Decreto Rilancio: overview of the main measures to support business and companies in Italy
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The Italian government has approved Law Decree No. 34 of May 19, 2020 (“Decreto Rilancio”), which includes several measures aimed at providing additional support to businesses impacted by the COVID-19 emergency. Below is an overview of said measures.

A. Reduction of IRAP (Regional Tax on Production Activities)

Section 24 of the Decreto Rilancio sets forth an exemption for companies and self-employed workers with revenues not exceeding EUR250 million in the last financial year from payment of (1) the balance of IRAP for the current tax period until December 31, 2019, and (2) the first installment (usually equal to 40%) of IRAP for the tax period after December 31, 2019, without prejudice, however, to any advance payment still due for the 2019 tax period.

B. Non-refundable grants

Section 25 of the Decreto Rilancio provides a tax-free non-refundable grant to (a) companies and self-employed workers with revenues for the last financial year not exceeding EUR5 million and whose revenues in April 2020 have decreased by more than two thirds relative to those of April 2019 and (b) any business (1) that started after January 1, 2019, or (2) that was already affected by other emergency events as of the date of the COVID-19 pandemic. The grant is calculated as a percentage of the difference between April 2020 revenues and April 2019 revenues, as follows:

(1) 20% of such difference, if FY2019 revenues were less than EUR400,000;

(2) 15% of such difference, if FY2019 revenues were between EUR400,000 and EUR1,000,000; and

(3) 10% of such difference, if FY2019 revenues were between EUR1,000,000 and EUR5,000,000

provided that the minimum guaranteed amount of the non-refundable grants is equal to EUR1,000 for individuals and EUR2,000 for any entity other than individuals.

C. Measures aimed at strengthening the equity of SMEs (tax credits)

Section 26 of the Decreto Rilancio grants a tax credit equal to 20% of the amount of capital increases up to EUR2,000,000 resolved, and entirely paid-in in cash, in the period between May 20, 2020 and December 31, 2020.

Companies that may benefit from such a tax credit must satisfy the following requirements: (a) revenues between EUR5 million and EUR50 million (if the company is part of a group); (b) a decrease in revenues due to the COVID-19 emergency in March and April 2020 of at least 33% compared to March and April 2019 revenues; (c) not classified as a “distressed company” (imprese in difficoltà) pursuant to EU Regulations No. 651/2014, No. 702/2014, and No. 1388/2014; (d) compliant with certain laws and regulations (e.g., tax laws, workplace health and safety regulations, environmental regulations, construction and urban planning regulations, “anti-mafia” measures, etc.); (e) fewer than 250 employees, if the same also wants to benefit from the SMEs Asset Fund (Fondo Patrimonio PMI) set forth under Section 27 of the Decreto Rilancio.

The tax credit is excluded (or, if already granted, revoked) if the shares or quotas subscribed and paid-in as a result of the capital increase are transferred before December 31, 2023, or if any distribution of profits occurs during that same period. In addition, the tax credit cannot be granted to any company that, directly or indirectly, controls, is jointly controlled by, or is an affiliate of the beneficiary company.

Finally, the same companies that may benefit from the above tax credit and that comply with certain “good management” requirements upon approval of their FY2020 financial statements will be granted an additional tax credit equal to 50% of the losses exceeding 10% of their net equity (patrimonio netto), up to 30% of the amount of the same capital increase benefitting from the tax credit. Any tax losses to be carried forward to the next tax periods may also be reduced by the amount of the tax credit granted.

All the above tax credits must not exceed EUR800,000 together with any other supporting measures due to the COVID-19 emergency.

D. Measures aimed at facilitating access to debt financing by SMEs (SMEs Asset Fund – Fondo Patrimonio PMI)

Section 27 of the Decreto Rilancio sets forth the SMEs Asset Fund (Fondo Patrimonio PMI) managed by Invitalia S.p.A., aimed at subscribing new bonds or debt securities issued by companies eligible for tax credits set forth under Section 26 above. The amount of debt that may be subscribed by the SMEs Asset Fund must not exceed the lower of (a) three times the amount of the capital increase under Section 26 mentioned above; or (b) 12.5% of FY2019 revenues. Overall debt incurred by an SME through the SMEs Asset Fund, other loans guaranteed by Italian state, and subsidized loans in general cannot exceed the higher of (1) 25% of FY2019 revenues; (2) two times the cost of personnel in 2019; or (3) the company’s liquidity requirements for the next 18 months, as self-certified by its legal representative. This tool will remain in force until December 31, 2020.

