Facilitated depreciation (super depreciation) under Italy’s 2016 Stability Law

Super depreciation is a term coined by the Italian press for rules referring to paragraph 91 of Italy’s 2016 Stability Law.

'Super depreciation' is a term coined by the Italian press for rules referring to paragraph 91 of Italy’s 2016 Stability Law. This is a provision designed to encourage investment in depreciable assets that allow the asset holder to deduct from their corporate or self-employment income, depreciation for a value increased by 40% compared to the acquisition value.

For example, an asset worth €10,000 will count for calculation of the depreciation, for the purposes of the deduction in question, for a value of €14,000. For the first year of operation of the asset, the 40% increase applies to half the deductible depreciation rate ordinarily deducted.

Subjective requirements: the rule makes express reference to corporate or self-employment income, implicitly excluding non-holders of such income from the list of beneficiaries.

Objective requirements: the facility includes only investments in new capital goods (never previously used) other than:

  • Buildings or constructions
  • Assets for which the relevant ministerial decree has provided for a depreciation rate below 6.5%
  • Investments in the assets referred to in Annex No. 3 attached to the same Law under examination (e.g.: some types of piping, rolling stock/railway and tramway systems, aircraft).

Acquisition methods

The facility applies to the following assets:

  • Purchased
  • Acquired with a financial leasing contract
  • Own-produced

While nothing is specified by the rule with reference to assets under contract, the facility should also include the cost of progress payments accepted (without reservation) by the principal. In such case, the depreciation will apply only upon completion of the work, when the asset is put into use.

Relevant time for the purposes of application of the rule

The relevant investments for the purposes of the facility are those carried out in the period between 15 October 2015 and 31 December 2016; in order to correctly identify the effective date, reference should be made to the general criteria set forth by Art. 109 of the Consolidated Income Tax Code, namely:

  • Purchases: the date of delivery or shipment of the goods shall apply in the event of immediate transfer of the property rights; in the event of deferred transfer of ownership, the relevant date for the purposes of the effective date of the entitlement to the facility is the date on which the effect establishing or transferring divisible property rights occurs
  • Leasing: the time when the machinery is delivered, i.e. it becomes available to the lessee, shall apply.

Conceptually, then, the conditions required for the entitlement of the benefit may occur also for purchases made prior to 15 October 2015.  

Relevant time for the purposes of the deduction

The increased depreciation is deducted from the moment in which the asset is put into use. The effective date of the rule does not therefore necessarily coincide with the date of relevance thereof: the asset could become available to the subject during the relevant period for the purposes of the benefit but without the possibility of enjoying the benefit insofar as the same has not yet been put into use; in this last circumstance, it will not be possible for the subject to take advantage of the super depreciation, since the benefit is only applicable at the time of operation of the asset (time from which it is possible to fiscally deduct the depreciation). 

Relevance for tax purposes

The deduction relating to the share of super depreciation operates outside of the accounts. The asset and the related depreciation are therefore entered in the accounts in accordance with the normal rules; subsequently, a downward adjustment will be performed equal to the increased depreciation only during the tax return, thus making this value relevant for IRES/IRPEF tax purposes. Since nothing is provided for by the rule in this regard, there seems to be no relevance for deduction also for the purposes of IRAP tax, all the more so if one considers that the deduction operates outside of the accounts, while, for the purposes of the regional tax, the accounts derivation principle will apply.

For entities subject to IRES tax, the savings will be equal to 27.5% of the 40% applied to the carrying amount of the asset, i.e. a greater deduction equal to 11% of the carrying amount of the asset. The legislator has provided that the rule in question shall not produce effects on the determination of the advance payment due for the tax period 2015, nor on the advance payment due for the current tax period as at 31 December 2016; the calculation relating to these advance payments will therefore have to be carried out by considering as tax for the previous period the tax that would have been determined by not applying the provisions in question.

Special cases

  • Assets with limited deductibility: assets with limited deductibility, such as for example motor vehicles, are subject to the determination of the so-called "fiscally relevant" share to which the depreciation rates to be deducted for tax purposes should be applied. In order to avoid unequal treatment, for the purposes of the facility in question the rule provides that, for these assets, even the fiscally relevant share may be extended by 40%, thus ensuring full enjoyment of the facility.
  • Assets below Euro 516.46: these also fall within the facility, with a super depreciation of 140% entirely in the year of purchase.
  • Early disposal of the asset: if the asset included in the provision of the rule is transferred before the conclusion of the depreciation process, no account will be taken of the 40% increase in determining any capital gain or loss.

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