In a nutshell, if several conditions are met then neither the IRAP balance for the FY in progress on 31.12.2019 nor the IRAP first instalment for the following FY have to be paid (Article 24, Law Decree 19th May 2020, No. 34 – hereafter the “Law Decree”).
To benefit from the IRAP waiver, the following conditions must be met:
In light of the above, the measure discriminates in favour of the beneficiaries as compared to other undertakings in a comparable factual and legal situation (those being undertakings above the respective ceilings or being part of sectors (or engaging in activities) not covered by the measure) that remain subject to the payment of IRAP. The Italian authorities have not provided any justification for this discrimination based on the nature or the general scheme of the tax system. Accordingly, the tax advantage is selective.
Due to its selectivity, the measure falls within the scope of application of EU State aid rules and so must be applied in compliance with the limits and conditions set out in the EU Communication of 19 March 2020 C(2020)1863 final "Temporary framework for state aid measures to support the economy in the current emergency of the COVID-19" and subsequent amendments.
In particular, the IRAP waiver has been designed to meet the requirements of a specific category of aid (“Limited amounts of aid” described in Section 3.1 of the Temporary Framework).
According to Section 3.1 of the “Temporary Framework”, the following additional conditions should be met:
In light of the above, the following points will be further explored:
it could be argued that the new conditions apply in terms of the ceiling and timeframe.
The aid limit applies “per undertaking”. This means that the maximum limit will not be checked focusing on the (separate) company (i.e. single entity approach) but considering the entire, relevant “undertaking”, which to some extent will lead to an analysis at the group level.
According to the Italian clarifications (see Circular letter DPE-0005531-P-18/06/2020), for the definition of “undertakings” reference will be made to point 11, of the Commission Notice on the notion of State aid as referred to in Article 107(1) TFEU 2016/C 262/01, in which “Several separate legal entities may be considered to form one economic unit for the purposes of the application of State aid rules. That economic unit is then considered to be the relevant undertaking. In this respect, the Court of Justice considers the existence of a controlling share and other functional, economic and organic links to be relevant” (see also the Judgment of the Court of Justice of 10th January 2006, Cassa di Risparmio di Firenze SpA and Others, C-222/04; Judgment of the Court of Justice of 16th December 2010, AceaElectrabel Produzione SpA v Commission, C-480/09 P).
However, for multinational enterprises having entities located worldwide, the territorial scope must be checked to identify the relevant “undertaking”.
In this respect, it should be pointed out that:
In light of the above, even if there are no specific clarifications concerning the territorial requirement of the Temporary Framework, it may be assumed that the focus will be on the “one economic unit” including the companies being established within the same EU Member State, i.e. the ceiling will be checked at the country level (see Association of Italian Joint Stock Companies, Circular Letter No. 10/2021).
Additional information about the Temporary framework, including the list of the State aid measures implemented by each EU Member State during the COVID-19 pandemic, can be found on the European Commission’s website
The following link contains additional information about the State aid rules and the COVID-19 pandemic:
If you have any questions about WTS Global or our global services, please get in touch.
We will respond to you as soon as possible.