What’s new about HR and Corporate Tax in 2019? · What’s new about HR and Corporate Tax in 2019? Milan, 14/2/2019 Provisions of the Budget Law for 2019 & other recent measures

What’s new about HR and Corporate Tax in 2019?

Milan, 14/2/2019

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Provisions of the Budget Law for 2019 & other recent measures that can impact the operations of MNEs in Italy

Strictly Private and Confidential

PwC

Agenda

1. Macroeconomic Assessment of Italy

2. HR - Introduction & Employment in 2019

3. HR - Personnel management and payroll in 2019

4. HR - Global Mobility

5. Review of tax incentives

6. Italian Amnesty on tax disputes

7. Interest deduction limitation amendments

2

© 2019 TLS Associazione Professionale di Avvocati e Commercialisti. All rights reserved. This content is for general information purposes

only, and should not be used as a substitute for consultation with professional advisors.

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1. Macroeconomic Assessment of Italybetween an Unsteady Past and an Unpredictable Future

Speaker: Flavio Mondello

3

Topics1. The performance of GDP from its historical trend 2. Snapshot of the shift in aggregate demand from 20073. How current data diverge from the pre-crisis period4. The performance of GDP components: latest data suggest the growth momentum has eased and is expected to remain subdued in 20195. The industrial sector suffered a deep contraction because of the Great Recession but it recovered with the introduction of tax incentives and the national plan “Industry 4.0”6. Private Consumption will hold up because of low inflation but it could be hindered by labour market dynamics7. Looking ahead, political uncertainty seems to be the main downward risk to economic expansion 8. The 2019 Budget Law and its amendments9. The Italian government decided to give a boost to small realities10. Various organisations predict that the Italian Economy will slowdown in 2019, recovering in 2020 and 2021

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The performance of GDP and GDP per capita since 2007 and the divergence of GDP from its historical trend

4

February 2019

809000

909000

1009000

1109000

1209000

1309000

1409000

1509000

1609000

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

GDP with/ without the Great Recession (million €)

• We have assumed an annual GDP growth trend of 1.2%, calculated as a linear trend joining 1981 with 2017.

• From Q1 2008 when Italian GDP reached its apex, at € 1,690 billion, economic activity has contracted of 6.8% up to the first minimum (recorded in Q4 2009) and of another 2.3% up to the second minimum (recorded in Q4 2013).

• In Q4 2018, Italian GDP was still at -5.3% compared to its apex in Q1 2008.

• GDP per capita has contracted even more, being at -8.1% at the end of 2017 compared to its 2007 level

PwC on ISTAT data

PwC on ISTAT data

25.000

25.500

26.000

26.500

27.000

27.500

28.000

28.500

29.000

1.500.000

1.520.000

1.540.000

1.560.000

1.580.000

1.600.000

1.620.000

1.640.000

1.660.000

1.680.000

1.700.000

T4-2

00

6

T2-2

00

7

T4-2

00

7

T2-2

00

8

T4-2

00

8

T2-2

00

9

T4-2

00

9

T2-2

01

0

T4-2

01

0

T2-2

01

1

T4-2

01

1

T2-2

01

2

T4-2

01

2

T2-2

01

3

T4-2

01

3

T2-2

01

4

T4-2

01

4

T2-2

01

5

T4-2

01

5

T2-2

01

6

T4-2

01

6

T2-2

01

7

T4-2

01

7

T2-2

01

8

T4-2

01

8

GDP as sum of the last 4Q and GDP per capita (million €)

GDP GDP per capita

© 2019 TLS Associazione Professionale di Avvocati e Commercialisti. All rights reserved. This content is for general

information purposes only, and should not be used as a substitute for consultation with professional advisors.

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Snapshot of the shift in aggregate demand from 2007

58,88% 61,30% 60,65% 59,50% 60,15% 60,20%

19,05% 20,65% 19,93% 20,52% 20,05% 19,56%

-27,38% -24,57% -27,14% -25,52% -27,85% -29,55%

21,85%20,39% 19,44% 17,25% 17,03% 17,89%

26,98% 22,91% 26,34% 28,42% 30,15% 31,70%

-20%

0%

20%

40%

60%

80%

100%

2007 2009 2011 2013 2015 2017

Components of Aggregate Demand

Private Consumption Public Consumption Imports Investments Exports

PrivateConsumption

Investments Public Consumption Exports Imports

2008 -1.1% -3.1% 1.0% -3.1% -3.7%

2009 -2.6% -12.7% 1.3% -20.6% -16.1%

2010 -1.5% -13.2% 1.9% -11.2% -5.7%

2011 -1.5% -14.9% 0.1% -6.6% -5.2%

2012 -5.4% -22.8% -1.3% -4.5% -12.8%

2013 -7.7% -27.9% -1.6% -3.8% -14.9%

2014 -7.4% -29.5% -2.3% -1.2% -12.1%

2015 -5.7% -28.1% -2.9% 3.1% -6.1%

2016 -4.5% -25.5% -2.6% 5.3% -2.7%

2017 -3.1% -22.4% -2.6% 11.4% 2.3%

• The Great Recession has damaged investments, which have lost their incidence on GDP. They contracted of 22.4% from 2007 to 2017, with a marginal recovery starting from 2015

• Exports have grown of 11.4% from 2007 to 2017

• Imports have exceeded their 2007 level, growing of 2.3 percentage points

• Public Consumption reacted anti-cyclically to the Great Recession. However, it was hindered by the Sovereign Debt Crisis. It started recovering in 2016.

PwC on ISTAT data

PwC on ISTAT data5

February 2019© 2019 TLS Associazione Professionale di Avvocati e Commercialisti. All rights reserved. This content is for general information purposes


PwC

Historical trends of the components of aggregate demand demonstrate how current data diverge from the pre-crisis period

6

February 2019

623000

723000

823000

923000

1023000

1123000

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

Private Consumption (million €)

200000

250000

300000

350000

400000

450000

500000

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

Investments (million €)

209100

229100

249100

269100

289100

309100

329100

349100

369100

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

Public Consumption (million €)

-1000000

-800000

-600000

-400000

-200000

0

200000

400000

600000

800000

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

Trade Balance (million €)

PwC on ISTAT data

PwC on ISTAT data PwC on ISTAT datac

PwC on ISTAT data



PwC

The performance of GDP components: latest data suggest the growth momentum has eased and is expected to remain subdued in 2019

7

February 2019

250.000

300.000

350.000

400.000

450.000

500.000

550.000

900.000

910.000

920.000

930.000

940.000

950.000

960.000

970.000

980.000

990.000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

GDP Components from 2006 (Million €)

Private Consumption Public Consumption Investments

Imports Exports

60.000

70.000

80.000

90.000

100.000

110.000

120.000

130.000

140.000

236.000

237.000

238.000

239.000

240.000

241.000

242.000

243.000

GDP Components (Quarterly Data, Million €)

Private Consumption Imports Public Consumption

Investments Exports

PwC on ISTAT data

PwC on ISTAT data

• According to official data, the Italian growth momentum eased in the second half of 2018, pushing the country in a “technical recession”

• In Q4 2018, GDP contracted of 0.2% following a 0.1% contraction in Q3 2018. Despite positive yoy growth, lower consumption growth and lower investments underlined last semester weak performance.

