Italy introduces a tax credit in case of assignment of impaired loans
- Financing and strengthening the national health system, civil protection and other public bodies involved in the emergency;
- Supporting employment and workers;
- Supporting credit to families and micro, small and medium enterprises, through the banking system and the use of the central guarantee fund;
- Suspension of payment obligations for taxes and contributions, as well as other tax obligations and tax incentives.
The provisions apply both to the financial and any other economic sector and aim at supporting enterprises facing cash-flow difficulties owing to the current economic uncertainty.
Out of the different measures, it is worth mentioning the provisions contained in article 55, that amend those contained in article 44-bis of the law decree no. 34/2019. Article 55 introduces for companies assigning within 31 December 2020 credits towards their defaulting debtors a right to convert in a tax credit a quota of their deferred tax assets ("DTA") referred to specific items and for an amount equal to the impaired loans object of assignment.
Impaired pecuniary credits can be both of a commercial and of a financial nature, they can be assigned for a maximum nominal value of 2 billion euros, and allow DTA to be converted into a tax credits, even if not entered in the balance sheet. The conversion into a tax credit takes place on the effective date of the credit assignment.
In order to benefit from these provisions, the object of assignment must be a pecuniary claim against defaulting parties. The party is considered as "defaulting" 90 days after the date when the payment was due.
By contrast, the new rules do not apply to companies in a bankruptcy status or in such a risk (article 17 of Legislative Decree 180/2015) or in a state of insolvency based on bankruptcy law or the Corporate Crisis Code, nor do they so to the assignments of intragroup credits.
From an objective point of view, the rules only apply to companies that in the current year have:
- tax losses that can be carried forward pursuant to article 84 of the Italian Tax Law; and / or
- basic surplus ACE (aid for economic growth) which can be carried forward pursuant to article 1, paragraph 4, of law decree 211/2011.
The tax credits deriving from the conversion do not bear interest and can be offset, without limitation, pursuant to article 17 of the legislative decree 241/1997, or they can be assigned or requested for reimbursement. These credits must be indicated in the tax return and are not considered to determine the taxable base of the Italian corporate income tax.
The conversion of the DTA into tax credits requires that the assigning company exercises the option pursuant to art. 11 paragraph 1 of the law decree n. 59/2016 to take advantage of other rules for the conversion of DTA. The option must be exercised by the end of the current year on the date on which the assignment of the credit occurs.
The new provision does not set forth any requirement on the residence or nationality of the assigning company or of the defaulting debtor. Therefore, even Swiss companies operating in Italy through subsidiaries or permanent establishments located there, being required to pay Italian corporate income taxes, might qualify to benefit from the new rules.
The professionals of our office are keen to provide you with any further clarifications and assistance in this respect.