COVID-19 Countermeasures in Italy

Funds and the Supplementary Fund

• The Italian Government adopted a measure regarding the rules applicable for accessing wage compensation funds already provided for by law (the Funds).
• The decree also provides for a supplementary fund (the Supplementary Fund) for those employers who are not entitled to benefit from the Funds under the ordinary rules.
• The Funds and the Supplementary Fund will fund a percentage of the remuneration due to an employee whose employment is suspended or their working time is reduced as a result of the temporary interruption or reduction of the employer’s business activity for reasons beyond each party’s control- In particular, the Funds and the Supplementary Fund will cover 80 percent of the total remuneration that would have been payable to an employee for hours not worked as a consequence of the Covid-19 crisis.

For the year 2020,

• if an employee’s salary is €2,159.48/month, or less, then the maximum contribution from the fund is € 998,18/month
• if an employee’s salary is over €2,159.48/month then the maximum contribution from the fund is € 1.199,72

Companies/employers entitled to benefit from the new rules regarding the Funds

• Employers who suspend or reduce their business activities in 2020 as a result of the Covid-19 epidemic, including those enrolled in the Wage Integration Fund (FIS) that employ on average more than 5 employees;
• Companies which, on the date of entry into force of Decree Law No. 6 of February 23, 2020, are in the process of receiving extraordinary wage integration treatment (the granting of ordinary treatment suspends and replaces the extraordinary integration treatment already underway);
• Employers who are members of the Wage Supplementary Fund and who, on the date of entry into force of Decree Law No 6 of February 23, 2020, are in the process of drawing funding under the existing fund (the granting of ordinary treatment suspends and replaces the status already in place).

Maximum period for relief”

For contributions starting on February 23, 2020, the maximum duration is nine weeks with a final end date of August 2020, increased by a further 5 weeks in the same period for the only employers who made full use of the period previously granted.

It is also recognized any additional period of futher 4 weeks for periods running from 1.9.2020 to 31.10.2020 (as provided by the Relaunch Decree, that has modified the Cura Italia Decree).

Requirement relating to the length of employment of the employees:

The support is available only for employees hired before February 23, 2020. No length of service requirement is applied.

The Law Decree no. 34 of 19 May 2020, so called “Relaunch Decree“ (effective on its date of publication in the official gazette no. 128 - 19 May 2020; the Relaunch decree must be converted into law within 60 days of this date of publication) is, in chronological order, the third major intervention by the Government to tackle the economic consequences of the Covid-19 emergency, after the Cura Italia (Save Italy) and the Decreto Liquidità (Liquidity Decree).

The Relaunch Decree is aimed at protect businesses, families and workers from the damage of the health emergency, in order to start the recovery.

In particular, the Relaunch Decree provides for:

a) cancellation of the June IRAP (regional tax on productive activities) balance 2019 and first advance payment 2020, for enterprises and professionals with turnover up to € 250 million in the fiscal year 2019 (with the exception of banks, insurance companies and public administration);

b) postponement to September 16 of all tax payments suspended by the previous aforementioned decrees (see below);

c) a new tax credit for the adjusting of the workplaces (see below);

d) specific rules concerning the payments of the notifications of irregularities issued by the Italian tax administration (see below);

e) extension of deadlines related to the payments concerning tax assessment agreements, mediations, judicial settlements, tax credit recovery and clearance notices (see below);

f) extension of deadlines related to notification of assessment notices (see below);

g) postponement to September 16 of the deadline concerning the notification of the introductory appeal to the Tax Commission (see below);

h) the increase from € 700,000 to € one million, starting from 2020, of the annual limit of credits that can be offset through the F24 model.

i) the elimination of the "safeguard clauses" which provide for the automatic increase in VAT rates, starting from 2021. In this way, the VAT rates of 10% and 22% would remain unchanged even after January 1, 2021, unlike the provisions of current legislation (i.e. art.1 par. 718, Law 190/2014);

j) a specific exemption regime, in force until 31 December 2020, concerning numerous goods necessary for the containment and management of the epidemiological emergency. Starting from 1 January 2021, however, the aforementioned goods will be sold with the application of the 5% VAT rate (table A, part II-bis, attached to the presidential decree 633/72), introduced by the same Relaunch Decree.

In particular, the products that require the benefit described above are mainly lung ventilators for intensive and sub-intensive therapy, as well as thermometers, hand disinfectant cleaners, wall mounted dispensers for disinfectants, surgical masks, Ffp2 and Ffp3 masks and other goods with eminently sanitary purposes;

k) the Relaunch Decree postpones, from 1 January 2020 to 1 January 2021, the entry into force of the new rule on stamp duty introduced last year. Under this rule the Italian Revenue Agency will automatically check that e-invoices comply with stamp duty requirements and could apply penalties ranging from 100 percent to 500 percent of the stamp duty for non-compliant e-invoices.