• Lower employment growth led to lower consumption while political uncertainty weighted negatively on investments that fell 1.05 percentage points compared to the previous quarter.

• On the positive side, despite weakening global perspectives, export kept pace expanding 1.06 percentage points. However, trade tension between China and the United States represents a significant downward risk to export expansion



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The industrial sector suffered a deep contraction because of the Great Recession but it recovered with the introduction of tax incentives and the national plan “Industry 4.0”

8

February 2019

PwC on ISTAT data

250000

300000

350000

400000

450000

500000

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

The evolution of the industrial sector (million €)

• The industrial sector has lost momentum due to a higher impact on GDP of the service sector

• In terms of production, the industrial sector contracted of 19.9% from 2007 to 2016

• Capital goods continue to have a positive growth trend. Between 2015 and 2017, investments in machinery and equipment increased of 7.3%. In 2017 and 2018, there is an additional increase in investments, which speed up the already positive trend (9.1% in 2017, 10% in 2018)



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Private Consumption will hold up because of low inflation but it could be hindered by labour market dynamics

9

February 2019

100,5

101

101,5

102

102,5

103

103,5

Consumer Price Index

24.600

24.700

24.800

24.900

25.000

25.100

25.200

25.300

25.400

Employment in Persons (Thousands)

Inflation was driven by exogenous factors (oil and unprocessed food products)

• Half of the inflation in 2018 is due to higher prices in the energy sector, which increased CPI of 0.7%.

• In August 2018, the consumer price index reached its apex, 103.

• In November 2018, the Italian consumer price index for the whole nation decreased by 0.2% on a monthly basis but it increased of 1.4% yoy.

• Spring 2019: Headline inflation is expected to fall below 1%, as a result of falling oil prices and the strengthening of the € against the $, reducing imported inflation.

• In Q3 2018, the contraction in consumer spending was in durable and non-durable goods, respectively -0.1% and -0.5% qoq.

The labour market weakened slightly in 2018 Q3.

• Employment fell slightly, -0.2% qoq: the number of employees has grown in the industry and service sectors, the number of self-employed workers has fallen

• 2019: wages and employment are expected to grow at, respectively, 1.8% and 1.0%

• In Q3 2018, unemployment rate has fallen to 10.2%, reaching the lowest value since Q1 2012

PwC on ISTAT data

PwC on ISTAT data

© 2019 TLS Associazione Professionale di Avvocati e Commercialisti. All rights reserved. This content is for general information

purposes only, and should not be used as a substitute for consultation with professional advisors.

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Looking ahead, political uncertainty seems to be the main downward risk to economic expansion

10

February 2019

100

150

200

250

300

• The yield spread between Italy 10 Year Bonds and Germany 10 Year Bonds goes from 122 in April 2018 to 290.5 in May 2018. This swift increase was correlated to the uncertainty arisen from the inability of forming a majority government.

• This political instability affected the confidence in the Italian market of businesses and international investors. In May and June 2018, net purchases of government bonds by foreign investors declined by €77 billion. In August 2018, net purchases further declined of €17 billion.

• The yields of BTP 5Y and BTP 7Y reflect the concern there was around the 2019 Budget Law• NPLs shrank of 0.6 percentage points, from 3.4% Q3 2017 to 2.8% Q3 2018. In 2018, new NPLs reached a value of €14 billion, against the

€19 billion in 2017. The deterioration in market conditions will not halt the process of convergence of the asset quality parameters of Italian banks towards European averages.

• Loans to firms have slowed to 1.1% yoy, while loans to households have remained broadly stable, 2.7% yoy. The increase in the cost of credit has led to worst loan conditions.

• The European Central Bank took control of Banca Carige. This intervention spotlighted the risks that political chaos in Rome and a sputtering economy might cause to the Eurozone’s financial system.

Italy 10 Year vs Germany 10 Year Spread Bond Yield (Base point)

PwC on Investing.com data PwC on Investing.com data

0

1

2

3

4

5

6

7

8

105

110

115

120

125

130

135

feb

-07

ott

-07

giu

-08

feb

-09

ott

-09

giu

-10

feb

-11

ott

-11

giu

-12

feb

-13

ott

-13

giu

-14

feb

-15

ott

-15

giu

-16

feb

-17

ott

-17

giu

-18

Governments Security Yields at Issue %

BOT 6M (LX Axis) BTP 5Y (RX Axis) BTP 7Y (RX Axis)

Bas

e p

oin

t

Pri

ce



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The 2019 Budget Law and its amendments

11

On December 30, 2018 the Italian Budget Law was approved.

To avoid a costly European Union infringement procedure, the Minister of Economy and Finance, Giovanni Tria, revised the debt to GDP ratio for 2019: from 2.4% to 2.04%.

The Italian government had to cut €10 billion from previously allocated funds. The minimum income scheme –Reddito di Cittadinanza- and the policy for higher flexibility for early retirement –Quota 100- received €13.2 billion, €4 billion less than expected. €6 billion came from a cut in investments.

As shown in Slide 2, the annual growth of gross fixed capital formation goes from 3.7% in 2018 to 2.0% in 2019

• Super Depreciation (for general investments) has been abolished.

• Super Depreciation will only be applicable to software (intangible assets) pertaining to Industry 4.0.

• Hyper Depreciation: 170% for investments of maximum €2.5 million, 100% for investments from €2.5 to €10 million, 50% for investments from €10 to €20 million. Hyper Depreciation will not be applied to investments over the ceiling of €20 million

• R&D Tax Credit: 25% of the increase (50% for personnel costs for employees directly employed in R&D activities) and €10 million for eligible expenses of materials used in R&D activities.

• NED (ACE) and Tax on Entrepreneurial Income (IRI) have not been translated into 2019.

February 2019



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The Italian government decided to give a boost to small realities

12

• New ceiling to access the flat-rate scheme; modification of the revenues, compensation and general requirements limits –employee limitation, compensation to personnel and capital goods-.

