Italian New Patent Box: the tax benefit for companies investing in Innovation

Nicola Francione – IP Lawyer – BLCI Rome

The Patent Box is an optional tax regime (tax relief) for Innovation through Intellectual Property Assets, combinable with other tax credits. It is valid for 5 years, renewable, in force in Italy since 2015 (Old Patent Box).

The 2022 Budget Law (effective from February 2022) issued the New Patent Box, which greatly changed the previous regulation, modifying its purposes, structure and functioning.

Currently, it is a subsidy based on R&D Costs relating to IPR (Intellectual Property Rights) to the extent of 110%: these are all those costs incurred in carrying out the company’s Relevant Activities involving the development, growth, maintenance protection and exploitation of specific IPRs.

New Patent Box following can benefit: natural persons carrying out commercial businesses; corporations and commercial entities; non-commercial entities, under certain conditions; partnerships and equivalents; companies and entities residing in countries with which an agreement is in force to avoid double taxation and with which the exchange of information is effective, with a permanent offices in Italy to which the intangible assets under the relief can be attributed.

The Relevant Activities eligible for relief are: industrial research and experimental development; technical activities of technological innovation (software, patents for inventions, utility models, plant varieties); protection of aesthetic elements (design); legal protection of IPR.

IPR must be used, directly or indirectly, in carrying out the business activity.

The eligible costs to obtain the subsidy are those for personnel; for related to movable capital goods and intangible assets (e.g. software licenses); for consultancy services and equivalent services; for materials, supplies and other similar products; those related to maintenance of subsidized IPRs, renewal, protection.

To obtain the New Patent Box , it is necessary to prepare, with the help of skilled consultants (experts in IPR and corporate taxation), the Appropriate Documentation (penalty protection) relating to the Relevant Activities and Costs incurred for their performance: this Documentation consists of a document, divided into two Sections:

  1. a) Section A must contain: the shareholding structure of the company; Relevant Activities; Company Organizational Model; Technical report; functions, risks and assets of the company.
  2. b) Section B must contain: eligible costs incurred; tax changes referable to the intangible assets to be facilitated.

The taxpayer must notify the Italian Tax Agency in the report concerning the tax period for which he/she benefits of the Patent Box.

In recent times, some proposals are ruling to the Italian Government to extend cases of patent Box also to the profits generated by IPRs, as happened until October 2021.

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