Incentives to investors: Italy’s Industria 4.0 plan

Launched in late 2016, Industria 4.0 is Italy’s national strategy for digitising industry. It encompasses a wide range of policy measures to spur both domestic and international investment, and boost innovation-driven economic growth.

As a result of Industria 4.0, Italy’s fiscal framework for innovative companies is now one of the most attractive in the world (Digital Tax Index 2017). Its tax incentives are designed to be automatically available to any type of company, reducing uncertainty and red tape. Alongside this, several other industrial policy measures are provided to support a diverse range of companies, ranging from fledgling startups to established multinational corporations.

The cornerstones of the Industria 4.0 plan are the 5 fiscal measures described below:


1. Tax incentives for investments in innovative startups and SMEs

Investment by both individuals and legal entities towards innovative startups and innovative SMEs benefit from a substantial break on Italian income tax (IRPEF allowance for individuals, IRES deduction for corporations).

The benefit amounts to 30% of the invested sum for both categories, up to €1M yearly for individuals, and to €1,8M for companies. The incentive also applies to investments in Italian venture capital funds, CIUs, and other entities that predominantly invest in innovative startups and SMEs.

2. Super-depreciation

Entails a 40% increase in the ordinary depreciation deduction for investments in new industrial machinery, meaning that acquisition costs are raised by an equivalent share for accounting purposes. As assets are subject to fiscal depreciation over the years, this leads to a substantial, long-lasting reduction in taxable income, and thus of the effective tax rate.

3. Hyper-depreciation

Similar to the former, hyper-depreciation consists of a 150% increase in the ordinary depreciation deduction. This massive increase in the acquisition cost calculated for accounting purposes results in a large reduction in the tax burden over several years.

This incentive applies to selected industrial equipment of a “Industry 4.0” character (e.g. machinery that can exchange information with other systems through the Internet of Things). Its goal is to encourage firms to invest in the digital transformation of their production processes and supply chains.


4. Tax credit for Research and Development

Companies that increase their R&D expenditure in the 2017-2020 period benefit from a 50% tax credit on their additional expenses (incremental credit), with an annual ceiling of €20M.

The measure applies to basic research, industrial research and experimental development – including personnel expenditure, research agreements with other entities – and IP costs. Moreover, the tax credit can be used to offset a wide range of taxes and contributions, even if companies report losses.


5. Patent Box

 It is a special fiscal regime consisting of a 50% reduction in corporate tax on income deriving from direct and indirect use of intangible assets (i.e. industrial patent rights, industrial design and models, know-how and copyrighted software).

In order to determine the benefit, there must be a direct link between R&D activities, qualified IP and the resulting income (the so-called “nexus approach”). Except for a few cases, the incentive is conditional on a preliminary tax ruling from the Italian Revenue Agency (more info).

For more information on Industria 4.0 plan, visit the following page, or check the following Guide.


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