New Irpef and Ires: what the Legislative Decree of 30 April contains

The Council of Ministers, on the proposal of the Minister of Economy and Finance Giancarlo Giorgetti, approved a legislative decree on 30 April, in preliminary examination which, in implementation of the enabling law on tax reform (law 9 August 2023, n. 111), carries out the overall revision of the tax regime for the income of individuals (IRPEF) and companies and entities (IRES).

Let’s see the summary of the measures coming from the Government’s press release.

1) Land income reform: the tax reform Legislative Decree

The regulations relating to the determination of agricultural income are modified: currently this income is related exclusively to the agricultural activities carried out on the land.

The new regulation also includes activities not focused on the direct exploitation of agricultural landsuch as the so-called “soilless crops” (e.g. hydroponic activities), also carried out in properties, falling within specific cadastral categories and within certain limits (the excess part of the income will contribute to the formation of the business income), and activities aimed at production of goods, including intangible ones through cultivation, breeding, forestry which contribute to environmental protectionwithin the limits of the fees for sales of goods registered or subject to registration for VAT purposes.

Consequentially, Domain income is defined as income related to properties used for soilless cropswhich therefore are not income producing buildings, if they are not rented.

2) Self-employment income reform: the tax reform Legislative Decree

The all-inclusive principle is introduced as a general criterion for determining income from self-employment (in analogy to employees):

• the income deriving from the exercise of arts and professions will be made up of the difference between all sums and values ​​in general, for any reason received in the tax period in relation to the artistic or professional activity and the amount of expenses incurred in the same period in carrying out the business.

Furthermore, it is expected that are excluded from the formation of incomein addition to welfare and social security contributions, also:

• the sums received as reimbursement of expenses incurred for the execution of a task and charged to the client and the chargeback to other parties of the expenses incurred for the common use of the properties used, even promiscuously, for the exercise of these activities and for the services connected to them.

The cash principle is confirmed as the criterion for temporal attribution of income components to the tax period (therefore the compensation is relevant at the time of receipt and the costs are deductible in the year in which the expense is actually incurred), without prejudice to the exceptions provided for (e.g. for depreciation, leasing installments and severance pay quotas).

The separate taxation regime is extended to capital gains deriving from the transfer for consideration of shareholdings in associations, companies and entities, in any case relating to professional artistic activity.

A specific regulation is envisaged relating to the deductibility of expenses relating to goods and intangible elements incurred in the exercise of arts and professions.

The principle of is introduced fiscal neutrality (therefore not realizing capital gains or losses) with reference to: extraordinary operations concerning contributions, transformations, mergers and splits relating to companies between professionals; contributions to associations without legal personality established between natural persons for the joint exercise of arts and professions or in simple companies; contributions of participatory positions in professional associations or simple companies in other associations or companies established for the joint exercise of arts and professions or in companies between professionals.

Regarding the temporal regime of application of the new measures:

• regarding income from self-employment, application is expected starting from the tax period in progress on the date of entry into force of the decree;
• in relation to the expenses incurred for the execution of an assignment and charged analytically to the client, a transitional regime is established on the basis of which until 31 December 2024 the provisions in force prior to the amendments made by the decree, regarding the deductibility of expenses and the competition in the formation of income of the relative sums received as reimbursement of the same;
• regarding the temporal attribution of compensation subject to withholding, the new provisions are also effective for tax periods prior to the one in progress on the date of entry into force of the decree, if the relevant declarations, validly submitted, comply with the new regulations . However, tax assessments and payments which have become definitive remain unchanged.

3) Corporate income reform: the tax reform Legislative Decree

With regard to business income a first phase of implementation of the delegation regarding the rationalization and simplification of the regimes is carried out realignment of fiscal values ​​to accounting values and modification of the criteria for determining business income.

In the field of determination of the tax base of resident companies and commercial entitiesin order to bring accounting values ​​and tax values ​​closer together, the tax treatment is changed:

• of the contingent assets deriving from proceeds in money or in kind obtained by way of contribution or donations, which may contribute to forming the income exclusively in the financial year in which they are collected;
• the evaluation of final inventories of works, supplies and services;
• exchange rate differences.

Furthermore, a regulation is introduced regarding the realignment of misalignments between fiscal values ​​and accounting values ​​aimed at ensuring the homogenization of the rules of the various realignment regimes currently existing.

We intervene in the matter of business transfers made between resident subjects and in the exercise of commercial businesses, introducing the possibility for the transferee company to opt, in the tax return relating to the tax period during which the contribution takes place, for the application of a substitute tax (to be paid in a single solution and within one specific term) on the greater values ​​attributed in the balance sheet to tangible and intangible assets relating to the company received and a regulation is introduced relating to the entry into force and the transitional regime connected to the new provisions on realignment.

4) Different income reform: the tax reform Legislative Decree

With regard to different incomes, it is established that for land susceptible to building use purchased as a result of donation, the purchase price borne by the donor is assumed, increased by the donation tax as well as any other subsequent related costs. Furthermore, with reference to the sale of properties acquired by donation no more than five years ago, it is envisaged that donation tax as well as any other related subsequent cost will also be included in the formation of the purchase cost, in analogy with what is currently envisaged with regard to to land acquired as a result of inheritance.

5) Reform of employee income: the Tax Reform Legislative Decree

The components excluded from the formation of employee income are expanding.

In particular, contributions and premiums paid by the employer for dependent family members of employees for benefits, including in the form of insurance, having as their object the risk of non-self-sufficiency in carrying out acts of daily life, or having as their object the risk of serious diseases.

Furthermore, pending the introduction of a replacement tax regime for the thirteenth month’s salary, the disbursement, in January 2025, of aallowance of 100 euros for employees for which, in the year 2024, the following conditions jointly apply:

• total income not more than 28,000 euros;
• non-separated spouse and at least one child, both dependent, or at least one dependent child, where the other parent is missing or has not recognized the child and the taxpayer is not married or, if married, has subsequently separated, or if there are adopted, fostered or affiliated children of the taxpayer alone and he is not married or, if married, has subsequently separated;
• gross tax determined on income from employment (with the exclusion of pensions and allowances equivalent to them), received by the worker, of an amount higher than that of the deductions due.