Italy: Guidance, details about “patent box” regime

The first year of full application of the regime is FY 2021.

The first year of full application of the regime is FY 2021.

The Italian tax authority on 15 February 2022 released details about how the new “patent box” regime is to be applied by taxpayers.

The patent box rules required that to qualify for the benefit, the taxpayer must:

  • “Control” the research and development (R&D) risks (generally in with the definitions included in the OECD’s Transfer Pricing Guidelines)
  • Engage in R&D activity involving industrial research, experimental development, technological innovation and creative design (in line with the definitions set forth by the Ministry of Economic Development)

The Italian tax authority also defined the content of the “patent box documentation” which must contain a DEMPE* FAR** (in line again with the OECD Transfer Pricing Guidelines) and a technical report prepared by the head of the taxpayer’s R&D function.

The first year of full application of the regime is FY 2021. Therefore, the deadline for inclusion of the calculation in the income tax return and preparation of the patent box documentation is 30 November 2022.

Beginning from FY 2021, taxpayers can apply for the new patent box regime that basically consists of a possibility, under certain conditions, of increasing the deduction of costs incurred in the DEMPE of certain eligible intangible assets, such as:

  • Software protected by copyright
  • Patents
  • Legally protected models and designs
  • Two or more intangible assets from the three categories (above) that complement each other in relation to a product or process

The new patent box relief consists in the possibility of increasing by 110% the deduction of costs incurred in relation to the eligible intangible assets.

The benefit must be claimed in the fiscal year when the intangible asset is patented, copyrighted or legally protected and may be used to deduct all the costs incurred in relation to the eligible assets in that year and in the previous eight years.

Read a February 2022 report [PDF 234 KB] prepared by the KPMG member firm in Italy

*Development, enhancement, maintenance, protection and exploitation

**Functional, asset and risk analysis


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