The new patent box regime in Italy

Beginning in 2021, the new regime provides for a “super deduction” tax of 110% on the costs incurred for the creation and development of software protected by copyright, industrial patents, designs, and models relevant for both income tax and regional income tax.

Expenditures that qualify for the extra deduction include, for example, personnel costs for R&D, technical and legal advice, depreciation, and leasing fees.

Considering the current Italian tax rates for a corporation, the net tax saving is about 31% of the costs incurred. For example, a taxpayer who invests EUR 100,000 for the development and registration of a patent will benefit from a tax saving of EUR 30,690. In addition, expenses incurred in the year of obtaining the patent right (e.g. patent registration), and in the preceding eight financial years, can be facilitated.

The range of entities eligible for this tax relief is very broad and includes, among other items, partnerships and corporations, and permanent establishments of foreign entities and trusts.

A further interesting fact is that the patent box can be combined with another important benefit granted by the Italian tax authorities – the Research & Development tax credit, a benefit that very often facilitates the same costs as those included in the patent box.

Finally, the penalty protection regime, already known in the field of transfer pricing, is applied to the patent box. The preparation of a document illustrating how the benefit was calculated guarantees the taxpayer exemption from penalties in the event of any dispute of the benefit raised by the revenue agency.

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