1. Start-ups: a 5% substitute tax for the first 5 years of activity

2. Start-ups from the 6th year of activity and for self-employed workers who transition from an ordinary tax regime to the flat-rate scheme: a 15% substitute tax

3. Flat Tax at 15% for individuals who do not exceed €65,000 in annual revenues or compensation.

4. Abolition of the €5,000 ceiling for personnel expenses, €20,000 for capital goods and €30,000 for personnel compensation

5. 2020: a 20% substitute tax for self-employed workers and companies that do not exceed €100,000 in annual revenues or compensation.

• Social security benefits for small businesses and/or self employed workers: artisans and traders can request a 35% reductionin INPS contributions.

• IRES at 15% (instead of 24%) for businesses that invest and hire new employeesFebruary 2019



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Various organisations predict that the Italian Economy will slowdown in 2019, recovering in 2020 and 2021

13

February 2019

In 2019, GDP growth is forecasted at 0.6%.

Private investment will slowdown because of the phasing out of the ECB quantitative easing, the partial cut of tax incentives under the 2019 Budget Law and tighter financing conditions for firms. Gross fixed capital formation goes from a growth of 3.8% yoy in 2018 to a growth of 0.6% yoy in 2019.

Private consumption will increase. Wages and employment are expected to grow at, respectively, 1.8% and 1.0%.

Public consumption will grow because of the new forms of social transfers introduced within the 2019 Budget Law.

Exports will recover and will be in line with export markets, thus allowing Italy to keep its competitive position

January 21, 2018 – 2.00 PM

“The International Monetary Fund revised down its forecast for Italy’s economic growth this year, warning that any new tensions over public finances may hurt the nation’s output, borrowing costs and banking system. The fund’s new estimate for 2019 matches revised projections that the Bank of Italy published in its quarterly economic bulleting on Friday”.

Bloomberg

Banca d'Italia

2018 2019 2020 2021

GDP 0.9% 0.6% 0.9% 1.0%

Private Consumption 0.6% 0.6% 1.0% 0.9%

Public Consumption 0.2% 0.3% 0.0% -0.2%

Gross Fixed Capital Formation 3.8% 0.6% 0.2% 0.8%

Exports 0.8% 3.0% 3.3% 3.5%

Imports 1.7% 2.8% 2.5% 2.5%

EurostatGDP Growth

Forecasts

Q3 2018 - 0.1%

Q4 2018 -0.2%

2019 0.2%

2020 0.8%



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2. HR - Introduction & Employment

Speaker: Davide Neirotti, Luca Saglione

14

Topics1. Trends from current Government, companies' concerns2. "Decreto Dignità", how much it compresses the "employability"? First operative solutions for the companies to react.3. Impacts of the Constitutional Court's decision about the indemnity for unlawful dismissals4. Confirmation of "welfare benefits"?

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only, and should not be used as a substitute for consultation with professional advisors. 15

Trends from current Government, companies’ concerns

NEW GOVERNMENT’s APPROACH

New provisions for HR incentives for companies

Increase of Public Social Supports

Reduction of flexibility

Decrease of the overall job offering

Concerns about incentives granted to the business performances

Worries about sensitive limits to the incentives connected to the “Industria 4.0” especially concerning the training in this matter

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“Decreto Dignità”: how much does it compress the “employability”? First operative solutions for the companies(1 of 3)

Within the points touched by the recently approved Law no. 95/18 - better known as «Decreto Dignità» - one of the key pointis the impacts of the reform on fixed term and temporary employment contracts.

Fixed term employment contract

Formal requirement

With the sole exception of employment relationships lasting no more than twelve days, the termination of the contract shall have no effect unless it is in writing.

In the case of an extension of more than 12 months or in the case of a renewal regardless of the duration, the reasons must be stated in the same "written document".

Maximum duration

A fixed-term contract may be concluded for a maximum period of 12 months, without the need of reasons justifying the application of the time-limit.Otherwise, the contract may be concluded for a longer period, not exceeding 24 months, only if at least one of the following conditions is met:• temporary and objective needs, unrelated to the

ordinary business, or the need to replace other workers;• temporary, significant and non-programmable increases

in ordinary activities.

NEW

Renewal and postponement

The term of the fixed-term contract may be extended for a maximum of 4 times (before 5) within 24 months (before 36). If the number of extensions is greater, the contract shall be converted into an open-term contract from the date on which the 5 extension takes effect. The contract may be extended freely for the first 12 months; afterwards, only in the presence of the reasons for the extension.

The fixed-term contract may only be renewed if there are the aforementioned reasons, even if the renewal occurs within the first 12 months.

NEW

Sanctions for breaches

If a contract hiring with a duration of more than 12 months does not indicate an express reason, the contract shall be converted into an open-term contract from the date on which the 12-month period is exceeded.

If there is no valid reason for extending the duration of the contract to more than 12 months or for renewing the contract, the latter shall be converted into an open-term contract.

If the maximum limit of 24 months is exceeded as a result of a single contract or a succession of contracts, the relationship shall be converted into a contract of indefinite duration from the date of such overrun.

NEW

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“Decreto Dignità”: how much does it compress the “employability”? First operative solutions for the companies (2 of 3)

Temporary employment contract - with duly authorized Agency

New provisions and exceptions

The “Decreto Dignità” made the rules on fixed-term employment contract also applicable to temporary employment contract with agency.More in detail, it provides for: • an obligation to provide a reason for contracts with a

duration of more than 12 months;• an obligation to provide the reason for the contract

starting from the first renewal and extension that exceeds a total of 12 months of the contract;

• an overall maximum limit of 24 months;• an 180-day appeal period;• an additional charge for the contribution of 0,50% at the

time of each renewal.

Exceptions:• the obligation to respect a minimum interval between

one contract and another;• the maximum limit of 20% of workers hired on a

temporary basis compared to the permanent workforce;• the right of priority of the worker hired for more than 6

months in the hiring of permanent staff by the employer in the following 12 months.

Maximum number of temporary employees

The “Decreto Dignità” introduced a maximum limit on the number of temporary employees that could be used by the same company, establishing that the number of workers employed on a fixed-term or on a temporary basis may not exceed 30% of the permanent workers employed by the user.

Collective Bargaining Agreements are allowed to establish different rules.

Conversion

The contract will be transformed to an indefinite relationship in case of: • termination of a fixed-term contract exceeding 12

months without reason (from the date on which the 12-month period was exceeded);

• overrun of the 24-month limit with a single contract or as a result of several fixed-term contracts (from the date of overrun);

• renewal or extension (exceeding 12 months) without reason.

