Budget Law main updates

After a simpler approval procedure than usual, given the short time available, Law no. 197/2022, known as Budget Law 2023, was published in the Official Gazette dated 29 December.

The Law was passed by the new Government, installed on 23 October 2022 and presented to the Parliament only in November and therefore, in order to avert the adoption of provisional norms, it was subject to a very fast approval procedure, during which the text was not changed much compared to the draft law approved by the Government on 21 November.

The Law was certainly affected by the effects of the international context and, particularly, by the economic consequences connected to the increase in the cost of raw materials, which strained the economic sustainability of Italian companies and families. A 35 billion measure, 20 of which (almost 60%) are allocated to face the increase in energy costs by introducing discounts on VAT and new tax credits, mainly in favour of energy- and gas-intensive businesses, as well as through the elimination of general charges that weigh on users.

Many measures are not long-term provisions and some only concern quarter 1, 2023, but they reflect the prudent and realistic approach of the Government, pending interventions that could concretely support the economic recovery.

The Law can still be considered an “emergency” provision, being aware that the mass of aids that characterized the whole pandemic period cannot lead to a recover of the economic system, but rather relieve its suffering in the short term. Now there is the need for planning, long-term programmes, brave industrial policies allowing companies to invest confidently, and strategies to improve GDP, which is crucial for the country’s wealth.

The considerable resources aimed to relieve the burden of energy costs certainly limited the action of the Government, which, however, also intervened on other issues – though limiting its scope of action to 2023 in most cases. Bernoni Grant Thornton already analysed the main updates introduced by Budget Law 2023 through its media channels and this TopHic edition focuses on two specific issues.

In fact, the “Expert’s opinion” article analyses the revaluation of the cost of land, participating interests, UCIs shares, and life insurance policies, as well as the terms for the application of tax reliefs to the distribution and transfer to shareholders of real estate and movable assets recorded in public registries and not used in the corporate activity and to the transformation of joint-stock companies that manage such assets as their exclusive or main activity into a partnership. 

The “Focus on” article analyses the updates introduced by the legislator concerning tax disputes, particularly the new opportunities for taxpayers to settle them under concessional terms, even in case of litigations already initiated with a court or before the Court of Cassation.

The “tax amnesty” is absolutely central in Budget Law, since its final purpose is to recover, for example though the so-called "Rottamazione Quarter" measure, a discrete portion of overdue credits through a system of concessions that will allow taxpayers – many of which are still struggling due to the post-pandemic period – to regularize their position by paying, in some cases, only the principal due and annulling penalties, interest, and collecting commissions (also if amounts due were already included in previous concessional measures that lapsed due to omitted payment).

The collection of overdue debt will be accompanied by control activities by the Revenue Office, which will be implemented through the so-called “fisco digitale” service and that will also regard the new measures introduced. The aim is that of recovering at least 10 billion for each year (2023, 2024 and 2025), although these can still appear as minimal amounts compared to the total tax evasion, which is estimated to be of about 100 billion Euro per year in Italy.

Higher inland revenue should derive from the tax on additional income due by energy companies that produce, sell, distribute, and import electricity, natural gas or oil products and, hopefully, as an effect of the introduction of the provision concerning the tax on capital gains and other proceeds realized on crypto assets, as well as due to the clampdown on the deductibility of expenses and other charges deriving from transactions occurred with blacklist countries.

Pending an organic tax reform that has not yet been issued, the legislator also intervened on the tax on individual income from business and/or self-employment activities, increasing the threshold of revenues and proceeds to access the flat-rate taxation regime from 65.000 Euro to 85.000 Euro and providing for the immediate exclusion from the regime (and the subsequent application of ordinary IRPEF) once the 100.000 Euro threshold is exceeded, starting from the year in which this occurs.

We also point out the introduction – as a tentative measure for 2023 – of the so-called incremental flat tax in favour of those taxpayers that do not apply the flat-rate taxation regime, which allows applying a reduced tax on any income increases realized in 2023 compared to the income realized in the previous three years, within a maximum limit of 40.000 Euros.

Following the interruption of the discussion for the approval of the text of the law concerning the tax reform due to the lack of a political agreement, the Italian Government announced that it is working on a new text, that will be mainly aimed to simplification, e.g., through a substantial review of the so-called tax expenditures, which is the complex of all tax concessions that are difficult to apply and whose related benefits or refunds are deferred.

Further provisions that are worth analysing are: the extension of the application of the so-called Superbonus 110% given the presence of specific requirements; the increase of the so-called bonus for furniture from 5.000 to 8.000 Euro; and the reduction from 10% to 5% of the substitute tax applicable on performance-based bonuses granted following the subscription of supplementary collective agreements.

Lastly, we point out that the legislator also intervened on labour, tax, and social security, by providing, among others, the following measures: cut of the tax wedge for 2023; tax allowances for companies that hire under-36 people and women in disadvantaged situations; new tax allowances for companies that hire receivers of the so called "reddito di cittadinanza” (basic income); updates on remote working, occasional work, and parental leave (besides the introduction of the so-called fuel bonus under Law Decree no. 5/2023).

Should you be interested in further details on the updates introduced on labour, tax, and social security, watch the video of the webinar held on January 20, 2023, available at this link (click here), or read the circular letter drawn up by Grant Thornton HR experts at this link (click here).

Hopefully, Budget Law 2023 will be a springboard to an economic recovery that can allow businesses and families to be more optimistic about the future. Future trends, however, do not only depend on the legislator’s choices, but also on ours and before taking any choice, either brave or not, the prior opinion of an expert can be crucial, particularly for businesses and when a choice can impact their future and the future of their collaborators.