Suspension of payments for enterprises and professionals

The provision is aimed at sustaining taxpayers dealing with liquidity matters arising from the Covid-19 emergency.

The beneficiaries are identified based on income earned in the previous FY.

For enterprises

• having tax domicile, registered office or place of business in Italy,
• revenues not higher than 50 million euros in the preceding fiscal year and
• which have had a reduction of their turnover for an amount higher than 33% during March or April 2020 if compared to the same months of 2019

the Liquidità Decree provides for the suspension of:

a) payment of withholding taxes on employment income and similar income, as well as

b) withholding of local surcharges,

c) VAT and

d) social security contributions and premium for mandatory insurance on employment.

• For enterprises and professionals having revenues higher than 50 millions euros the suspension is allowed in case the reduction of their turnover is higher than 50%.
• For VAT taxpayers located in Bergamo, Brescia, Cremona, Lodi and Piacenza provinces, the suspension of VAT payments for April and May applies irrespective from the amount of revenues provided that they have had a reduction of their turnover for an amount higher than 33% during March or April 2020 if compared to the same months of 2019.
• The suspension applies also to enterprises and professionals which started their activity after 31st March 2019.
• In particular, the suspended payments must be made by 31 June 2020 in full, or in five equal instalments starting from June 2020, without penalties and interest. Sports associations and clubs must make payments by 30 June 2020 or in five equal instalments starting from June 2020, without penalties and interest.
• For entities pertaining to those sectors heavily hit by the crisis arising from COVD-19 emergency (inter alia tourism companies, travel agencies and tour operators, sport, art, culture, transport, catering, education, thermal, wellness and amusement parks sectors, non-profit organisations), in the case they lack one or more of the requirements to benefit from the abovementioned suspension, it is unprejudiced the possibility to benefit from the suspension of payments up to 30 April 2020 and the consequent obligation to perform the suspended payments by 31 May 2020 in full, or in five equal instalments starting from May 2020, without penalties and interest.
• Sports associations and clubs must make payments by 30 June 2020 or in five equal instalments starting from June 2020, without penalties and interest.

Extension of suspension of tax duties and payments for small taxpayers

• Concerning small taxpayers (i.e. having income not higher than €400,000 in the previous FY), income earned 31st May 2020 are not subject to withholding tax at source provided that the taxpayer did not borne employment expenses in the previous month. A self declaration is required in this respect.
• Under the Relaunch Decree, the tax not levied by withholding agents can be paid directly by the taxpayer in one lump sum by 16 September 2020 (in spite of the previous deadline of 31st July 2020) or in up to four equal monthly instalments (the first instalment is due by 16 September 2020). Any amounts already paid are not refundable.

Extension of tax credit for sanitation costs in the workplace

• The tax credit for sanitization costs is extended to the purchase of personal protective equipment (such as, for example, surgical masks, Ffp2 and Ffp3, gloves, protective visors and protective goggles, protective suits and shoes), purchase and installation of other safety devices designed to protect workers from accidental exposure to biological agents or to guarantee an interpersonal safety distance (such as, for example, barriers and protective panels). Also included are hand cleaners and disinfectants.
• The amount of the tax credit is unprejudiced, being equal to 50% of the costs borne by enterprises and professionals for 2020 FY up to an amount of € 20,000.

Tax credit for the adjusting of the workplaces

• The Relaunch Decree recognizes to enterprises and professionals carrying out their activities in places open to public (indicated in a specific Annex, i.e. bars, restaurants, hotels, theaters and cinemas) a tax credit equal to 60% of expenses incurred in 2020, for a maximum of € 80,000, in relation to interventions necessary to enforce health regulations and containment measures against the spread of the Covid-19 virus.

Temporary provisions on accounting principles

• With reference to the principle based on which financial statements shall be prepared on a going concern basis, considering the current emergency situation, the Liquidità Decree provides that the evaluation may be performed making reference to financial statements approved before 23 February 2020, even if they have been closed but not yet approved.
• The evaluation criteria are commented within the explanatory notes to the financial statements even making reference to the results of the previous financial statements.
• The postponement of the deadline to approve financial statements stated by the Cura Italia Decree is unprejudiced:
  • Yearly VAT Return FY 2019: filing due date extended until 30 June 2020
  • TR form (for quarterly VAT refund): filing due date extended until 30 June 2020
  • VAT settlement communication I quarter 2020:  filing due date extended until 30 June 2020
  • esterometro I quarter 2020: filing due date extended until 30 June 2020
  • Intrastat I quarter 2020 and Intrastat of February, March and April:  filing due date extended until 30 June 2020

