“ACE”: Tax allowance for equity financed investments
By Lodovico Comploj, Pichler Dejori Comploj Partner
In order to promote equity instead of debt financing, the Italian government introduced a tax allowance in 2011 which, although applicable without any sector restrictions, deeply affected the Italian real estate sector.
The allowance is calculated as percentage of the lower amount between the accumulated equity increase achieved by the company since 31 October 2010 (or its first fiscal year, had the company been incorporated after 2010), and the net equity at the end of the current fiscal year. The percentage varies from year to year: it was 3 per cent from 2011 to 2013, 4 per cent in 2014 and will amount to 4.5 per cent in 2015 and 4.75 per cent in 2016.
The allowance calculated for each fiscal year can be deducted from the taxable income, implying an implicit tax discount of 27.5 per cent of the allowance itself. Should in one year the allowance be higher than the taxable income, then the excess allowance can be brought forward and used in the following fiscal years.
The calculation of the allowance is slightly different in the case of partnerships (Italian “società di persone”). For such companies the allowance is simply calculated on the net equity at the end of each year.
It is clear how this allowance can positively impact tax expenditures of real estate investors, increasing the attractiveness of the Italian real estate market. After all, real estate companies, above all investment vehicles, have implemented best practice strategies for the funding of their projects with around 50 per cent of equity, and the real estate sector is one of the most capital intensive within the Italian economy.
Lodovico ComplojPichler Dejori Comploj Partner, Bolzano, Italy
T: +39 0471 288333
Mattia PrevedelloPichler Dejori Comploj Partner, Bolzano, Italy
T: +39 0471 288333
Lodovico Comploj and Mattia Prevedello, Certified Chartered Accountants, advise both local and foreign real estate investors and have broad experience in assisting foreign investment funds investing in Italy. They are both fluent in German and English.
For over 30 years, Pichler Dejori Comploj & Partner has been providing reliable and competent consultation on tax issues, business management and corporate law for national and international clients operating in several disciplines and with different legal forms. Based in Bolzano, South Tyrol, Italy, the firm is ideally located at the interface between Italian and German economic, legal and linguistic regions.
Published: October 2015 l Photo: Colourbox.de - Insung Choi