Fraudolent supply of workforce

“Decreto Dignità” reintroduced this case, according to which when the workforce is supplied through a temporary contract with the specific purpose of circumventing compulsory rules of law or collective agreement, both the agency and the user are punished with a fine of € 20 for each worker involved and for each day of supply.

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“Decreto Dignità”: how much does it compress the “employability”? First operative solutions for the companies (3 of 3)

The Ministry of Labor and Social Policy released an Official Document on October 31st, 2018 aimed atclarifying some key points related to the concrete implementation and application of the “Decreto Dignità”.

Companies should evaluate costs (also in terms of potential litigation) / benefits to stipulate fixed term employment contracts

Companies should assess all red flags related to potential postponements / renewals of on-going fixed term employment contract

Companies should check the previous work-history of the interested employee in case of a new hiring due to the fact that the maximum 24 month duration of a fixed term employment contract shall be calculated with reference to same / similar performed tasks

Companies should assess the limit percentage of fixed term employment contract / temporary employment contract before proceeding with new hirings

Companies should further assess the possibility to use Staff leasing contract rather than temporary employment contract (due to the fact that the first has not been affected by the reform)

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Impacts of the Constitutional Court’s decision about theindemnity for unlawful dismissal

WHAT

APPLICABLE SCENARIO

THE PROVISIONS OF LAW (Legislative Decree no. 23/15, as

amended by the so called “DecretoDignità” – Law no. 87/18)

The Constitutional Court(Sentence no. 194, November 8th, 2018)

Economic Indemnity in lieu of unlawful dismissal

The provision is referred to open term employment relationships when it occurs: • a discriminatory, null or verbal dismissal; • a dismissal for objective reasons or in case of just cause; • a dismissal affected by formal or procedural defect.

In case of unlawful dismissal stated by the Judge, the employer might be condemned to pay to the dismissed employee an economic indemnity “equal to no. 2 monthly installments» multiplied for the employee’s years of seniority and, in any case, an amount equal to «not less that no. 6 and no more than no. 36 monthly installments».

The Italian Supreme Court stated that the sole criteria linked to the employee’s seniority provided for by the Law should be considered as unconstitutional due to the fact that this indemnity should be calculated taking in consideration also different requirements which have characterized the entire relationship, such as number of company’s workforce, business weight of the employer as well as the general behaviour and conditions of the parties.

In case of dismissal, the amount to be paid to the employee unlawfully dismissed should be defined by the Judge using discretional criteria which could imply a final amount higher than the one previously linked only to the employee’s seniority (within the provided limits: among 6 and 36 monthly instalments).

IMPACTS for the EMPLOYER

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Confirmation of “welfare benefits”?

The Circular no. 5/E of the Italian “Agenzia delle Entrate” (dated March 29th, 2018) provides clarifications about anumber of doubts / key points relating to tax exemptions on performance bonuses and company welfare.

EXTENSION The provisions of previous Italian

“Legge di Bilancio” for 2016, concerning tax exemption of performance bonuses and company welfare are extended, adapted and integrated for the subsequent years 2017, 2018 and 2019.

The number of beneficiaries has been increased (now private sector workers who, in the year preceding the year in which the bonus was received, had an income of no more than € 80,000 per year).

The maximum amount of the premium subject to substitute tax, has been raised and is now set at € 3,000 or € 4,000, in case of companies that recur to the involvement of workers in the organization of work.

Involvement of workers: carried out through organizational schemes that allow the direct and active involvement of workers in the processes of business innovation. It must be formalized at company level by means of a specific Innovation Plan, drawn up by the employer or by joint company committees, according to the indications of the collective agreement.

Since its introduction, tax exemption for productivity bonuses has been subject to the application of a corporate or territorial collective agreement. The circular clarifies that even a company without internal trade union representation can join a territorial collective agreement and, consequently, apply the substitute tax on performance bonuses.

The percentage of the applicable substitute taxation on the premium amounts is equal to 10%.

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Confirmation of “welfare benefits”?

Potentialities, opportunities and Welfare 2.0 added value, grounded on Unions’ negotiation (or mere reference to 2nd levelterritorial agreement signed by third parties) could contribute to boost undertakings and the employees within a virtuous

circle «WIN WIN» among an improved employees’ wellness, competitiveness of undertakings and work

sustainability.

Individual wellness(physical, psychological, social)

4

Familiar wellness 3

Increased purchasing capabilities due to a higher

“effective remuneration” 2

Life-work balance 1

Tax and contributory advantages (company and employees)

0

Overall improvement of thesocial climate

5

Brand reputation’sconsolidation

Motivation of personnel,Reduction of absenteeism

Allurement and entrustmentof talents’ loyalty

Better efficiency and productivity

6

7

8

9

PwC

How can we assist you

Resolution of tax and labour law issues (complex cases) relating to the «welfare practices» of employees

and second level check concerned the assistance service (Contact Center- First level)

Compliance check of the former welfare system – Planning of labour options based on the «regulatorysituation» of the company (collective agreements, individual agreements, policies, best and common practices)

Planning tax and social security solutions in order to evalute impacts in terms of «risks index» and«opportunities index»

Developing the welfare intiative and related main economics (saving and impacts on personnel involved) andfocus on organizational wellness (work organization)

Tailoring of remuneration schemes according to the productivity scheme

PwC TLS

Compliance check of the former employment relationships situation, with a special focus on fixed termempoyment contracts and temporary contracts

Identify potential critical situation and plan remediations in order to comply with normative provisions

Provide support in managing day by day matters concerning HR / Labour matters and relationships withemployees

PwC

3. HR - Personnel management and payroll in 2019

Speaker: Marzio Scaglioni

23

Topics1. Increase of the 20% in the penalty due for illegal working activity2. new total social tax relief for the engagement of young graduates of excellence3. new mandatory maternity leave flexibility4. increase of paternity leave days5. postponement of the payment deadline for Inail premiums to May 16th, 20196. smart-working: priority to the request of female workers in the 3 years following the maternity leave7. Social security cap 20198. Social contribution – commerce sector9. Retirement - Quota 100

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Illegal working activity (1/2)

The administrative sanctions in case of unlawful secondment has beenincreased of 20% starting from January the 1st, 2019, according to theLaw 145/2018 (sect. 1, par. 445).

• workforces hired in so-called “under the table”, that means without any prior hiring communication;

• temporary working activities, subcontracts and secondments;

• international mobility;

• maximum duration of working time, daily rest and weekly rest.

