Patent Box in Italy: 110% Uplift for Software, Patents, Designs and Models
The Italian Patent Box regime allows companies carrying out qualifying research and development activities on certain intangible assets to apply a 110% uplift to the related tax-deductible costs. CMO&A assists companies in assessing eligibility, identifying qualifying intangible assets and activities and reconstructing the relevant costs.
Subject to the applicable requirements, the regime covers:
- copyright-protected software;
- industrial patents;
- legally protected designs and models.
The qualifying intangible assets must be used, directly or indirectly, in the company’s business activities. The regime is governed by Article 6 of Italian Decree-Law No. 146/2021, as subsequently amended.
From eligibility assessment to calculation of the tax benefit
We assist companies with:
- preliminary assessment of Patent Box eligibility;
- identification of qualifying intangible assets;
- analysis of relevant activities carried out internally or through external parties;
- identification and review of costs attributable to qualifying assets;
- calculation of the 110% tax uplift;
- assessment of the possible application of the look-back mechanism;
- preparation of appropriate documentation for penalty protection purposes.
The analysis therefore requires an integrated review of tax, accounting and documentation aspects, linking the costs incurred to the activities actually performed in relation to the qualifying intangible assets.
Look-back mechanism
Where the statutory conditions are met, the Patent Box regime may also allow companies to benefit from qualifying costs incurred in previous years.
In the tax period in which the relevant intangible asset obtains the required legal protection, the 110% uplift may also apply to certain qualifying expenses incurred in up to the eight preceding tax periods, provided that those costs contributed to the creation of the qualifying intangible asset.
For this reason, Patent Box eligibility should not always be assessed solely by reference to current-year expenditure: it may also be appropriate to reconstruct the historical investments that led to the development of the protected asset.
Documentation and penalty protection
The preparation of appropriate supporting documentation is not a condition for obtaining the tax benefit itself, but it may be particularly important in the event of a tax audit.
Where the documentation is prepared in accordance with the applicable requirements and the relevant disclosure obligations are satisfied, it may provide protection from penalties for an inaccurate tax return if the Italian Tax Authorities subsequently challenge the amount of the uplift claimed.
The Patent Box regime may be considered together with the Firm’s expertise in tax credits for research and development, technological innovation and design and tax advisory and financial statements, allowing the tax effects of innovation investments to be assessed on a coordinated basis.
If your company develops software, patents, designs or models and you would like to assess eligibility for the Italian Patent Box regime, you can arrange an initial meeting with CMO&A by emailing c.orsini@studiassociato.it
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