Today, when we talk about innovation, research and development in the corporate sector in Italy, we often hear about the tax credit. This tax break is a very useful tool for businesses, as it allows them to reduce the amount of taxes that they owe to the government, therefore allowing them to make significant savings. As of 2020, Italy also introduced a tax credit on electronic payment fees, with the aim of promoting the use of payment methods other than cash. In this article, you'll find out what the tax credit is, what the tax credit on electronic payment fees is and how it works, and what advantages it can offer your business.
What's in this article?
- What is the tax credit?
- What is the tax credit on electronic payments?
- Who can benefit from the tax credit on electronic payment fees and how can you can get it?
- Option to transfer the tax credit
What is the tax credit?
The tax credit is a form of tax relief that Italian businesses can use to reduce the tax payable on their net profits. The goal of this measure is to encourage the economic growth and competitiveness of Italian businesses by supporting investments and promoting technological innovation. The tax credit for businesses can cover different types of expenses, including those for research and development, professional training, internationalisation, investments in capital goods and other activities that are seen to be strategic.
As it is a tax credit, businesses can use this incentive to offset tax debts towards various Italian creditor institutions, such as the government, social security (INPS), the National Institute for Insurance against Accidents at Work (INAIL), local authorities and so on. And, when permitted, businesses can request the reimbursement of income in a tax return.
What is the tax credit on electronic payments?
Article 22 of Italian Legislative Decree no. 124/2019 introduced the tax credit on electronic payment fees, a tax relief for business owners and self-employed workers aimed at promoting the use of payment methods other than cash. The purpose of this measure is to partially offset the costs incurred by businesses from accepting electronic transactions. The amount of the tax credit that businesses can claim is equal to 30% of the fees charged for transactions carried out by a private entity using credit, debit or prepaid cards, as well as other traceable electronic payment instruments. Transactions made with corporate cards are therefore excluded.
The tax credit on electronic payment fees, also known as the POS Bonus, does not contribute to the generation of income and will not be taxed for corporate income tax (IRES) or regional business tax (IRAP) purposes. In addition, businesses can only use it to offset costs starting from the month after the one in which they incurred the expense. They must indicate the 30% tax credit both when filling in the F24 tax form with tax code 6916 and when completing the "RU" section of the 2023 Income Form, using code "H3" to offset the recognised credit.
As already mentioned, the amount of credit due is equal to 30% of the fees charged. However, it is useful to know that following the changes introduced by Article 11-bis, paragraph 10, of Italian Decree-Law 73/2021 for fees accrued from 1 July 2021 to 30 June 2022, the tax credit increased to 100% for businesses that adopted electronic payment tools linked to technological tools that guarantee the inalterability and security of data. This includes those that allow payments by debit and credit card, or the advanced payment instruments referred to in Article 2, paragraph 3, of Italian Legislative Decree 127/2015. However, this provision is no longer in force and as of 1 July 2022, the tax credit has been returned to 30%.
Who can benefit from the tax credit on electronic payment fees and how can you get it?
What are the requirements?
All value-added tax (VAT) number holders, traders, businesses, artisans and business owners can apply for the tax credit on electronic payments – regardless of the business type or tax regime adopted – if their turnover did not exceed €400,000 in the tax year prior to the one in which the payment transactions were made. In practice, this includes all small- and medium-sized businesses.
The role of electronic payment service providers
In order for eligible business owners and self-employed workers to obtain the tax credit on electronic payments, payment service providers that have entered into an agreement with businesses to accept payment cards in Italy (debit, credit or pre-paid), or other traceable electronic payment instruments, are required to send business owners a monthly document displaying all the fees on electronic payments made over the last thirty days.
Notice to the Agenzia delle Entrate
To obtain the 30% tax credit, businesses must send this document to the Agenzia delle Entrate (Italian revenue agency) by the twentieth day of the month following the month in which they made the payments. This can be done independently, using the appropriate page on the Agenzia delle Entrate website, or with the help of an accountant. Once eligibility has been verified, the Agenzia delle Entrate will be able to assign the tax credit to the business.
Option to transfer the tax credit
Article 121 of Italian Legislative Decree no. 34 of 2020 introduced the two options below as an alternative to the direct use of the deduction for building work and energy measures:
- A discount on the fee due: What is known as the "invoice discount" is up to a maximum amount equal to the fee itself, advanced by the providers who carried out the work.
- The transfer of a tax credit of the same amount to other parties: Other parties include credit institutions and other financial intermediaries.
Subsequently, Article 2 of Italian Legislative Decree no. 11 of 2023 established that, as of 17 February 2023, this right can no longer be exercised, albeit with some exceptions. But let's see how the transfer of the tax credit works.
What is a tax credit transfer?
The transfer of a tax credit allows the right to obtain the tax deduction to be transferred to third parties – such as financial intermediaries, banks and contractors – which then collect it from the debtor. To better understand how it works, it is useful to understand who the interested parties are:
- Assignee: This is the debtor – in other words, the party whom the transferee will ask to pay off the acquired credit.
- Transferor: This is the party who has the right to a credit.
- Transferee: This is the party who acquires the credit and manages it (usually a bank).
The credit is usually transferred by the transferor to the transferee, generally upon payment of a fee agreed between the parties. In the construction sector, the transferor is generally the taxpayer who bears the expense and the transferee is the business or the bank.
The main advantage of transferring the tax credit is that the liquidity deriving from its sale can be obtained immediately. Businesses can therefore obtain an immediate benefit compared with the tax deduction, which is spread over several years.
Until 2023, the transfer of the tax credit was permissible as part of the execution of the following types of work:
- Energy redevelopment measures, which provided the right to obtain the Ecobonus or the Sismabonus (the adoption of anti-seismic measures)
- Building renovations benefitting from a ten-year deduction
- Recovery and/or restoration of the facades of existing buildings
- Installation of charging stations for electric vehicles
- Works eligible for the 110% Superbonus
- The installation of photovoltaic systems
As mentioned, as of 17 February 2023, the option of transferring the tax credit can no longer be exercised, except in some specific cases. These include works aimed at overcoming and eliminating architectural barriers, as well as interventions carried out in municipalities falling within areas classified as being at seismic risk.
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