TAX AID TO FAMILIES AND ENTERPRISES IN "CURA ITALIA": ANOTHER MISSED OPPORTUNITY?
#Lexamp News Team
Decree Law 17 Mach 2020 no. 18, s.c. “Cura Italia”, contains, among others, a series of initiatives that the Italian Government has taken, in the field of labour and taxation, in order to support families and enterprises during the economic crisis resulting from the coronavirus pandemic.
We asked for some comments to Mr. Daniele Criscio, accountant and Partner of Counsel of the AMP Firm, very critical about the rules in question.
"There is no doubt that, in the state of emergency in which the country finds itself, companies and professionals are experiencing a period of deep crisis, due on the one hand to the mandatory closures and on the other hand to the general reduction in cash flows. It is therefore necessary to face a generalized problem of scarce circulating liquidity which, however, the rules of the Decree Law Cura Italia do not seem able to resolve".
The crisis is unprecedented and the measures contained in the Decree of the President of the Council of Ministers of 22 March 2020 seems destined to exacerbate its effects, having ordered a drastic expansion of forced closures, now extended to all industrial and commercial activities not considered essential. And also the new Decree Law of 24 March 2020 (still in the promulgation phase at the date of publication of this article) suggests a difficult solution to the crisis, given that it should be foreseen the possibility of extending the restrictive measures even up to the next July 31.
"In a truly apocalyptic scenario for the national economy", continues Criscio, "companies and self-employed workers are clamouring for the Government's help, in order to survive to this deep crisis, still far from a solution. The first right response, of a 25 billion aid manoeuvre, has been translated into a series of measures that appear quite complex in their concrete implementation and, in any case, not suitable to guarantee the rapid restoration of an acceptable cash flow, especially for smaller activities".
With regard to support for workers, for example, art. 22 of the Decree Cura Italia provides for a layoff in derogation for work suspensions due to the health emergency, which can be used by companies that have also only one employee: a very appreciable intervention that, however, in the final version of the Decree - and unlike what was provided for in the drafts initially circulated - has left its concrete implementation to the Regions and Trade Unions and this, evidently, will lengthen the time, making the amounts to the workers with inevitable delay compared to the real needs. "Thus, not immediately perceiving the necessary liquidity", observes Criscio, "the workers will find themselves having to further compress their expenses, further reducing the liquidity in circulation, with cascading effects also on the companies themselves".
In any case, INPS (the Italian National Institute for Social Security) has already specified on its institutional website that the procedures already foreseen for the "red zone", before the national extension of the measure, planned by the Decree Cura Italia.
Things should instead go a little better for workers not subject to suspension of activity: art. 63 of the Decree has in fact provided for the month of march 2020 a premium of 100 net, to be related to the number of days of work actually done in the month, which does not contribute to the formation of income (and, therefore, will not be taxed). This premium, however, will be paid by employers, as tax substitutes, who will then be able to take advantage of the compensation: in this way, therefore, workers in service (who would have received their salary in any case) are supported in a much more effective way, to the disadvantage, however, of employers, who must actually anticipate the payment of the support by the State.
On the tax side, the measures of the Decree essentially concern suspensions of payments and recognition of tax credits. Well, comments Criscio, "to tell the whole truth, nothing that remains permanently in the pockets of taxpayers or that can be readily monetized by them".
On march 19th, Agenzia delle Entrate (the Italian Revenue Authority) issued a vademecum on its institutional website relating to these measures: a useful tool that, however, does not allow to fully grasp some problematic aspects inherent in the Decree.
According to our accountant, "the main problem lies in the incomprehensibly complicated and unequal treatment methods used to implement the suspension of payments".
Let's see the main ones.
Article 60 provided for a general suspension, which deferred the payment of all taxes due on march 16th, postponing them until march 20th, without exclusions or differentiation.
Art. 61 then provided for a freeze of the expiration dates of march and april 2020, for the only activities identified as most affected and in general for the tourism-hotel sector, with postponement of payments to may 31 and subsequent possibility of instalment in 5 deadlines, but only with regard to VAT as well as withheld and contributions arising from remuneration of workers.
Art. 62 extended the measures to all other activities with a turnover of less than 2 million euro, for which the same postponement of the deadlines of march 2020 to May 31, which can then be deferred in 5 deadlines, again with regard to VAT, withheld and contributions.
For self-employed workers and professionals with an income of less than € 400.000 per year, paragraph 7 of the same art. 62 suspended the application of withholding taxes until march 31. This suspension is effective on the active side, so that the invoices issued in this period by the self-employed may not include the withholding tax, with the effect of allowing full collection of the service and, therefore, to keep more liquidity in the pockets of these persons. However, it remains doubtful, because it is not provided for by the rule, what will happen later, when the self-employed and professionals themselves will still have to pay (how?) the amounts collected, corresponding to the withholding taxes not applied.
