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  • Service: Tax
  • Type: Regulatory update
  • Date: 10/8/2013

Italy 

Taxes and Incentintives
Italy Taxes and incentives for renewable energy KPMG Global Energy & Natural Resources.

Support schemes

Investment and other subsidies

 

Italy has a well-developed system of incentives for renewable energy generated from solar, wind and biomass. In particular, the Ministerial Decree of 5 July 2012 – which introduced the so-called Fifth Energy Incentives Plan – revises the system of incentives for the production of electricity from photovoltaic (PV) plants. At the same time, the Ministerial Decree of 6 July 2012 establishes new procedures aimed at supporting the production of electricity from Renewable Energy Source-Electricity (RES-E) plants (other than the PV ones) with a capacity of at least 1 kW. Under this Decree, such plants must be “new, totally rebuilt, reactivated, repowered/upgraded or renovated plants which will be commissioned on or after 1 January 2013” (More information at the Gestore dei Servizi Elettrici website: gse.it).


To safeguard investments on projects under completion, the Ministerial Decree of 6 July 2012 provides that the following plants may apply for support on the terms and conditions specified in the Ministerial Decree of 18 December 2008:


  • Plants authorized before 11 July 2012 (the Decree’s enforcement date) and commissioned by 30 April 2013
  • Plants authorized before 11 July 2012, fuelled by waste (as per article 8, paragraph 4C of the Decree) and commissioned by 30 June 2013. The feed-in tariffs granted or the multiplicative factors for the green certificates issued to these plants will be decreased as indicated in article 30, paragraph 1 of the Decree.

The Decree of 6 July 2012 also covers the procedures under which plants already in service and supported under the Ministerial Decree of 18 December 2008 must pass in 2016 from the Green Certificates scheme of incentives to new support schemes as defined in the Decree.

Operating subsidies

Feed-in tariff premiums


Solar


Solar plants that began operations before 31 May 2011


  • According to the Ministerial Decree of 6 August 2010 (the Third Energy Incentive) there is a fixed premium (a bonus on top of the market price of electricity).
  • The size of the premium depends on:
    • type of plant
    • nominal output
    • when the plant started to operate.
  • The premium ranges from EUR0.251/kWh to EUR0.402/kWh.
  • The premium will be paid for 20 years after the plant starts operating. For thermodynamic plants, the premium will be paid for 25 years.

 

Solar plants that began operations between 31 May 2011 and 31 December 2012


  • According to the Ministerial Decree of 5 May 2011 (the Fourth Energy Incentive) a fixed premium computed on the basis of the type and the nominal power of the plant is available up to 31 December 2012.
  • In the first six months of 2012 the premium ranges from EUR0.148/kWh to EUR0.274/kWh and in the second six months of 2012 the premium will range from EUR0.133/kWh to EUR0.252/kWh.
  • This type of subsidy will expire on 31 December 2012.
  • The premium will be paid for 20 years after the plant starts operating, as long as it does so by 31 December 2016. For thermodynamic plants, the premium will be paid for 25 years.

Solar plants that began operations after 27 August 2012


  • The Ministerial Decree of 5 July 2012 became effective on 27 August 2012 and introduced the Fifth Energy Incentive Plan, thus redefining the Italian incentive system for the production of PV energy.
  • Based on the new scheme, some plants can still have access to incentives granted under the Fourth Energy Incentive Plan. In particular, the Fourth Energy Incentive Plan shall continue to apply to:
    • Plants installed in public buildings and areas owned by the Public Administrations, commissioned before 31 December 2012.
    • Small PV plants integrated into buildings with innovative features (BIPV) and concentrating PV plants commissioned before 27 August 2012.
    • Large PV plants that are positioned in the relevant Public Registers as plants that do not exceed a given applicable cost limit and whose certificates of completion are submitted for the registration within seven months – or nine months in the case of plants with a capacity of above 1 MW – after the publication of the related ranking list.
  • In accordance to the Ministerial Decree of 5 July 2012, the incentives for new PV plants will cease and therefore no longer apply once the relevant total expenditure reaches EUR6.7 billion.
  • In accordance with the new tariff system, the most important change is that plants with a capacity not exceeding 12 kW (including upgraded, renovated, repowered plants with an increase in capacity not exceeding an overall capacity of 12 kW) now have direct access to the feed-in tariff in compliance with the procedures set by the Manager of Electricity Services (Gestore dei Servizi Energetici or GSE). In the case of plants with a capacity up to 20 kW, they may have access to the same incentives upon condition that a 20 percent tariff reduction is accepted.
  • In the case of the Fifth Incentive Plan, the tariff scheme applies as follows:
    • For plants with capacity up to 1 MW, a feed-in tariff applies based on the electricity sold to the GSE.
    • For plants with capacity exceeding 1 MW, a premium tariff is paid based on the electricity generated which is not sold to the GSE.
    • For self-consumption, a special tariff applies.

