Italian government response to COVID-19 and supportive measure for businessBy Eugenio Tarabini, HLB Italy
Italy now has the greatest number of deaths related to Coronavirus infections. The situation in Italy escalated rapidly and anyone who has seen he news in the past two weeks knows the impact COVID-19 has on the country. The implications for society and the economy are major. In this news article, we discuss the response of the Italian government and what supportive measures are in place for Italian businesses and taxpayers.
Government response to COVID-19
The Law Decree dated 23 February is the first measure in response to COVID-19 and concerns the insulation of the first affected municipalities, the so-called "Red Zone". On 8 March, a new Law Decree established the whole of Italy as a protected area and provided for a limitation of all transfers inside and outside the Italian territory until 3 April.
The Law Decree of 17 March, the so-called Cura Italia, gives the first measures adopted by Italian government to economically support the national health system, families, employment and businesses.
Finally, the Law Decree of 22 March provides further limitation of business activities within the Italian territory. Until 3 April, only the essential productive activities will be allowed to proceed.
Supportive measures for business
We expect that the government will adopt measures accordingly as the COVID-19 emergency in Italy evolves. For the time being, although it is quite difficult to foresee specific measures in the near future, the government is now promising new supporting actions if required. The Decree Cura Italia provides urgent measures regarding tax compliance, corporate and employment regulations, in response to COVID-19
For all Italian taxpayers
- The deadline of all tax payments due on 16 March 2020 (including VAT and payroll tax payments) is postponed to 20 March 2020.
- All other tax obligations (with the exception of tax payments and withholding) due from 8 March to 31 May 2020 are postponed. Any postponed obligation must be fulfilled by 30 June 2020, and if this is accomplished no penalties will be applied.
- The deadline for certain tax payments (such as payments due based on notices issued by the tax and social security authorities) due between 8 March and 31 May 2020 is postponed to 30 June 2020.
- Deadline of activities carried out by the tax authorities, that would expire in 2020, must be considered postponed for two additional years (i.e. until 2022).
For taxpayers with revenues or compensation lower than €400,000 in 2019
- Non-application of withholding tax by the withholding agent for revenues or compensation earned between 13 and 31 March 2020, where in February no expenses have been incurred for employment or similar work (to be paid within 31 May 2020, with the option of payment made in up to five equal monthly instalments).
For companies and professionals
- The deadline for tax and social contribution payments due for 8 – 31 March 2020 is postponed for companies that have their legal seat or centre of operations in Italy and that had turnover below €2 million in the prior fiscal year. The extended deadline is 31 May 2020; payment may be made in up to five equal monthly instalments if the first instalment is paid by 31 May 2020. This provision applies also for companies with their legal seat or centre of operations in the municipalities of Bergamo, Cremona, Lodi, or Piacenza, regardless their level of turnover.
- Tax credit equal to 60% of March 2020 rental fees for real estate belonging to C/1 Land Register.
- Tax credit equal to 50% of sanitization expenses for work equipment and environments (up to a limit of €20,000).
For entities that operate in sectors as tourism, catering, sport and transport
- The deadline for payroll tax and social contribution payments due from 2 March 2020 to 30 April 2020 is postponed. The extended deadline is 31 May 2020; payment may be made in up to five equal monthly instalments. The deadline is 30 June 2020 for payments by entities in the sports sector.
- For these entities, the deadline for VAT payments due in the month of March 2020 is postponed as well.
For taxpayers in the so-called "Red Zone"
- The deadline for tax payments and other tax obligations due from 21 February to 31 March 2020 for taxpayers based in the "red zone" (i.e., the first municipalities affected by COVI D-19, as identified by presidential decrees dated 23 February and 1 March 2020) are postponed to 31 May 2020.
For Small and Medium size Enterprises (SME)
- Suspension until 30 September 2020 of loan tranches and non-instalment loans repayment from banks and financial intermediaries.
- irrevocability until 30 September 2020 of credit lines granted "until revocation" and of loans granted against advances on credits
- In order to benefit from these measures, the SME must send to the bank or financial intermediary a self-certification (according to Article 47 of Presidential Decree 445/2000), stating that it suffered temporary liquidity deficits as a direct consequence of the COVID-19 epidemic diffusion.
- Exceptional granting of layoff's fund ("Cassa integrazione"), to cover the suspension or reduction of work for, up to 9 weeks (including enterprises with less than 5 employees).
For self-employed workers
- Allowance of a €600 one-off indemnity for individuals enrolled in the pension scheme "INPS Separate Account". This one-off indemnity is also guaranteed to the "Co.Co.Co". employees but not to persons registered with a professional association (e.g. chartered accountants, lawyers).
- Suspension of instalments for first home mortgage loans in the event of a loss, in the quarter following 21 February 2020, of more than 33% of its turnover compared to the last quarter of 2019 (upon presentation of self- declaration stating that it suffered turnover loss as a direct consequence of the COVID-19 epidemic diffusion).
- Italian companies must pay an extraordinary bonus for the month of March 2020 (€100) to all employees for which it was impossible to adopt remote working, with overall income lower than €40,000 in the previous fiscal year.
- For employees with children under 12 years old, recognition of parental leave up to 15 days (with 50% of the monthly wage) or, alternatively, recognition of a bonus for baby-sitting services up to €600.
For all companies, the period for approval of financial statements is extended by 60 days, from 120 to 180 days after the end of the business year. Moreover, shareholders meetings held up to 31 July 2020 may be conducted under particular methods (votes by electronic methods or by mail, participation by telecommunication, etc.), to be detailed in the call for the meeting.
In relation to the 2019 financial statements, the companies should indicate in the Explanatory Note that the COVID-19 could negatively affect the 2020 figures. Moreover, if the companies are able to quantify the COVID-19 effect on the future performance, they should already allocate an appropriate provision in the fiscal year 2019 accounts.
Finally, we expect that the companies will face the financial effects of this period on their 2020 financials. Therefore, the assessment of their assets (especially the working capital items) will be of extremely importance in order to identify potential write-downs.
To discuss any of the topics raised in this article or to find out more about doing business in Italy in light of coronavirus, please get in touch.