Hyper depreciation with no continuative interconnection required

The 2019 Budget Law has confirmed for tax year 2019 the hyper depreciation tax regime, which was enforced by the “Industria 4.0” Decree issued by the Ministry of Economic Development (MI.S.E.) in 2017.
The hyper depreciation is a tax deduction linked to the purchase of operational assets aimed to the digital conversion of enterprises according to the “Industria 4.0” criteria, that allows businesses to benefit of a lift up of the purchase costs for fiscal depreciation purposes, under art. 1 c.9 L.232/2016.
In order to benefit from the incentive, the company must draw up a statement duly signed by the legal representative, or appoint a technical expert (i.e. an engineer) in order to assessing whether or not the asset meets the requirement set forth by the Law. In particular, the assets must:
• meet the characteristics and features laid down in the Budget Law n. 232/2016 annex A and/or B;
• be linked to the enterprise manufacturing system, as pointed out by the Circular n.4/E of 2017 issued by the Italian Tax Authority.
The last condition is not always easy to maintain when the assets are operated manually or when they’re placed in remoted areas, away from the wired network.
The Italian Tax Authority consulted with the MI.S.E . in order to address this issue, for which the latter rendered a dedicated opinion identifying the following requirements: if the lack of interconnection with the enterprise manufacturing system is not linked to the assets features nor it is dependent of the companies’ discretion, it is likely possible that said circumstances will not jeopardize the application of the tax deduction as long as the interconnection requirement is safeguarded for the majority of the time in which the assets are put in service.
The Tax Authority also clarified that when the asset is operated manually, the application of the tax deduction might not be in jeopardy, provided that it is related to fringe circumstances.
To that extent, this implies that business owners will be able to benefit from hyper depreciation if the partial lack of the interconnection requirement:
• is not predominant during the tax year;
• does not depend on inadequacy of assets with respect to the technical requirements set forth by the Law;
• is not the result of the company’s decisions, but depends on external factors.