Instead, Criscio observes, "nothing has been provided for the activities not considered as most affected by the crisis, which have a turnover of more than 2 million euros, which could therefore only benefit from the postponement of payments by 4 days, provided by art. 61 of the Decree, and nothing else".
"In practice, it has happened that, for example, a wholesaler of food raw materials with a turnover exceeding 2 million (an absolutely normal fact, considering the very low profit margins in this specific product sector taken as an example), which would be counted among small businesses because it has, for example, only about ten employees, has in fact been assimilated by the Decree to much larger entrepreneurial entities, such as industrial or digital giants".
"And this would not even be the most serious problem, because the truly absurd element of this criterion of access to benefits lies in the obvious circumstance that these individuals, who are in fact small but who invoice more than 2 million euros a year, have been considered rich and, therefore, completely capable of solving any liquidity problems on their own. Consideration, the latter, far from the reality of the average Italian entrepreneurship".
"It should not be forgotten," he concludes on the point Criscio, "that the problem of liquidity is not at all different in small, medium and large companies: what changes is only the order of magnitude, which is why it seems regrettable this treatment without discounts for those considered larger”.
Coming then to the chapter on tax credits, art. 64 recognizes to all subjects carrying out business, art or profession activities, without distinction, a tax credit equal to 50% of the costs of sanitizing environments and work tools, up to a maximum of 20.000 euros. However, a national ceiling of 50 million euros is set, leaving the implementation of this measure to measures to be issued by the Ministry of Economic Development in agreement with the Ministry of the Economy.
Article 65 provides for a measure intended for small businesses and artisan activities that are carried out in premises not owned by the entrepreneur: in this case, the tax credit recognized is equal to 60% of the amount of the rent for March 2020 for buildings falling under cadastral category C/1 [the subject is also discussed in the interesting article by the lawyer Mr. Gabriele Maxia, published on the blog of this firm, Commercial lease in time of coronavirus pandemic: how to protect small entrepreneurs?].
With regard to tax collection, art. 68 provides for the suspension of all payments due between march 8th and may 31, 2020 for collection slips and good-faith notices, with the important clarification that it is however not possible to request the return of any payments already made on the date of entry into force of the Decree. Any payments not made must in any case be made, in a single solution, within the month following the end of the suspension period.
Finally, the terms for the payment of the instalment, which had already expired on february 28th, of the "rottamazione ter", as well as the "full and final settlement" due on march 31, have also been postponed to may 31.
What if a virtuous taxpayer would prefer not to take advantage of the benefits provided by the Decree?
In a period in which the cash requirements are higher than ever, for a State engaged in the fight against the epidemic, art. 71 has thought of a real commendation, in terms of mention of merit, for those taxpayers who, "not availing themselves of one or more of the suspension of payments provided for [...], make any of the suspended payments and notify the Ministry of Economy".
Therefore, comments Criscio in a critical way, "while on the one hand it becomes complex and strongly limits the effective access to benefits, on the other hand there is even an incentive not to use them".
"This wretched affair to combat the terrible epidemic, which sees all of us Italians deprived of part of our fundamental freedoms and which is really massacring our economy, could perhaps have been the right opportunity for the tax legislator to make the qualitative leap that we have been waiting for too long: to finally start legislating in a simple, clear and fair manner, to the effective benefit of the taxpayer. On the contrary - and as usual - the usual chaos of illogical postponements and distinctions has been repeated, which makes it extremely complicated to understand what and how much to pay, when and especially by whom. Without forgetting the absurd disincentive to the use of benefits."
The confusion generated by the Decree has been a real problem for all economic operators.
For example, Criscio points out, "while benefiting from the suspension of taxes and contributions for the months of march and april 2020, last march 20th all companies, without distinction, found themselves, however, having to pay withholding taxes for compensation paid to professionals, as well as government concessions on social books: taxes that were simply forgotten by those who drafted the Decree, thus rendering vain the intention to completely exclude, at least for those considered most affected by the crisis, the obligation to make payments to the Treasury at this dramatic time”.
"It is intuitive that it would have taken very little to realize this intention: given the general state of crisis, all taxes and contributions for the months of march and april are frozen, without distinction. But the reality was very different and, so, we accountants had to perform, in these difficult days of social distancing and reduced working capacity, real marathons to understand the situation of each Customer and assist him in the proper fulfilment of his duties as a taxpayer".
Hope, however, is always the last to die: in the end, a "ravvedimento operoso" (an active repentance, according to the law) will save all of us !