Italy's Patent Box Regime Under The 2016 Stability Law

The main changes to patent box regulations stemming from the 2016 Stability Law concern the objective scope of the regulations and the simplification of de-taxation in case of complementary intangible assets.

The Patent Box is an optional facilitated tax scheme that provides for the exclusion from taxation of a share of the income arising from the use of:

software protected by copyright industrial patents, including those for inventions, such as biotechnological inventions and the related protection certificates trademarks drawings and models, subject to legal protection corporate information and technical-industrial know-how, including commercial or scientific know-how, which may be protected as secret information, subject to legal protection. This facility was established by the 2015 Stability Law (Law 190/2014), in order to bring back to Italy intellectual property located abroad, and promote investment in research and development.

The beneficiaries of the facility in question are the holders of corporate income (such as limited companies, partnerships, Italian entrepreneurs and stable Italian organisations of persons resident in so-called White List countries); conversely, companies subject to bankruptcy and compulsory liquidation procedures are excluded from the preferential scheme. The above-mentioned subjects may enjoy a partial deduction from the corporate income (30% in 2015, 40% in 2016 and 50% in 2017) of the proceeds arising both from the granting for use of intangible assets and of those used directly by the applicant.

Now let us look at the method of calculation of the share of income that can benefit from the facility and the methods for subjecting this share to the facilitated Patent Box regime.

Determining the share of income eligible for the facility

The share of income that can benefit from the facility must be determined on the basis of the ratio between the costs incurred for the research and development activities for the maintenance, growth and development of the intangible asset, and the overall operating costs. To this end, it is necessary for the company to allow the identification of the direct connection between research and development costs, intangible assets, used and/or realised assets and the related income produced.

In the event of direct use of the intangible asset, the company determines the share of income eligible for the facility in consultation with the Revenue Agency, in order to avoid the risk of...