Taxation

Italian Super-Depreciation and Hyper-Depreciation Rules Extended to 2018

By Roberto M. Cagnazzo, Studio Tributario Cagnazzo

The Italian Budget Law 2018 has extended the super-depreciation and the hyper-depreciation provisions to all new tangible assets purchased or leased under a finance lease agreement from January 1, 2018 to December 31, 2018. In addition, the assets purchased or leased by the longest terms of June 30, 2019 (in case of super-depreciation) and December 31, 2019 (in case of hyper-depreciation) can benefit of the mentioned provisions on condition that the order of the asset has been accepted by the supplier and at least 20% of the purchase price has been paid by December 31, 2018.

As regards the persons to whom the previously mentioned provisions apply, are entitled to benefit from these rules:

  • Companies resident in Italy.
  • Permanent establishments in Italy of non-residents persons.
  • Professionals resident in Italy.

Both the super-depreciation and the hyper-depreciation provisions provide for a notional increase of the tax cost of the asset purchased or leased and result in a higher depreciation deduction.

SUPER-DEPRECIATION

The super-depreciation provisions increase by 30% the tax cost of the asset purchased or leased under a finance lease agreement. This increased cost, that will come to be 130, will be the new tax base on which to calculate the future depreciation of the asset.

With regard to the goods to which the super-depreciation provisions are applied, they are the new tangible fixed assets whose depreciation rate for tax purposes exceeds 6.5%.

The Budget Law specifically excludes from the benefit the following goods:

  • Assets with a depreciation rate of less than 6.5% (silos, tanks, etc.).
  • Aircrafts, pipelines, cars and other vehicles.
  • Intangible assets (with the exception of the software analytically identified by the law).
  • Secondhand assets.
  • Buildings and constructions.

If the asset is sold to a third party before the benefit is fully utilized, the depreciation relating to the year in which the asset is sold will be determined on a pro rata temporis basis and the depreciation rates not deducted will be lost.

A short example can be useful:

  • Asset purchased on 15.01.2018
  • Purchase price EUR 10,000
  • Ordinary depreciation rate 20% (half-reduced in the first FY)

The depreciation plan of the asset is as follows:

FISCAL YEAR ORDINARY DEPRECIATION
(Income Statement) 
SUPER DEPRECIATION
(Tax Return)
2018 1,000 300 
2019 2,000 600 
2020 2,000 600 
2021 2,000 600 
2022 2,000 600 
2023 1,000 300 
TOTAL 10,000 3,000 

 
HYPER-DEPRECIATION

The hyper-depreciation provisions increase by 150% the tax cost of the asset purchased or leased under a finance lease agreement. This increased cost, that will come to be 250, will be the new tax base on which to calculate the future depreciation of the asset.

With regard to the goods to which the hyper-depreciation provisions are applied, they are the new tangible high technological assets suitable to stimulate the technological transformation processes of enterprises under an initiative known in Italy as the “Industry 4.0” plan.

The Budget Law contains a list of qualifying assets able to benefit from the provisions like plants, equipment and machinery whose operations are digitally controlled and/or operated by smart sensors and drives interconnected with a factory’s computer systems.

If the asset subject to hyper-depreciation has a purchase price of more than EUR 500,000, it is compulsory to prepare a sworn appraisal made by a technical independent expert certifying that the asset:

  • Has the technical characteristics to include it among the assets identified by the law.
  • Is interconnected with the company's production management system or supply chain.

If the asset is sold to a third party before the benefit is fully utilized, the depreciation rates not deducted will not be lost provided that:

  • One having the same (or higher) characteristics replaces the asset.
  • There is a statement by the legal representative or a sworn appraisal made by a technical independent expert (if the purchase price is more than EUR 500,000) which confirms the new investment.

A short example can be useful:

  • Asset purchased on 15.01.2018
  • Purchase price EUR 10,000
  • Ordinary depreciation rate 20% (half-reduced in the first FY)

The depreciation plan of the asset is as follows:

FISCAL YEAR ORDINARY DEPRECIATION
(Income Statement) 
HYPER DEPRECIATION
(Tax Return)
2018 1,000 1,500
2019 2,000 3,000
2020 2,000 3,000 
2021 2,000 3,000 
2022 2,000 3,000 
2023 1,000 1,500 
TOTAL 10,000 15,000 

 


Prof Dr Roberto M. Cagnazzo

Prof Dr Roberto M. Cagnazzo

Studio Tributario Cagnazzo, Torino, Italy
T: +39 011 580 8352
E: This email address is being protected from spambots. You need JavaScript enabled to view it.; W: www.cagnazzo.com

Studio Tributario Cagnazzo is a “boutique” firm mainly focused on providing integrated tax advice and assistance all over Italy to corporations, banks, multinational groups and high-net-worth individuals on a wide range of domestic and international tax and corporate issues. The company provides its clients with specialist knowledge for strategic advice that ranges from corporate tax systems to extraordinary financial transactions, such as domestic and cross-border reorganisations, IPOs, takeover bids, and M&A.

Prof Dr Roberto M. Cagnazzo, Founder and Partner, is a Chartered Accountant and Statutory Auditor with considerable expertise in domestic and international taxation acquired as Head of Tax in some of the leading listed Italian multinational groups and as Professor of Tax Law and International Tax Law at the University of Torino.


Published: March 2018 l Photo: Marco Saracco - Fotolia.com

 

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