Growth Decree: the mini-IRES 2019

The Growth Decree, initially approved on 4 April 2019 with the formula “except to agreements”, received its final green light from the Council of Ministers on last April 23rd.

Among the many economic, fiscal and development provisions envisaged, the final version of the decree (published in the Official Gazette on 30/04/2019 and entered into force on 01/05/2019) definitively amends the provision upon mini-IRES 15% set out by the Budget Law 2019, introducing a new measure aimed at taxing with the application of a reduced Corporate Income Tax rate, undistributed business profits.

In particular, article 2 of the Growth Decree provides that, starting from the tax period following the one in progress as at 31/12/2021, business profits are subject to a reduced CIT rate of 20,5% (instead of 24%), up to the amount of the latter accrued to freely disposable retained earning reserves.
For the previous tax periods, therefore until 31/12/2021, a transitional regime is envisaged according to which the applicable reduced CIT rates will be equal to:

• at 22,5% for the year 2019;
• at 21,5% for the year 2019;
• at 21% for the year 2019.

The amount of retained earnings that exceed the fiscal taxable profit for the year (if any) is computed as an increase in the profits set aside in the retained earnings reserve in the following year.
By express provision of the law, the tax advantage provided for by article 2 can be combined with other benefits that may be granted, with the exception of those that provide for flat-rate income determination schemes and those referred to in article 6 of the DPR 601/73.

Finally, it is specified that the provision will also be applicable for the purposes of personal income tax and therefore to the business income declared by individual entrepreneurs and by general partnerships and simple limited partnerships under ordinary accounting. Financial intermediaries are excluded from this facility.