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Illegal working activity - Focus on detachment (2/2)

The legal employer for unlawful secondment, could be sanctioned as follows:

For each worker, up to 500,00 €

now up to 600,00 €

In case the on-line communications have not been performed (or within the deadlines)

Up to 3.000,00 € for each worker involved

now up to 3.600,00 €

In case the company does not keep the documentation requested (to be translated in Italian)

Up to 6.000,00 €

now up to 7.200,00 €

In case the company does not communicate the contact person who sends, receives and keeps the requested documentation in case of detachment, or the contact person who has the power of attorney to take the relationship with trade unions (the law disposes “social parts”, but generally the trade unions are interested to promote a potential second level agreement), the sanction is up to 6.000,00 € (now up to 7.200,00 €).

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Total social tax relief for the assumption of young graduates of excellence (1/2)

With effect from the 1st January 2019 and until the 31st December 2019, private employers who employ with an open-ended contract the following full-time or part-time employee are exempted from payment of social security contributions in their charges, with the exclusion of working injury premiums due to INAIL.

Graduates with age less than 30 years, with a Master's degree, achieved in the period between the 1st January 2018 and the 30th

June 2019 with the highest mark (110 and honors) and with a weighted average score of at least 108/110. Such accomplishment has to be reached within the legal duration of the course. in state or non-state universities that are legally recognized.

Young person in possession of a research doctorate achieved in the period between January 1st, 2018 and June 30th, 2019 and in any case before than the 34th years old, in state or non-state universities that are legally recognized.

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Total social tax relief for the assumption of young graduates of excellence (2/2)

The social tax relief is applied

• for a maximum period of 12 months starting from the date of employment,• up to a maximum limit of € 8.000 for each recruitment.

The benefit is also due in the case of transformation of a fixed-term contract into an open ended one, which took place between the 1st January 2019 and the 31st December 2019.

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Mandatory maternity leave flexibility

The Budget Law 2019 provides for a further option of

compulsory maternity leave fruition, in addition to those

already provided.

2 + 3 months

before and after childbirth

1 +4 months


0 + 5 months


provided that a specialist doctor

of the National Health Service

and the competent doctor, for the

purposes of prevention and

health protection in the

workplace, certify that these

options do not prejudice the

health of the pregnant and the

unborn.

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YEAR 2019

compulsory paternity leave for a working father, to be enjoyed within 5 months from the birth of the child or from the entry into the family or in

Italy in case of adoption or custody

5 days also usable

in non-continuous way

daily allowance equal to 100% is paid by INPS

the working father can take off for a further period of one day

upon agreement with the mother and in her place in

relation to the relative period of mandatory leave

Paternity leave

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Postponement of working injury annual premium

Deadline for submitting the salary report and the self-payment of the premium

May 16th, 2019

Smart-working

Priority for smart working requests submitted by female workers in the 3 years following the maternity leave, as well as by workers with disable children.

Social security Cap 2019

Euro 102.543

Considering that the Social Security Agreement between Japan and Italy is not applicable yet, Japanese secondees are subject to Italian social contribution within the social security cap.

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31

Social contribution – commerce sector

Company Position Gross salaryper year

Burdenratio of Company

Burden ratio of Manager /Employee

Less than 50 employees

Manager

Up to € 47.143 26,54% 9,19%

Exceeding € 47.143

26,54% 10,19%

Employee

Up € 47.143 28,98% 9,19%


28,98% 10,19%

More than 50 employees

Manager

Up to € 47.143 26,84% 9,19%


26,84% 10,19%

Employee

Up to € 47.143 29,88% 9,49%


29,88% 10,49%

Social contributions are not changed. Only the taxable remuneration for the additional contribution 1% changes every year (47.143 for 2019).

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Retirement - Quota 100

Windows Quota 100

Type of employeeDate of accrual of the

requirements Quota 100Window

Employees and self-employed - Private sector

62 years and 38 years of contribution reached by

31/12/2018

April 1st, 2019

62 years and 38 years of contribution reached after

31/12/2018

After 3 monthsthe requirements

are accrued

• Requirements (age and years of contribution) must be accrued by 31/12/2021

• Prohibition to sum pension income and employee income until 67 years old

• It’s possible to sum pension only with occasional incomes up to € 5.000 gross

Conditions

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4. Global Mobility

Speaker: Rosaria Cera

Topics

1. New international agreement signed between Italy and Japan related to the exchange of information

2. Business travellers

3. New flat tax rate on self employment income

33

PwC© 2019 TLS Associazione Professionale di Avvocati e Commercialisti. All rights reserved. This content is for general information

purposes only, and should not be used as a substitute for consultation with professional advisors. 34

New International agreement signed in Japan related to the exchange of information

What

When

Tax implications

CRS MULTILATERAL COMPETENT AUTHORITY AGREEMENT (MCAA)http://www.oecd.org/tax/automatic-exchange/international-framework-for-the-crs/

Since September 2018

Tax Assessment by the Italian tax authority on the Italian tax returns will increase since now, considering that it will be easier for the Italian tax authority receive tax information related to:

- Japanese employment incomes and

- Japanese personal investments.

Japanese companies have to be compliant with the Italian tax and social security dispositions when they move Japanese individual to Italy. In general, in case of assignment, Japanese entities

-> for SSC purposes, have to appoint a SS Representative in Italy for paying SSC (Not yet in force SSC agreement signed between Italy and Japan);

- > for tax purposes, are not tax agents in Italy, and therefore Italian taxes will be paid through the Italian tax return, unless the compensation are paid by a PE of the Japanese companies in Italy.

FY2018 Italian Tax return : new deadline

Submission 2018 tax return: September 30. 2019

Balance due and first advanced payment : June 30. 2019

Second advanced payment : November 30. 2019

Alert!!!

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Focus : Business travellers OUTbound

Immigration To UE countries N/A; To Extra UE countries , it needs to be verified, case by case, which work activity is performed abroad in order to understand the type of visa required in the host country: i) meeting, training, dealing contract, it needs to apply the “Business Visa”; ii) otherwise, it needs to apply the “Work Visa.

Labor It needs to verify case by case if it is a “real” business trip (despite the “labor name” provided to the institute applied) and the labor implications and obligations in the hots countries.

UE posting workers directive

Implications will arise abroad for real “assignment” and for “business trip”. It needs to verify if the work activity performed abroad is considered relevant according to how the directive has been implemented.

Tax It needs to verify if tax obligations will arise in the foreign country according to the local tax provisions; in case of double taxation, it will need to claim the FTC in Italy.

