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  • Service: Tax
  • Type: Regulatory update
  • Date: 9/24/2014

Italy 

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

Support schemes

Renewable energy in Italy: recent changes to legislation


In 2013 several changes to the law adversely affected the photovoltaic business in particular and the overall renewable energy industry in Italy.


The system of incentives for energy generated from renewable sources (introduced by the Ministerial Decree of 5 July 2012 – the “FER Decree”) was abolished and, as a result, several energy incentives expired at the end of 2013.


In particular, the FER Decree introduced:


  • the Fifth Energy Incentives Plan revising the system of incentives for the production of electricity from photovoltaic plants;
  • new procedures supporting the production of electricity from other renewable energy sources at plants with a capacity of at least 1 kW.

The FER Decree applies to plants already operating by 31 December 2013.


To safeguard investments in projects approaching completion and to support existing plants already benefiting from incentives (green certificates, feed-in tariffs or premium tariffs), further changes to the rules were introduced early in 2014 by Law Decree no. 145/20131 (the ‘Destinazione Italia Decree’). This Decree introduces an optional incentive system for existing plants and new rules for plants benefiting from incentives based on electricity rates.


The end of 2013 also saw the expiry of a number of fuel and energy efficiency incentives; it is unclear whether or when the legislation will be passed to extend these incentives.


The regulatory changes of 2013 have had the biggest impact on existing large ground-mounted plants, hit by the reductions in guaranteed minimum prices and higher taxation. The changes may discourage future investments in plants used in the industrial sector (>200kW) and power plants (>1 MW), making grid parity very difficult to achieve without a significant amount of ‘self-consumption’. Thanks to efficient consumption systems (‘SEUs’), plants of under 200 kW still have the best prospects, as net-metering (the Italian mechanism is called ‘Scambio sul Posto’) remains viable, despite the changes.

Subsidies available under the FER Decree

Feed-in tariff premiums for solar energy


Various feed-in tariff systems are affected by the changes introduced by the Destinazione Italia Decree. These schemes, listed below, are still in force for plants up and running by 31 December 2013.


Solar plants going into operation by 31 May 2011


The Ministerial Decree of 6 August 2010 (the ‘Third Energy Incentive’) offered a fixed premium (a bonus on top of the market price of electricity).


The size of the premium depends on:


  • the type of plant;
  • the nominal output;
  • when the plant started to operate.

The premium ranges from EUR 0.251/ kWh to EUR 0.402/kWh.


The premium is paid for 20 years after the plant starts operating. For thermodynamic plants, the premium is paid for 25 years.


Solar plants going into operation between 1 June 2011 and 31 December 2012


The Ministerial Decree of 5 May 2011 (the ‘Fourth Energy Incentive’) offered a fixed premium based on the type and nominal power of the plant.


The premium is paid for 20 years after the plant starts operating. For thermodynamic plants, the premium is paid for 25 years.


Solar plants going into operation between 27 August 2012 and 31 December 2013


A Ministerial Decree of 5 July 2012 (the ‘Fifth Energy Incentive’ or – as defined above – the FER Decree), redefined the subsidy system for the production of photovoltaic energy.


The tariff scheme is the following:


  • for plants with capacity of up to 1 MW, there is a feed-in tariff based on the electricity sold to the GSE (the national energy manager).
  • for plants with capacity exceeding 1 MW, there is a premium tariff based on the electricity generated and not sold to the GSE.
  • for ‘self-consumption’, there is a special tariff.

Subsidies for plants using other renewable energy sources and entering into operation by 31 December 2013


There are two separate subsidies, which can be used as an alternative to net metering and simplified purchase/resale arrangements.


An inclusive feed-in tariff


There is 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 (defined for each energy source, type of plant and capacity class) and any premiums, such as those for high efficiency, emission reductions, etc.


For plants entering into operation from 2013, the FER Decree identifies the base feed-in tariff for each energy source, type of plant and capacity class. The tariffs decrease by 2 percent in each subsequent year until 2015, except in certain specific cases.


The FER Decree also provides a number of premiums on top of the base tariff for plants that meet specific operating requirements.


A special incentive


There is a special incentive for:


  • plants with a capacity of more than 1 MW;
  • those with a capacity of up to 1 MW that do not opt for the all-inclusive feed-in tariff.

This incentive is the difference between the base feed-in tariff – plus any premiums 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.


