R&D tax credits: first assessments on the Amnesty


On 15 October, press release no.41 of the Council of Ministers no.41, confirmed that the approved decree-law provides for " some corrections to the regulation of the Research and Development tax credit in order to overcome some interpretative uncertainties related to the original formulation of the measure. "

Basically, the Executive confirmed that originally there was a different formulation of the measure from that later expressed by the subsequent practice [1] .

In this perspective, it appears insufficient to argue that companies have found themselves applying the facility in the absence of official indications from the competent bodies, in reality it would be more precise to say that the initial official indications - mainly contained in the implementing decree of 27 May 2015 and in Circular 5/2016 - at the time provided information other than that then communicated starting from 2018.

To appreciate the changes that have taken place in the original formulation of the measure, it is sufficient to consider that for the concrete identification, in the context of research and development activities, of the activities to be considered admissible in the specific textile and fashion sector, Circular 5/2016 refers to the indications provided by Mi.SE with the attached circular no. 46586 of April 16, 2009.

This ministerial circular well illustrated, in general terms, the importance attributed to the concept of innovation in the definitions of research and development used within the Community (Communication 2006 / C 323/01) and their adherence to the criteria of the OSLO Manual, however, starting from 2018, only the criteria of the 2015 Frascati Manual are referred to in the documents of practice.

As observed by some careful authors [2] , it appears really anomalous that the Frascati Manual was never referred to until a few years ago in the numerous documents of practice issued by the competent bodies, moreover, as also emerges from various assessment documents, if if it were true that the regulations on the 2015-2019 tax credit are identical to that of the previous R&D tax credit for the three-year period 2007-2009 (Article 1, paragraphs 280-283, Law 296/2006), then it is not possible to explain why on the previous regulations, no observations have been made in the past on the failure to apply the criteria of the Frascati Manual.

Faced with this situation, the Executive decided to introduce a " spontaneous reversal " procedure in favor of taxpayers who have committed errors in quantifying or identifying eligible expenses in violation of the principles of relevance and congruity as well as in determining the historical average of reference.

On the other hand, companies that have used the tax credit as a result of fraudulent conduct are rightly excluded from the procedure.

According to some authors [3] , it does not seem correct to impose the spontaneous repayment of credit to those who, at the time, in absolute good faith, relied on current legislation, which was then strictly interpreted by the competent bodies. On the other hand, it would have been preferable to opt for a solution capable of fully protecting the companies that placed legitimate expectations in the original interpretation of the measure, excluding them from the repayment of the offset tax credit.

Indeed, the appeal of this "amnesty" appears to be rather limited, as the non-application of the sanctions is already widely provided for in the general rules of the tax system (article 10 of the Statute and article 8 of Legislative Decree 546/1992).

However, adhering to the spontaneous reversal procedure offers some advantages to companies that have encountered errors, especially in cases where such errors lead to punishment pursuant to art. 10-quater of Legislative Decree no. 74/2000 (crime of undue offsetting of credits).

In this regard, as duly recalled by Assonime in Circular No. 30 of 29 October 2021, action should be taken on the sanctioning profiles, because complex interpretative doubts should not give rise to the application of the sanction envisaged in the event of the use of non-existent credits pursuant to art. 13, paragraph 5, of the legislative decree n.471 / 1997.

Recently, the Revenue Agency, with circular letter no. 31 / E of 23 December 2020, on the other hand, has validated the assessment procedure adopted so far by numerous Offices which automatically qualifies as non-existent credits all credits used on the basis of activities deemed (by the same Offices) lacking, in whole or even in part, of the requirements (also of a technical nature) envisaged by the 2015 Frascati Manual for R&D activities.

If this setting is not corrected, for example with a specific penalty protection rule (also provided for the new Patent Box), the disputes relating to the objective scope of the facility will continue to be accompanied by the application of the penalty for non-existent credit, proposing again in the future the problem that the provision in question aims to solve.

Among the various limits of the "amnesty", many of which are not dealt with here for reasons of synthesis, one that has so far been somewhat underestimated, concerning the effective possibility of conducting accurate technical assessments, after the expiry of the terms for spontaneous repayment , on R&D projects carried out many years ago.

Basically, in 2023 the competent bodies will have to be able to compare the level of innovation of a company project with the state of the art of the existing sector, for example, in 2015, that is eight years earlier!

Based on our experience this is not an easy activity, to succeed it is necessary to define a set of objective criteria and equip oneself with adequate technological tools.

In light of all the above considerations, while acknowledging the laudable intention of the provision which to some extent improves the previous situation, the outcome of the "amnesty" for R&D tax credits appears at the moment quite disappointing.

The hope is that the provision can be improved shortly.

[ 1] Among the numerous authors who express themselves in this sense, cf. V. Giordano and M. Bettarini, " Disputes of undue use of R&D credit: the state of the art and the amnesty provided for by the Tax Decree", paragraph 1.4, Il Sole 24 Ore - NT Plus Right, of 20.10.2021.

[2] See A. Iorio, “Amendments for research and development bonus, the application does not protect from the crime”Il Sole 24 Ore - NT Plus Law, of 19.10.2021.

[3] See M. Meo, “R&D tax credits, amnesty without reward” Il Sole 24 Ore of 28.10.2021.