Bonus for business acquisitions are introduced by the Law Decree on urgent measures for economic growth again

  • IL DECRETO
  • WHO CAN BENEFIT FROM BONUSES FOR BUSINESS ACQUISITIONS?
  • NEWS RELATED TO BONUS FOR BUSINESS ACQUISITIONS 2019
  • WHO IS EXCLUDED FROM THE BONUS FOR BUSINESS ACQUISITIONS?
  • SANCTIONS FOR COMPANIES THAT BENEFIT FROM THE BONUS FOR BUSINESS ACQUISITIONS AND UNDERGO EXTRA OPERATIONS
IL DECRETO

The Law Decree on urgent measures for economic growth 34/2019 converted with modifications into Law 58/2019 has introduced bonuses for business acquisitions again. This tax incentive, up to a maximum of € 5,000,000.00, is addressed to those companies resulting from mergers, demergers and business contributions up to 31 December 2022 in order to calculate the Corporate Income Tax (IRES) and the Regional Income Tax (IRAP). Regulations expressly establish that this bonus is valid only if companies participating to business acquisitions have been incorporated by at least two years. In the official memorandum of the Italian Revenue Office (Agenzia delle Entrate) of 21 March 2007, No 16/E, you can find a definition of “business functioning” that is valid for the purposes of regulations concerning “shell” companies, pursuant to article 30, Law of 23 December 1994, No 724.

The main purpose of this tax incentive is the fostering of those companies that intend to increase their dimensions in order to become more competitive on the market.

WHO CAN BENEFIT FROM BONUSES FOR BUSINESS ACQUISITIONS?

The following subjects indicated by article 73, paragraph 1, letter a) of the Consolidated Law on Income Tax (Tuir) may benefit from the aforesaid tax incentive:

  • limited liability companies,
  • mutual insurance companies,
  • joint stock companies and companies with unlimited responsibility,
  • cooperative companies.

NEWS RELATED TO BONUS FOR BUSINESS ACQUISITIONS 2019

The main difference between the new version of this tax incentive addressed to companies resulting from mergers, demergers and business contributions and the version dating back to the three-years period ranging from 2007 and 2009 is that, according to the first regulations, a preliminary tax clearance application was mandatory, pursuant to article 11 of the Law of 27 July 2000 No 212. This application was necessary in order to know if, according to the Italian Revenue Office, the company meets all subjective and objective requirements established by law in order to benefit from this bonus. Of course, the absence of this duty in the new version of the bonus represents a simplification for taxpayers; anyway, in some cases, new regulations concerning the applicability of this tax incentive may be differently interpreted.

WHO IS EXCLUDED FROM THE BONUS FOR BUSINESS ACQUISITIONS?

The Law Decree provides for the possibility to benefit from this tax incentive provided that the following main conditions are met: the business acquisitions do not involve companies pertaining to the same group or anyhow companies with a 20% participation’s relationship or controlled by the same person, even indirectly (pursuant to article 2359, first paragraph, No 1 of the Italian Civil Code). Those companies that during the two-years period before that the business acquisition occurred did not meet all necessary requirements, as indicated by regulations, are not allowed to submit their application for this tax incentive.

The company resulting from a business acquisition that in the four tax years after the transaction undergoes another reorganization transaction (e.g. transformations, mergers, demergers, business contributions) or transfers the registered assets or those that have been stepped up as established by law is no more allowed to benefit from this tax incentive.

SANCTIONS FOR COMPANIES THAT BENEFIT FROM THE BONUS FOR BUSINESS ACQUISITIONS AND UNDERGO EXTRA OPERATIONS

Anyway, those companies resulting from an acquisition that then undergo other operations and, as a result, are no more allowed to benefit from this tax incentive, can submit their requests to set aside to the tax authorities in charge. In the tax return related to the tax year during which this tax incentive is no more valid, you must liquidate and pay the Corporate Income Tax (IRES) and the Regional Income Tax (IRAP) calculated on the basis of the exceeding income. Moreover, this refers to previous tax years and is established without considering higher values that are recognized at tax level according to regulations related to bonuses. Sanctions are not applied to higher tax bases that were paid. In order to undergo any operation, i.e. findings, collection service, liquidation, bonus repaying as well as for the aforesaid sanctions the same regulations of income taxes are applied.