Other types of support for energy producers


In addition to the subsidies available under the FER Decree, there are other forms of support:


  • Green certificates, representing the environmental value of the renewable energy generated. All-inclusive tariffs, these are a type of premium tariff and differ according to the length of the incentive period, the source of renewable energy, and the type of incentive scheme.

New rules governing the other types of support: the Destinazione Italia Decree


Among other things, the Destinazione Italia Decree offers a new optional incentive scheme to certain renewable electricity producers. Producers owning power plants that have already obtained green certificates and/or all-inclusive tariffs, may do one of the following:


  • They may continue to benefit from their existing incentive scheme over the remaining original period. In this case, for 10 years after the end of the original incentive period, any new initiative on the same site will not benefit from further incentives, including dedicated withdrawal2 and net-metering.
  • They may restructure their existing incentive scheme. In this case, the existing incentive is reduced by a percentage which differs according to the type of plant, while the incentive period is extended by 7 years. This new scheme operates from the first day of the month following the deadline for exercising the option.

This rule does not apply to power plants which benefit from:


  • the CIP 6 incentives scheme3 ;
  • the incentives available under the FER Decree, with the exception of those covered by the interim regime.

Guaranteed minimum prices defined by AEEG for simplified purchase and resale arrangements


Guaranteed minimum prices were introduced by AEEG Resolution no. 34/054 to cover the production costs of power plants with a capacity of less than 1 MW and generating electricity from renewable sources. The prices are available for the first 2 million kWh produced and injected into the grid.


With effect from 1 January 2014, the Destinazione Italia Decree made two important changes:


  • it reduced the minimum prices significantly, to the hourly zonal electricity price.
  • it eliminated the guaranteed minimum price for plants with a capacity of more than 100 kW.

Additional information

Taxation


Companies are subject to IRES (corporate income tax) of 27.5 percent and IRAP (a regional business income tax) of 3.9 percent to 4.82 percent.


Important changes were made by the Italian Revenue Agency in Circular no. 36/E/2013 (concerning photovoltaic systems − land register and tax aspects), with effect from 1 January 2014:


  • photovoltaic systems, that have been built on land, are now classified as ‘immovable property’ (cadastral category D/1-D10) and, as such, are subject to taxation on the cadastral income,to property tax ‘Unified Municipal Tax’ (called ‘IMU’, that has replaced the old Municipal tax on real estate called ICI) starting from January 2012) and to an annual depreciation rate, currently 4 percent;
  • photovoltaic system on the rooftop are exempt by IMU, because they are classified as ‘movable property’. This type of photovoltaic system, on flat roofs both of private buildings and public buildings, is considered as an integral part of the existing building and, as such, contribute to the determination of the total land rents of housing units because it is part of the same building. In this case, the photovoltaic plants built on rooftop are subject to an annual depreciation rate, currently 9 percent.

Robin Hood Tax


In 2011, a surtax was introduced for the energy industry, known as the ‘Robin Hood Tax’5 . It applies to companies with the following business activities:


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

The surtax tax applies when the following thresholds are both exceeded in the previous fiscal year:


  • gross revenues of EUR 3 million;
  • a corporate income tax base of EUR 300.0006.

In 2014, the surtax is 6.5 percent. Therefore, the total corporate income tax rate is 34 percent (27.5 percent + 6.5 percent).


Non-operating or dormant companies


The IRES rate is 38 percent for dormant companies.


A company is considered to be dormant if:


  • it makes a tax loss (reported in its tax return) for three consecutive years;
  • it is subject to a minimum IRES and IRAP charge;
  • it is not eligible to claim a VAT refund.

There is a special test to determine whether a company is dormant: if the actual amounts reported in the profit and loss account are lower than the presumed amounts, the company is deemed to be dormant.


Depreciation


Wind and solar plants are subject to ordinary depreciation rules for tax purposes.



1Converted, with amendments, into Law no. 9 of 21 February 2014, and in force since 22 February 2014.
2 "Dedicated withdrawal” means the electricity taken by GSE from the producer and fed into the grid.
3 Regulated by Inter-ministerial Price Committee Resolution no. 6 of 29 April 1992.
4 AEEG is the Italian Electricity and Gas Authority.
5 Law Decree no. 138/2011 (the “Mid-August Measure”).
6 Law Decree no. 69/2013
 

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