Tax controversies

• The Cura Italia Decree provided for the deferral of hearings and suspension of terms also for tax controversies from 9 March to 15 April.
• With the new “Decree Liquidità” issued in April 9, the deferral of hearings and suspension of terms of – inter alia – tax proceedings is further postponed to 11 May 2020, so that the overall suspension is equal to 64 days.
• The deferral applies to appeals of first instance, appeals of second instance and appeals before the Supreme Court as well as to the filing of documents and defensive briefs.
• The Liquidità Decree provides, in addition, the alignment between the terms of suspension of tax litigation in the hands of both parties of tax controversies (taxpayers and tax offices), to be now intended aligned to 11 May 2020.
• It is also provided that the filing of documents and acts referred to controversies started in paper form must be now performed by electronic means.
• Similarly, penalties related to the omitted or insufficient payment of standard court fee (“contributo unificato”) must be notified by means of certified email or by means of deposit at tax court’s offices.
• The Relaunch Decree provides for the postponement to September 16 of the deadline concerning the notification of the first instance tax appeals to the Tax Commission, expiring between 9 March 2020 and 31 May 2020, provided that they relate to enforcement notices and certain settlement notices. Acts challenging or imposing sanctions and, in general, all other acts for which an application for a tax assessment settlement agreement has been submitted are excluded.

Payments of the notifications of irregularities

• The Relauch Decree sets forth a relief from the deadlines for payments due, in particular (i) between 8 March 2020 and the day prior to the date the Decree enters into force and (ii) in the period between the entry into force of the Decree and 31 May 2020, also for instalments in progress, of the amounts due on the basis of the tax slips of irregularities - notified as a result of automated settlement or formal check of returns - as well as through the notifications of the outcome of settlements with regard to income to be taxed separately. Payments shall be made by 16 September 2020.

Extension of deadlines related to specific tax procedure

• The Relauch Decree provides for the postponement to September 16 of the payment of the first or single instalment concerning the tax assessment agreements, of the payments related to mediations, judicial settlements, tax credits recovery and to specific clearance notices;

Extension of deadlines related to notification of assessment notices

• The acts of assessment, contestation, imposition of penalties, recovery of tax credits, settlement, adjustment and settlement, for which the expiry terms expire between 9 March and 31 December 2020, are issued by December 31, 2020 and are notified in the period between 1 January and 31 December 2021.

Temporary measures in support of companies’ liquidity

In order to ensure the necessary liquidity to companies affected by the COVID-19 epidemic, art. 1 of the Liquidità Decree sets out the enabling of disbursements of credit facilities under any form to businesses through the granting of guarantees by SACE (a subsidiary belonging to the Cassa Depositi e Prestiti group), in favor of banks.

SACE could grant, up to 31 December 2020, guarantees up to Eur 200 billion, allocating Eur 30 billion to SMEs, including self-employed workers and professionals VAT holders, to the extent that they already have reached the maximum credit issued by the Central Guarantee Fund for SMEs.

The guarantees could be delivered:

• in connection with loans of tenor not exceeding 6 years (plus an initial possible grace period of up to 24 months);       
• to businesses which, as at 31 December 2019, did not qualify as non-solvent, and, as at 29 February 2020, did not have defaulted payments classified as impaired exposures as per the applicable European legislation;    
• for guaranteed amounts not exceeding the 25% of the turnover accounted in 2019 by the beneficiary or not doubling the personnel costs incurred during the year 2019.

The Liquidità Decree sets forth three guarantee thresholds based on the beneficiary company size:

• 90% of the loan amount for companies with less than 5,000 employees in Italy and turnover up to Eur 1.5 billion;
• 80% of the loan amount for companies with more than 5,000 employees in Italy or turnover between Eur 1.5 and 5 billion;
• 70% of the loan amount for companies with a turnover of over Eur 5 billion.

Lastly, the Liquidità Decree also provides for the State to issue a guarantee on exposures assumed or to be assumed by Cassa Depositi e Prestiti within 31 December 2020 and arising from guarantees on loan portfolios granted by credit institutions. The effectiveness of the above provisions is subject to the approval of the European Commission.

The Measures through the Guarantee Fund for SMEs

The Liquidità Decree lays down new measures of support to SMEs through the Central Guarantee Fund, valid up to 31 December 2020, temporarily derogating the rules applying to the Fund pursuant to L. 662/1996.

The set of measures is extremely detailed; here below we provided some high-level overview.

