Italian revenue agency clarifies application of Italy’s new patent box regime
On 24 February 2023, a regulation of the director of the Italian revenue agency and a circular (No. 5/2023) of the revenue agency itself were published containing clarifications on the tax regime known as the “new patent box”, which entered into force on 22 October 2021 (see relevant news item) as a result of Italian Law Decree No. 146/2021 subsequently amended by Law 30 December 2021, n. 234, (see relevant news item).
Regarding eligibility for the regime, it is no longer possible to opt for the old patent box regime as from the tax period in progress as at 22 October 2022. Taxpayers can choose to keep the old regime only if they opted for it in the tax periods prior to 2021, and those wishing to switch from the old regime to the new one must notify the revenue agency that they intend to terminate the agreement procedure.
The regulation also defines in detail the conditions for benefiting from a provision on penalty protection should there be a finding that the deduction applied has been too high.
In addition, the circular shines a light on the cumulation of benefits of both the new patent box and of the research and development tax credit introduced by Italian Law No. 160/2019; the document explains that the new patent box regime should be considered as a subsidy for the same research and development costs that are also eligible for the tax credit.
Therefore, the tax credit used must be recalculated net of income tax and regional tax on productive activities referable to the decrease deriving from the 110% increase in the cost admitted to the new patent box.
Any tax credit enjoyed for the tax periods that have benefited from the patent box regime, and that has already been used, must be returned, but the return can take place without the application the payment of penalties and interest since at the time of using the tax credit, the taxpayer complied to the rules in force.
Lastly, there are a few clarifications specifically concerning industrial property rights and the new patent box:
- the new regime is not applicable to an asset for which an industrial property right has been obtained, but which is not used by the company in its activity (for example, a patent for defensive purposes);
- the wording “industrial patents”, for the purposes of applying the new regime, includes
a) patents for inventions;
b) utility model patents;
c) patents for new plant varieties;
d) the topographies of semiconductor products;
e) the complementary certificate for medicinal products;
f) the complementary certificate for plant protection products.
- Under certain conditions, the new regime may also apply to unregistered designs and software.