to fully exploit it – it is necessary a delicate tax and technical assessment.