• The measures set out by the Cura Italia Decree (art. 49) are superseded and replaced.
• First of all, SMEs and entrepreneurs impacted by the COVID-19 emergency (even stated by self-declaration pursuant to art. 47 of DPR 445/2000) shall have access to the guarantee of the Fund up to 100%, both in direct as well as in indirect form, for facilities newly disbursed up to Eur 25,000, possible 2 years initial grace period, and 72 months tenor, and provided that the disbursed amount shall not exceed 25% of the earnings of the beneficiary, as resulting per the last financial statement filed or the last tax declaration submitted, or, for entities of new incorporation following to the date of 1st January 2019, as per appropriate documentation (also per self-declaration pursuant to art. 47 of DPR 445/2000).

(previous measures of Cura Italia Decree were)

• for a period of 9 months from the provision of the Decree, where the state provides a guarantee for loans of up to 5 million euros with the aim of supporting investments and debt restructuring;
• Cassa Depositi e Prestiti SpA (a prominent Italian investment bank) provides emergency liquidity assistance to companies which recorded a reduction of turnover due to the emergency. The liquidity assistance may be granted in first loss financing portfolio guarantees. The Italian State issues the guarantee in favor of Cassa Depositi e Prestiti S.p.A. up to a maximum of 80% of the exposure assumed.

The Decree Liquidità issued on April 9 provides that:

The guarantees of the Fund shall be granted to all businesses having not more than 499 employees which have been impacted by the Covid-19 spread (even stated by self-declaration pursuant to art. 47 of DPR 445/2000):

• at no costs;
• up to a maximum guaranteed amount of Eur 5 Million per every single business;
• without formalities relating to the eligibility requirements set out in the statutory provisions applying to the Fund (Decree of the Ministry for the economic development 12 February 2019);
• also in respect of facilities already disbursed (not longer than 3 months since the application and, in any case, on a date following the 31 of January 2020);
• also in addition to other forms of guarantee, provided that the total earnings of the business do not exceed the amount of 3,200,000 Euro;

• with direct coverage up to 90% and indirect coverage up to 100% (subject to the prior clearance of the European Commission pursuant to art. 108 TFEU) for financing operations of a tenor of up to 72 months and in amounts not exceeding (alternatively) (i) two times of the overall salary costs for the year 2019 (or the last available financial year) of the beneficiary, or (ii) one quarter of the total turnover 2019 of the beneficiary, or (iii) the need (also represented by self-declaration pursuant to art. 47 of DPR 445/2000) for working capital costs and investment costs in the following 18 months, in the case of SMEs, or 12 months, in the case of other businesses with a number of employees not higher than 499;

The Relaunch Decree provides:

• a non-refundable relief is recognized to companies with revenues not exceeding 5 million euros in the previous tax period, if the amount of turnover and fees for April 2020 is less than two thirds of the amount of the turnover and fees of April 2019.

The amount of the contribution is between 20% and 10% of the reduction of turnover, depending on the amount of the revenues regarding the previous tax year;

• always for companies with revenues not exceeding 5 million euros in the previous tax period is recognized a tax credit amounting to 60% of the rent of non-residential properties intended for the carrying out of industrial, commercial, artisanal, agricultural, tourism activities or for the habitual and professional exercise of self-employed activities.

The tax credit is also due, in the lesser amount of 30%, in the case of service contracts concerning complex services or business leases, including at least one property for non-residential use. The tax credit is commensurate with the amount paid in the fiscal year 2020 with reference to each of the months of March, April and May;

• a series of measures aimed at the asset strengthening of S.p.A., S.r.l, and cooperative companies with revenues above 5 million euros and up to 50 million euros in 2019, which have undergone, during the period 01.03.2020-30.04.2020, a reduction of revenues for an amount higher than 33% if compared to the same period of 2019, due to the ongoing health emergency.

the person making the contribution in cash is entitled to a credit tax of 20% of the sums paid, with a maximum investment limit amounting to 2 million euros; the company is entitled to a tax credit based on losses carried out in 2020 and the capital increase.

The sum of these credits cannot exceed 800,000.00 euros. Both tax credits do not contribute to the formation of the tax base of income taxes and IRAP; their compensation in the F24 model is not subject to the general annual limit (raised by the same decree to one million euros), nor to the limit of 250.000,00 euro foreseen for the tax credits of facilitating nature. The distribution of reserves, of any kind, before 31.12.2023 by the company subject to the cash contribution entails the forfeiture of the benefit and the taxpayer's obligation to return the amount deducted, together with the legal interest.

• the creation of an "SME Asset Fund", aimed at subscribing bonds or debt securities newly issued by companies within 31 December 2020.
  

Civil, criminal, tax, administrative proceedings – Hearings and proceedings deadlines

Judicial hearings in civil, criminal, tax, administrative proceedings, pending before all courts, are postponed to a date after 11 May 2020, thus extending the analogous provisions of the Cura Italia Decree (art. 83, Law Decree No. 18/2020) by a further 26 days.