Research and Development Tax Credit 2021 Budget Law
Fundamental research, industrial research, and experimental development in the field of science and technology, the tax credit is recognised at 20% of the eligible expenses up to a maximum of €4 million.
Technological innovation activities aimed at creating new or substantially improved products or production processes, the tax credit is granted to the extent of:
- 10% of the eligible expenses up to a maximum of €2 million
- 15% of eligible expenses up to a maximum of EUR 2 million in the case of technological innovation activities aimed at achieving an objective of ecological transition or digital innovation 4.0
For all companies carrying out research and development activities in the field of ecological transition, technological innovation and design, there are two new features:
- The reduction of the facilitation percentages for research and development
- The introduction of new tax credits for technological innovation 4.0, design and aesthetic conception.
Who can benefit?
All companies’ resident in Italy may benefit from the R&D tax credit, regardless of their legal status, economic sector, size, accounting system and income determination system for tax purposes.
What are the eligible projects?
The activities that can be exploited to obtain the 2020 R&D tax credit are fundamental research, industrial research, and experimental development in the scientific and technological field. The tax credit is granted at a rate of 12% of eligible expenses up to a maximum of €3 million.
Technological innovation activities aimed at creating new or substantially improved products or production processes, the tax credit is granted at a rate of:
- 6% of the eligible expenses up to a maximum of EUR 1.5 million
- 10% of the eligible expenses up to a maximum of EUR 1.5 million in the case of technological innovation activities aimed at achieving an objective of ecological transition or digital innovation 4.0.
Technological innovation means the creation of new or significantly improved products or production processes in terms of performance, eco-compatibility or ergonomics, or other characteristics specific to the sector. New or significantly improved products are those goods or services that differ from what the enterprise has previously produced in terms of:
- Technical characteristics
- Novelty of components or materials
- Originality of the embedded software
- Ease of use or simplification of the procedure
- Greater flexibility and functionality.
Innovative or improved production processes; eligible are methods of production, distribution and logistics of goods or services that involve changes:
- In the technologies adopted
- In plant, machinery, and equipment
- In the software used
- In the efficiency of the resources employed
- In the reliability and safety for those involved.
For design and aesthetic conception activities for the conception and realisation of new products and samples in the textile and fashion, footwear, eyewear, goldsmith, furniture, furnishings and ceramics sectors and others, identified by ministerial decree, the tax credit is granted at 6% of the eligible expenses up to a maximum of 1, 5 million for projects, including those started in tax periods prior to the one in progress on 31 December 2019, which concern the innovation of products in terms of form and non-technical or functional elements (lines, contours, colours, surface structure, ornaments).
The innovation may also relate to packaging, presentations, graphics, and typefaces. Normal catalogue renewal activities are not eligible for the credit unless they aim to include significant new elements such as those indicated.
What expenses are valued?
A. Staff costs
Expenditure on personnel employed or self-employed, or other than employees, directly engaged in research and development within the company, within the limits of their actual employment in such operations.
Expenditure on staff aged up to 35 years, in their first job, in possession of a research doctorate or enrolled in a doctorate cycle at an Italian or foreign university or in possession of a master’s degree in technical or scientific disciplines, hired by the company with an indefinite employment contract and employed exclusively in research and development work, contribute to forming the basis for calculating the tax credit for an amount equal to 150% of their amount (in the case of design and aesthetic conception activities, the degree must be in design or other equivalent qualifications).
B. Depreciation allowances
Depreciation allowances, leasing or simple rental fees and other expenses relating to movable tangible assets and software used in the specific research and development projects also for the creation of prototypes or pilot plants, for the amount ordinarily deductible for the purposes of determining the business income for the tax period of use and up to the overall maximum limit of 30% of the personnel expenses indicated in subparagraph a).
C. Extra muros research contracts
Expenditures for extra muros research contracts for the direct performance by the commissioning entity of the R&D activities eligible for the tax credit. In the case of extra muros research contracts entered into with universities and research institutes established in Italy, 150 per cent of the expenses are included in the tax credit. If the contracts are concluded with companies or entities belonging to the same group as the client company, the same rules apply as in the case of research and development activities carried out within the company.
D. Consultancy services
Expenditure on consultancy and equivalent services relating to research and development activities eligible for the tax credit, up to an overall maximum of 20% of the eligible personnel costs indicated in point (a), i.e. the eligible costs indicated in point (c).
E. Materials and supplies
Expenditure on materials, supplies and other similar products used in research and development projects eligible for the tax credit carried out internally by the enterprise, including for the creation of prototypes or pilot plants, up to a maximum of 30% of the personnel costs indicated in point a) or, in the case of extra muros research, 30% of the costs of the contracts indicated in point c).
Fundamental research: acquisition of new knowledge
Fundamental research activities, as set out in Article 2 of the decree, are “experimental or theoretical work aimed at acquiring new knowledge in the field of science or technology by analysing the properties and structures of physical and natural phenomena, without necessarily considering a particular short-term use or application of the new knowledge acquired by the enterprise”.
Industrial research: the solution of scientific or technological problems
The mise decree defines industrial research activities as ‘original work undertaken to identify possible uses or applications of new knowledge arising from fundamental research to solve problems of a scientific or technological nature’.
Such activities must produce a test model for the experimental verification of the starting hypotheses and to represent the concrete developments of the research, even without a representation of the possible final product or process.
Experimental development: the realisation of new products or processes
As experimental development activities, the Mise R&D Decree 2020 identifies ‘systematic work carried out with the aim of acquiring further knowledge and gathering the technical information necessary for the realisation of new products or new production processes or with a view to the significant improvement of existing products or processes’. The improvement must be new.
How to access the credit
The actual incurring of eligible expenses must be certified by the auditing firm.
Companies that are not required by law to have their accounts audited are entitled to an increased tax credit of up to €5,000 for expenses incurred in producing the certification.
A technical report must also be drawn up with the purpose, content and results of the activity carried out and for which the tax relief is requested.
This request must be made through a communication to the Ministry of Economic Development.
The bonus can only be used by offsetting in three annual instalments of the same amount starting from the tax period following the one in which it accrues.
Changes introduced by the draft budget law 2021
The bonus is extended until the tax period ending 31 December 2022.
- The tax credit rates and ceilings are increased for the two-year period 2021/2022
- For research and development activities, the bonus is increased to 20% and the ceiling is raised from EUR 3 million to EUR 4 million.
- For technological innovation, the rate becomes 10%, with a ceiling of EUR 2 million.
- For green technological innovation, the rate rises to 15%, with a ceiling of EUR 2 million
- Design and aesthetic conception, the rate is increased to 10%, with a ceiling of EUR 2 million.
- Higher rates for research and development activities in companies located in southern Italy are confirmed for the two-year period 2021/2022
- The asseveration of the technical report becomes mandatory.
|Facilitation||Tax credit||Maximum limit of eligible expenditure||Annual fees|
|Research and development credit||12% (20%)||3 (4) million euro||3|
|Technological innovation credit aimed at the creation of new or substantially improved products or production processes||6% (10%)||1,5 (2) million euro||–|
|Technological innovation credit aimed at an ecological transition or digital innovation 4.0 objective||10% (15%)||1,5 (2) million euro||–|
|Design and aesthetic conception credit||6% (10%)||1,5 (2) million euro||–|
As this is a draft law, the amendments cannot be considered final.
Companies are required to draw up and keep a technical report explaining the purpose, content and results of the eligible activities carried out.