SSC It needs to verify if social security obligations will arise in the host country and if a certificate of coverage is required from the day one according to the local social security dispositions.

PE It needs to verify if the role and the work activity performed abroad and the relevant number od the individuals sent in business trip in the same country, could imply a PE risk according to corporate local provisions.

Media impacts Company image’s damage in case of any missing on the above topic.

1. “Business trips” is a labor institute which in Italy has different tax and social security treatments in respect of the “assignment”; on the contrary, in all other countries, the latter is quite the same. 2. Italian companies are applying in a wide way the “business trips” institute instead of the assignment : - thinking that the administrative burdens are easier and - also for saving company reasons (they are realizing that the “assignment” institute is too expensive).However, they are not aware of the relevant risks which could derive also in case of business trips.

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Focus : Business travellers INbound

Immigration From UE countries N/A; From Extra UE countries , it needs to be verified, case by case, which work activity is performed abroad in order to understand the type of visa required in the host country: i) i.e. meeting, training, dealing contract, it needs to apply the “Business Visa”; ii) otherwise, it needs to apply the “Work Visa.

Labor It needs to verify case by case if it is a “real” business trip (despite the “labor name” provided to the institute applied) and the labor implications and obligations in the hots countries.

UE posting workers directive

Implications will arise in Italy only on real “assignment” according to the Italian labor law.

Tax It needs to verify if tax obligations will arise in Italy or if the exemption according to the art 15 of the DTT signed between Italy and the foreign country is applicable, if any.

SSC It needs to verify if social security obligations will arise in Italy and if yes, if a certificate of coverage could be obtained: otherwise, SSC are due in Italy.

PE It needs to verify if the role and the work activity performed in Italy, could imply a PE risk according to corporate Italian dispositions.

Media impacts Company image’s damage in case of any missing on the above topic.

1. “Business trips” is a labour institute which in Italy has different tax and social security treatments in respect of the “assignment”; on the contrary, in all other countries, the latter is quite the same.

PwC© 2019 TLS Associazione Professionale di Avvocati e Commercialisti. All rights reserved. This content is for general

information purposes only, and should not be used as a substitute for consultation with professional advisors. 37

New flat tax rate on self employment income

Self employees Italian Tax Obligations Ordinary regime «Regime forfettario»

National income tax Progressive tax rates 5% or 15% up to 65.000 Euro

Regional and Municipal income tax Yes No

VAT Yes No

VAT Declaration Yes No

Accounting Records Yes No

IRAP (regional tax on productive activities) Yes/No No

Is a flat tax rate for self-employees individuals who earned up to 65.000 Euro which substitutes also others Italian taxes (so called “regime forfettario”) and that is equal to : - 15% as standard flat tax rate- 5% in case of first self employees activity and if others conditions are met.

for the self employees incomes earned between 65.000 Euro up to 100.000 Euro!!!! 20% from 2020

What

When Since January 2019

N/A

This tax regime is not applicable in principle for: i) not tax resident individuals, with some exceptions; ii) employees who performs self employee activity in a relevant way for its actual

employer or for who has been its employer in two previous years.

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5. Review of tax incentives

Speaker:Eva Sorgato

38

Topics1. Reduced corporate income tax rate at 15% 2. Amendments to R&D tax credit 3. Review and extension of Hyper-amortization regime 4. Extension and review of the tax credit for training expenses related to the Industry 4.0 development plan5. Revamping of the regime to step up business assets & Italian shareholdings6. Other tax credits & measures

PwC© 2019 TLS Associazione Professionale di Avvocati e Commercialisti. All rights reserved. This content is for general information


Mini-IRES: reduced 15% IRES on profits reinvested in new assets & employment (Art. 1, par. 28-34)

Overview New reduced IRES rate at 15% on retained earnings (allocated to available reserves) for

an amount equal to the sum of:

i. investments in new instrumental tangible assets (incremental as compared to net tax cost at YE18), and

ii. cost of personnel employed on fixed-term or permanent contracts, provided that the average number of employees is higher than the number of people employed at 30 Sept. 2018.

Exceeding surpluses can be transferred to following fiscal years so to maintain the benefit over time even if the investments were made in fiscal year with a tax loss

It replaces Notional Interest Deduction (NID) and “Super-Depreciation”, both canceled by 2019 Budget Law

When and how can apply? For taxpayers with a financial year that coincides with the calendar year (January to

December), the first tax period when mini-IRES applies is 2019.

IRES reduction is claimed in the annual tax return (no specific option or filing required)

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What to concern at first Booster for investing in employment contracts (no specific incentives for

employment costs available previously)

Complex calculation of parameters and benefit, causing less certainty around actual benefit (e.g. divestments of “old” tangible assets may reduce the benefit for new investments)

Uncertainties as to whether mini-IRES applies to certain investments that are not depreciated in the books (e.g. investments in improvements of owned/third party assets)

Investment in new tangible assets: 100.000Depreciation period: 5 yearsFinanced via equity injections (stable)

Old rules

30% “Super Depreciation” 24% IRES rate * 30% higher depreciation7.2%

7.200

Notional Interest Deduction 24% IRES rate * 1,5% NID rate 0,36%/year

1.800

Total saving 9.000

New rules

Mini-IRES Reduction of IRES rate from 24% to 15%9%

9.000 Only if there are profits allocated to

available reserves Divestments may impact the benefit

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New R&D tax credit (Art. 1, par.70-72)

Overview Tax credit on qualified R&D costs exceeding the average of R&D costs incurred in the

period FY12-FY14 (fixed 3-years benchmark), which can be used to offset taxes due

What’s new? Maximum amount of annual credit decreased (from 20M€ to 10M€); minimum of

30K€ unchanged

Reintroduction of double tax credit rate (25%/50%) on incremental R&D expenses, depending on the type of expenditure incurred (see next slide)

Can be combined with Patent Box and Hyper Depreciation regimes

Costs for materials and supplies directly used in the R&D activities/for realizing prototypes now eligible

New mandatory formalities effective for FY18 already: Technical dossier to be undersigned by legal representative Certification of the eligible expenses

Who can benefit? Italian companies or PEs that carry out R&D activities in tax years 2019 and 2020,

directly or indirectly, also acting as “principal” of the contract or as R&D services provider to foreign principals

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Qualifying R&D expenditure Tax credit %

a) Costs of personnel employed in R&D with subordinate employment contract 50%

b) Costs for R&D commissioned to universities, research centers, innovative start-ups or SMEs, not related to the company

