The new measures allow Italian companies and branches to file a special one-off refund claim for now-eligible IRAP deductions for prior years. Also, going forward, taxpayers may claim a deduction on current and future IRAP returns for eligible personnel expenses.
Rules for refunds
For these purposes, a refund of IRAP takes the form of a refund of IRES (Imposta sul reddito delle società or corporate income tax, from which IRAP is not deductible) and is based on the amount of IRAP “paid” with respect to the subject personnel costs.
For companies whose fiscal year (FY) coincides with the calendar years, the refund claim can look back to include taxes paid from FY 2007 to FY 2011 (inclusive).
Under the rules for the IRAP refunds, taxpayers must file an electronic refund claim pursuant to a prescribed calendar of submissions (the start-date of which depends on the Italian region where the taxpayer is located or resides).
There is a limited window of opportunity for submitting these refund claims.
In general, the refund amount will be approximately 1% of the cost of the claimed personnel expenses (i.e., the IRAP is on average a 4.25% levy; the IRAP amount paid with respect to the subject personnel costs is deductible at an IRES rate of 27.5%, subject to certain adjustments; thus producing a refund of approximately 1%).
Alternatively, a credit for the refund amount can be posted in the taxpayer’s annual accounts as of 31 December 2012 as a tax asset, in lieu of a refund, and is not taxed.
The calculations of these IRAP refunds can be intricate and time consuming, and may require further analysis of personnel and similar costs incurred in past years, less some deductions already taken and subject to certain adjustments.
For more information, contact a KPMG tax professional in Italy:
+39 045 811 4111
+39 045 811 4111