Italy –Tommaso Fonti (TF) After a highly volatile period of investment flow between 2008 and 2012, foreign direct investments (FDI) in Italy have stabilised and reached USD 28.9 billion in 2016, making Italy the 15th recipient of FDI in the world, ahead of many major economies including France, Mexico, Spain and Japan. In particular, investment projects in Italy rose by 62 per cent last year and that was the largest increase among large EU economies.
The most out-performing industries, which amount to the key sectors of the national economy, are the automobile sector, the fashion and luxury sector, the pharmaceutical and chemical sector, the aerospace sector and the high-tech industry and new technology sector.
Other high potential sectors for foreign investments are real estate, tourism and food industry.
The most attractive regions are those of the North of Italy that receives considerable amounts of foreign in- vestments. In particular, Lombardy, Emilia-Romagna and Veneto remain the favourite destinations for foreign investors: the three regions account for 67 per cent of FDI. On the contrary the regions of South of Italy remain largely ignored by international investors.
This is the reason why the Italian government has favored investments in the so called “Mezzogiorno” (i.e. regions of southern Italy, Sardinia and Sicily). More precisely, various regional aids are granted to investors who intend to invest and carry out business in the Mezzogiorno. The eligible projects must enable existing companies to be modernised and developed, new technologies to be integrated and local resources to be exploited. In addition, companies created in the aforesaid area in order to develop a new industrial activity (outside sectors in decline) may be exempted from corporate tax in all or in part.
The main tax incentives available for companies establishing a business in Italy include the ACE regime, which reduces corporate or income tax by an amount deter- mined with regard to the increase of the net equity of the relevant taxpayer.
Research and development (R&D) incentives are also important to be aware of. Up to the tax year 2020 (included), companies investing at least EUR30,000 (annually) in some eligible R&D activities benefit from a tax credit equal to 50 per cent of the annual increase in R&D expenses, compared to the average of the investments made in 2013, 2014 and 2015 (within certain limits per tax year).
Starting from 2017, 50 per cent of the income deriving from the exploitation of selected IPs (such as patents, de- signs or models, processes) will not be subject to income tax as part of the Patent Box Regime.
Capital gains deriving from the sale of these assets are fully exempt from income tax, provided that at least 90 per cent of the same capital gains are reinvested into other assets of the same type.
The 2016 Stability Act introduces a tax credit in favour of those businesses that purchase new assets between 2016 and 2019 and is aimed at production plants based in the regions of Campania, Apulia, Basilicata, Calabria, Sicily, Molise, Sardinia and Abruzzo. In particular, the tax credit is up to 20 per cent for small enterprises, 15 per cent for medium-sized enterprises and 10 per cent for large enterprises.