50%

c) Costs for R&D employees with a self-employment relationship 25%

d) Costs for R&D commissioned to companies different from those sub (b), not related to the company 25%

e) Depreciation of instruments and equipment 25%

f) costs incurred for technical skills and industrial property rights 25%

Costs related to materials and supplies directly used in the R&D activities/for realizing prototypes (NEW!) 25%

When and how can apply? For taxpayers with a financial year that coincides with the calendar year (January

to December), the first tax period when New R&D tax credit applies is 2019

Tax credit is claimed in the annual tax return for the tax year when R&D costs are incurred (no specific option or filing required)

What to concern at first More formalities

More complex calculation of parameters and benefit

PwC © 2019 TLS Associazione Professionale di Avvocati e Commercialisti. All rights reserved. This content is for general information purposes


Hyper-depreciation regime (Art. 1, par. 60-65 and 229)Overview Increased tax deductible cost of investments in:

High-tech tangible assets which are “interconnected” (i.e. closely linked to a company’s production management system or supply network) > tax cost increase % varying based on investment size (see below)

High-tech intangible assets (only in case taxpayer qualifies for hyper-depreciation on tangible assets) > tax cost increased by 40%

What’s new?

Incentive extended to investments made in 2019; investments finalized in 2020 also qualify, provided that the order is accepted and 20% advance payment is made within 2019.

Revision of increased amortization rates for tangible assets which now vary based on the size of the investment (the old rule provided for 150% general rate): Investment up to 2.5M€: 170%; Investment between 2.5M€ - 10M€: 100%; Investments between 10M€ - 20M€: 50% No benefits for acquisition costs higher than 20M€.

Increased tax deductible cost applicable to fees paid for the usage of “cloud computing solutions”

Smaller the investment, higher the benefit > incentive for small and medium sized enterprises (SMEs)

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Tax credit for training 4.0 (Art. 1, par. 78-81)

Extension to 2019, aimed at stimulating the costs for employees training in matters relating to the technologies envisaged by the "National Business Plan 4.0".

Amount of the tax credit varying based on the size of the beneficial enterprise:

SMEs (n. employees < 250 & Turnover < 50M€ or Total Assets < 43M€): 50% or 40% of eligible expenses (annual limit of 300K€);

large enterprises: 30% (annual limit of 200K€).

Mandatory certification of eligible costs by Statutory Auditor

Qualifying expenditures

• big data and data analysis • advanced and collaborative robotics;

• cloud and fog computing • man-machine interface;

• cyber security • additive manufacturing;

• cyber-physical systems; • internet of things and machines;

• rapid prototyping; • digital integration of business processes

• visualisation systems and augmented reality;

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Tax incentives - how PwC can help?

PwC provides expertise in tax matters, operations and strategy: thanks to ourintegrated multi-disciplinary team in the tax office You will be able to take theutmost advantage of an Industry 4.0 investment.

We offer You a global partnership which gives the chance to identify theopportunities from an investment plan and provide a turnkey end-to-end servicethat maximizes the impacts of 4.0 technologies on their business and optimizes thetax benefits from the new rules.

Objective

Optimization of the expectedeconomic returns and cash flowsfrom the investments made/to bemade in compliance with theregulations governing hyperdepreciation, R&D tax credit andother 4.0 incentives Analysis

Analysis of the past, present and future situation to check the access of the investments to the incentives

Review of the investment plan to secure timing of the investments and of tax deductions

Implementation

Arrangement of a complete file on the expected benefits (description of the investments; technical, legal and tax documentation; declaration of the legal representative where required)

Additional analysis on

request Support in choosing the best financing options (debt/equity) with relation to its treatment for tax purposes

Analysis of possible tax concessions on investments, already realized or currently underway.

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Step up of business assets & shares (Art. 1, par. 940-948)

Overview New opportunity to step-up the accounting values of tangible and intangible assets

(excluding goods for selling) and significant shareholdings classified as fixed assets to the higher fair market values at YE17

The assets must be booked in the financial statements as December 31st 2017. For calendar year taxpayers, the revaluation must be carried out in the financial statements as at December 31st 2018 (for which the approval deadline is after 1st

January 2019).

Opportunity to align the tax values to the stepped-up book values upon payment of substitute tax (substituting IRES and IRAP): 16% for the assets subject to depreciation 12% for the assets no subject to depreciation

Who can benefit? ITA GAAP adopters (legal entities and commercial entities who do not adopt IFRS)

What to concern at first? Costs/benefits analysis necessary: substitute tax due in one tranche in FY19 VS

higher tax depreciation generally allowed from FY21 / higher tax cost in case of sale recognized from FY22

Directors and statutory auditors should carefully monitor the revaluations in case of missing impairments in the books, in breach of the applicable GAAPs

PwC



Other tax incentives & measures

If you want to know more, please contact us.

Return to ITA GAAP for not listedIFRS adopters

New timing for deducting goodwill and intangible assets depreciation

«Nuova Sabatini»

Tax credit for the purchase of recycled plastic products

Investments in innovative startups

Tax credit for advertising investments

Tax credit for donations to finance interventions on public buildings and lands

PwC

6. Italian Amnesty on tax disputes

Speaker: Simone Marchiò

48

PwC



Italian Amnesty on tax disputes(ref. Law n. 13 of December 17, 2018)

New amnesty for tax disputes pending on October 24th, 2018.

Optional settlement (not mandatory).

Wide range tax dispute coverage:

Tax audit reports settlement (art. 1)

Tax assessment deeds settlement (art. 2)

Tax collection notices settlement (artt. 3 and 4)

Tax litigations settlement (art. 6)

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Tax audit reports settlement(Article 1)

Possibility to settle direct and indirect taxes, substitutive taxes, payroll and withholding taxes included in tax audit reports notified by October 24th, 2018 (to the extent that no notification of tax assessment deed has already taken place).

Payment of the higher taxes only (penalties and interest are not due)

Main characteristics:

Payment in a single instalment or in a maximum of 20 quarterly installments (plus legal interest, currently equal to 0,8%);

Not possible to off-set the amount due against other tax credits or tax losses;

“All in – all out” principle (the settlement should cover all the taxes included in the tax audit report and it will no be possible to do “cherry picking”);

Election made by May 31st, 2019 through amended tax return.

It’s possible to opt even in case tax assessment deeds have been already notified on specific areas only (i.e. covering different fiscal years and, likely, different taxes)

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Tax assessment deeds settlement(Article 2)

Possibility to settle direct and indirect taxes, substitutive taxes, payroll and withholding taxes included in

• (i) tax assessment deeds and (ii) undue tax credits recovery deeds notified within October 24th, 2018 and still open to appeal before the Tax Courts

or

• (iii) tax assessments within the framework of amicable settlement procedure.