The initial overall endowment of the SMEs Asset Fund is EUR4 billion. Ordinary restrictions of the Italian Civil Code on issuance of bonds (Art. 2412) do not apply. Maturity is 6 years from subscription, without prejudice should the issuer exercise the redemption right after 3 years.

The company issuing the above bonds and debt securities shall (a) not resolve or pay any profit, make any buy-back of its own shares, or reimburse any shareholder loans until the financial instruments are completely repaid; (b) allocate the financing received as a result of subscription of the above financial instruments for personnel costs, investments, or working capital for any production facilities or business activities in Italy; and (c) provide to Invitalia S.p.A. periodic reports aimed at verifying its ongoing compliance with the undertakings and commitments made under Section 27.

E. “Patrimonio Rilancio” by Cassa Depositi e Prestiti S.p.A.

Pursuant to the same Section 27, Cassa Depositi e Prestiti S.p.A. (“CDP”) shall set up a specific fund named “Patrimonio Rilancio” aimed at supporting and relaunching the Italian economic and production systems. The Italian Ministry of Economy and Finance (“MEF”) will contribute assets and contractual relationships to the Patrimonio Rilancio, which is completely autonomous and segregated from any other CDP asset or fund. In exchange for the contributions made by the MEF, CDP will issue equity financial instruments and bonds in favor of the MEF, the remuneration of which is subject to the economic results of Patrimonio Rilancio.

The resources of Patrimonio Rilancio will be addressed specifically to listed and non-listed joint-stock companies (società per azioni), including those that take the form of cooperative companies (società cooperative), which (a) have their registered offices in Italy; (b) do not operate in the banking, financial, or insurance business sectors; and (c) have a volume of revenues per year exceeding EUR50 million.

The Patrimonio Rilancio fund will support the above companies by subscribing convertible bonds or capital increases of the same, by purchasing listed shares on the secondary market, in case of strategic transactions, as well as by putting in place restructuring interventions for those companies that, notwithstanding temporary capital or financial imbalances, might have adequate profitability prospects.

The Patrimonio Rilancio fund shall last 12 years from its incorporation, although the board of directors of CDP, upon request of the MEF, can extend or reduce such duration.

F. Tax credits on rental fees for commercial lease agreements and leasing

Section 28 of the Decreto Rilancio sets forth a tax credit equal to 60% of the amount of the rental fees for commercial lease agreements, or leasing, for March, April, and May 2020. This measure is available only to (a) hotels and hospitality facilities without limitation, and (b) companies with less than EUR5 million in revenues in 2019 that in the period March–May 2020 suffered a decrease in revenues of at least 50% compared to March–May 2019.

The above percentage is reduced to 30% in the case of service agreements related to at least one commercial building and lease agreements of businesses as going concerns (affitti d’azienda).

G. Other measures

In addition to the above, the Decreto Rilancio set forth other measures aimed at supporting and relaunching Italian companies, including the following:

  • Section 30: reduction of energy costs for May, June, and July 2020 for low-voltage utilities for commercial buildings;
  • Section 31: refinancing of certain funds, such as the guarantee fund under Article 1, paragraph 14 of the Decreto Liquidità and the SMEs Guarantee Fund (which is refinanced with EUR3,950 million);
  • Section 35: SACE first demand guarantee in favor of short-term trade credit insurance companies aimed at supporting commercial trades, as well as the same type of credit insurance companies adversely affected by the COVID-19 emergency. This guarantee shall be equal to 90% of the indemnities resulting from exposure related to trade receivables accrued from the date of entry into force of the Decreto Rilancio until December 31, 2020, with a cap of EUR2 billion;
  • Section 38: several measures aimed at supporting and implementing innovative start-ups;
  • Section 40: supporting measures for gas stations located along Italian highways;
  • Section 41: supporting measures for what are known as “White Certificates” (Certificati Bianchi), e., energy efficiency certificates (titoli di efficienza energetica) certifying the energy savings achieved as a result of certain specific interventions;
  • Section 42: creation of a Technology Transfer Fund (Fondo per il Trasferimento Tecnologico) aimed at promoting R&D initiatives and investments at companies in Italy, with particular emphasis on innovative start-ups;
  • Section 137: postponement to September 30, 2020 of the term for the revaluation of shareholdings owned by individuals or partnerships (società semplici) as of July 1, 2020 in non-listed companies (the value of the substitute tax – imposta sostitutiva – will still be equal to 11%, but it may be split into three annual instalments of equal value, e., 3% each).

Articolo inserito in: Banking & Finance, COVID-19
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