Company’s capitalization, the tax credit introduced by the so-called “Decreto Rilancio”
Article 26 of Decree n. 34/2020 (so-called “Decreto Rilancio“), entitled “medium-sized companies capital strengthening “, provides new measures to support the capitalization processes of SMEs.
The Italian legislator, aware that the economic and productive structure of the country is mainly composed by SMEs, in order to let such companies reinforce their capital structure, weakened by the detrimental effects of the pandemic, created a tax credit in favor of the person (natural or legal) who subscribes and releases a capital increase equal to 20% of the amount of such an increase. A further tax credit is also provided in favor of the company which increases its share capital.
About the first aspect, the capital increase must be resolved, subscribed and fully paid up between May 19th and December 31st, 2020.
The tax credit is available to the current shareholder as well as new investors interested to be part of the company’s equity. It is also stated that companies’ groups cannot take advantage of such tax credit.
The tax credit is not automatically provided for every type of capital increase. Indeed, such an increase must meet some specific requirements listed in Decreto Rilancio. Among other requirements, it is stated that the capital increase must be at least worth Euro 250.000,00 for companies that registered in FY 2019 earnings among Euro 5 and Euro 50 million. Furthermore, the tax credit is strictly connected to the detrimental effects suffered by the companies during the COVID-19 lockdown period of March and April (a reduction of 33% of last year’s profits for the same timeframe is required).
It is also important to consider that if such tax credit will be enjoyed, the shareholder cannot sell or disinvest the acquired share capital until December 31st, 2023 as well as resolve the distribution of any kind capital reserve during the same time frame.
Before asking for the tax credit some further convenience considerations are also fundamental. Indeed, the legislative provision expressly states that such tax credit will cumulate with other State aids. Therefore, it is important to act in order to be sure that the total amount of such aids does not exceed the maximum amount of Euro 800.000,00 for each company, as stated by the European Commission communication entitled ” Temporary Framework For State Aid Measures To Support The Economy In The Current Covid-19 Outbreak “.