Payment of the higher taxes only (penalties and interest are not due).

Same characteristics of the tax audit reports settlement.

The main difference is deadline for application which is flexible (not fixed) and depends on the terms for filing the appeal to the provincial Tax Court (60 days plus 90 days in case of amicable settlement) procedure).

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Outcomes not later than

October 24th

Litigations still pending in 1st degree

1st degree positive ruling

for taxpayer

2nd degree positive ruling

for taxpayer

Negative ruling for taxpayer

Disputes involving higher taxes

90% of taxes(penalties and interest are not

due)


due)


due)


due)

Disputes involving penalties only

40% of penalties

15% of penalties

15% of penalties

40% of penalties

Tax litigations settlement(Article 6)

Possibility to settle tax disputes in front of Tax Courts initiated not later than October 24th, 2018 and for which no final decision has been issued so far.

Disputes on import VAT and recovery for undue State aids cannot be settled.

The amount depends on the object of the tax dispute and the previous Tax Court rulings outcome:

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Tax litigations settlement(Article 6)

In the event of a partially favorable Tax Court ruling, the settlement percentages are computed differently (i.e. 100% for the amounts related to the negative outcome vs 40%-15% for the amounts related to the positive outcome).

Tax litigations in front of the Supreme Court of Last Appeal, still pending as at December 19th 2018, can be settled by paying 5% of the higher taxes only (for tax litigation involving taxes) or penalties (for tax litigations involving penalties only) in case the previous Tax Court rulings were both (fully ?) in favor of the taxpayer.

The amount due can be paid - within May 31st, 2019 - in a single instalment or in a maximum of 20 quarterly installments (plus legal interest, currently equal to 0,8%).

Tax litigations whose terms for appealing are expiring between October 24th, 2018 and July 31st, 2019 are automatically suspended for 9 months. In other cases, taxpayers can apply to the competent Tax Court for the tax litigation suspension (till June 10th, 2019). Italian Tax Authority may oppose (by July 31st, 2020) only in case the matter in scope does not fall within the application of the tax amnesty regime.

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Tax collection notices settlement(Article 3 and 4)

Taxpayers can settle the tax debts entrusted to the Tax Collection Agent from January 1st, 2000 to December 31st, 2017, by filing a declaration within April 30th, 2019.

The settlement takes places if taxpayers pay ①the higher taxes due for capital, ②interests accrued up until the date the Tax Collection Agent takes charge of the premiums and ③expenses for refund. Penalties and other interest are not due.

The amount due can be paid - by July 31st, 2019 - in a single instalment or in a maximum of 18 periodical installments (plus 2% yearly interest). The amount due for each instalment will be computed by Tax Collection Agent within June 30th, 2019.

Any Debt up to Euro 1.000 (including capital, interest and penalties) entrusted to the Tax Collection Agent from January 1st, 2000 to December 31st, 2010, is automatically written-off. The amounts paid before, October 24th, 2018 are considered definitely paid (no more recoverable).

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Risk of carry back or carry forward audits

(artt. 1, 2 and 6)

Positive expectations in the amicable settlement

(art. 2)

Existence of off-settable tax credits or tax losses

(artt. 1 and 2)

Other costs of the tax disputes procedure

(artt. 2 and 6)

Expectation of the tax litigation outcomes

(art. 6)

Existence of different settlement procedure

(art. 1)

Italian Amnesty on tax disputes(ref. Law n. 13 of December 17, 2018)

Is it convenient to opt for the tax amnesty procedures ?

Different circumstances and reasons may influence the decision to opt for this regime

PwC

7. Interest deduction limitation amendments

Speaker: Simone Marchiò

56

PwC



ATAD Directive: changes on interest deduction rules

• The ATAD Directive implementation (Art. 1 ATAD Decree) heavily impacted the interest expenses deduction limitation. Different items have been amended.

Items Amendments

Subjective requirements Yes

Interest expenses definition Yes

Computation of exceeding interest expenses Yes

EBITDA definition Yes

Interest expenses carry forward Not

Exceeding EBITDA carry forward Yes

Tax consolidation Yes

PwC




Till 31/12/2018 From 1/1/2019

Interestreceivables carry forward

Not allowed. Allowed, without any timing limitation, to offset interest expenses before 30% EBIDTA computation.

EBITDA computation and carry forward

Any net interest expense was deductible up to 30% EBITDA.Any excess EBITDA capacity was carried forward indefinitely.

Any net interest expense is deductible up to 30% EBITDA of (i) the same fiscal year and (ii) previous fiscal year (FIFO method).Any excess EBITDA capacity can be carried forward not later than 5 fiscal years.

EBITDA definition

Rules made reference to the accounting EBITDA.

Accounting EBITDA has to be adjusted by positive and negative tax adjustments (i.e. not deductible costs or not taxable revenues -on a temporary or permanent basis – and other measure such as Patent Box and Branch Exemption regimes).Any temporary difference generated before 31/12/2018 and still pending is not relevant (to avoid undue benefits or prejudices) involving the necessity to keep monitored such amounts.

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Till 31/12/2018 From 1/1/2019

Grandfathering Not applicable. Accounting EBITDA excess capacity still pending as at 31/12/2018 can be carried forward indefinitely to deduct interested expenses related to loans signed before 17/06/2016 to the extent whose duration and amount has not be contractually changed.

Interest expenses and receivables subject to deductibility limitation

Interest expenses and receivables generated by loans, financial leasing, bonds and every financial transaction.

• Interest expenses and receivables as per the accounting definition (e.g. implicit interest on commercial transactions), either IFRS or Italian GAAP;

• capitalized interest expenses;• any kind of taxable interest receivable;• interest generated by financing

transactions or agreements.

Taxconsolidation

Possibility to transfer not deductible interest expenses and excess EBITDA capacity generated within the tax consolidation scheme.

Possibility to transfer not deductible interest expenses, excess of interest receivablesand EBITDA capacity generated within the tax consolidation scheme.

PwC




The possible risks and opportunities of the amended regime have to be carefully evaluated

Ascertain the impact of the new regime on the

company/group financing structure

Administrative burden (tax EBIDTA, temporary

difference reversal, capitalized interest)

Some tax options may influence interest

deduction capacity (capital gain taxation)

Review of tax consolidation agreement

SL E T' A L KT

We are looking forward to working with you!

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

Documents

What’s new about HR and Corporate Tax in 2019? · What’s new about HR and Corporate Tax in 2019? Milan, 14/2/2019 Provisions of the Budget Law for 2019 & other recent measures