Ministerial Decree of 6 July 2012 - Incentives awarded to RES-E plants other than PV plants


Types of incentives


  • The Ministerial Decree of 6 July 2012 establishes that the support shall be granted for the net electricity generated by the plant and injected into the grid. Therefore, self-consumed electricity is not eligible for incentives.
  • The net electricity generated and injected into the grid is the lower value between the net electricity generated and the electricity actually injected into the grid by the plant.
  • The Decree provides for two separate support schemes, based on plant capacity, renewable source used and type of plant:
    • An inclusive feed-in tariff for plants with a capacity of up to 1 MW. This capacity is the sum of a base feed-in tariff (whose value is defined for each source, type of plant and capacity class) and of any premiums, such as high-efficiency, emission reductions, etc.
    • An incentive for plants with a capacity of above 1 MW and for those with a capacity of up to 1 MW not opting for the all-inclusive feed-in tariff. This incentive is the difference between the base feed-in tariff – increased by the premiums, if any, for which the plant is eligible – and the hourly zonal electricity price. The electricity generated by plants benefiting from the incentive remains the property of the producer.
  • Access to the incentives according to the Ministerial Decree of 6 July 2012 is an alternative to net metering (“scambio sul posto”) and to simplified purchase/resale arrangements (“ritiro dedicato”).

Feed-in tariffs


  • The Ministerial Decree of 6 July 2012 identifies the value of the base feed-in tariffs for each source, type of plant and capacity class in the case of plants commissioned starting from 2013. The tariffs will decrease by 2 percent in each of the subsequent years until 2015, except in case of failure to reach 80 percent of the yearly capacity quota required for the registries and the auctions.
  • The value of the base feed-in tariff is the one applicable upon the date of the plant’s commissioning. The GSE will award the all-inclusive feed-in tariff or the incentive, calculated from the value of the base feed-in tariff, as of the date of entry into commercial operation of the plant.
  • For plants commissioned prior to the closing of the period of submission of applications for participating in the Registries or Auctions and whose ranking position in the relevant Registries does not exceed the applicable cost limit, the GSE will grant the base feed-in tariff applicable upon the date of closing of the same period.
  • The Decree also provides for a number of premiums on top of the base tariff for plants that meet specific operating requirements.

Additional information

Limit on public expenditure to support renewable energy:


The overall public expenditure should not exceed EUR5.8 billion per year.


Authorization procedures:


To accelerate the overall authorization process the Renewable Energy Decree simplified the procedures for building and operating renewable energy plants.


The new Single Authorization procedure (Autorizzazione Unica or AU) now takes only 90 days rather than 180 days. However, this period does not include the time required for the environmental impact assessment (Valutazione di Impatto Ambientale). The regulations that implemented the Renewable Energy Decree identified which “substantial modifications” to a project require a new AU and which modifications can be authorized by following a simplified procedure.


The new provisions of the AU apply to all authorization procedures that started after the Renewable Energy Decree came into force. Authorization procedures that started before then will continue to be subject to the previous authorization procedure. The Renewable Energy Decree also introduces a new simplified authorization procedure for small plants (the “PAS”). However, where specific environmental or landscape authorizations are required, the AU procedure remains mandatory.


Taxation:


Corporations are subject to IRES (a corporate income tax) which is levied at 27.5 percent and to IRAP (a regional business income tax) with a rate that varies from 3.9 percent to 4.82 percent.


Robin Hood Tax


Law Decree no. 138/2011 (the Mid- August measure) sets out certain significant changes to the corporate income tax surcharge for the energy industry (the so-called “Robin Hood Tax”).


The Robin Hood Tax applies to the solar and wind farm business if the following thresholds are both exceeded in the previous fiscal year:


  • EUR10 million of gross revenues
  • EUR1 million of corporate income tax base.

Such surcharge applies to companies involved in the following business activities:


  • transmission and distribution of electricity
  • transportation and distribution of gas
  • production of renewable energy (biomass, photovoltaic, wind).

The rate of the surcharge has been increased by 4 percent (i.e. from 6.5 percent to 10.5 percent) for fiscal years 2011, 2012 and 2013. As a result, the aggregate Corporate Income Tax rate which was applicable to companies involved in the energy business and was originally at 34 percent (27.5 percent plus 6.5 percent) starting from fiscal year 2009, is now fixed at 38 percent (27.5 percent plus 10.5 percent) for years 2011, 2012 and 2013.


Non-operating or dormant companies


The Mid-August Measure also introduced the following changes to the rules governing “dormant” companies, to take effect as of 2012:


  • an increase of IRES to 38 percent for companies that are considered as dormant
  • an extension of this rule to companies that have incurred in fiscal losses (included in their tax returns) for three consecutive years.

A company is considered dormant if following applies:


  • It is subject to a minimum tax charge as far as IRES and IRAP are concerned.
  • Limits are in effect to the off-setting or a refund request for any VAT credit accrued.

The minimum income level is calculated by applying specific percentages to certain balance sheet items. In addition, a specific test is conducted to determine whether a company is dormant, comparing the actual values reported in the statement of income with presumed values. If the actual values are below the presumed ones, the company is deemed to be dormant.


Depreciation


Wind and solar plants are subject to ordinary amortization/depreciation tax rules.

 

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