Less taxes and more focus on the environment and welfare: the 2020 Budget Law
With the 2020 Budget Law, the Italian government has paved the way for a series of policies that aim to reduce taxes on labour, relaunch investments for environmental and social issues and support the welfare system. The budget, which also includes the so-called “fiscal decree”, reports a net amount of € 32 billion and is designed to address three major challenges: the need to avoid the € 23.1 billion increase in indirect taxes starting from 2020; the need to ensure the stability and sustainability of public finances; the need to boost the Italian economy.
There will no longer be an increase to VAT and excise duties, and taxes payable by employees will be reduced by € 3 billion in 2020 and € 5 billion in subsequent years. The welfare system and measures to support families have been strengthened, with certain existing regulations being confirmed, others being reinforced and new measures also being introduced, such as the abolition of the “superticket” (surcharge on health care fees).
During the period 2020-2034, additional resources are planned for public investments by central government – an extra € 34.6 billion in addition to the resources already allocated in the budget – as well as measures to support investments by private companies, for a total of € 12.2 billion. Furthermore, additional funding of approximately € 36 billion is also planned for local authorities to make investments during the period 2020-2034.
The law focuses on the environment, introducing Italys Green New Deal, which involves funding of over € 4 billion for the period 2020-2023, to relaunch development and investments with a view to environmental sustainability. A fund has also been set up to relaunch investments by central government: endowed with over € 20 billion for the period between 2020 and 2034, this fund aims to channel resources into the development of the circular economy, decarbonisation and the reduction of emissions.
Please find below the main measures contained in the Budget Law.
- VAT increases scrapped
- Payroll taxes reduced
- “Superticket” scrapped and new hospitals to be built
- “Ape” early retirement scheme and “women’s option” extended
- Policies to support disabled people
- Kindergarten bonus
- Baby Bonus and Paternity Leave
- Tax relief for female entrepreneurship and women's sport
- Tax credit for earthquake-affected regions
- Eco-bonus and tax deductions for renovations extended
- Tax exemption for farmers
- Facade Bonus and Sports Bonus
- Green New Deal and sustainable growth
- Support for businesses
- Support to develop southern Italy
- Additional funding for universities, schools and research
- More resources for municipalities
- Public sector employment and security
Safeguard clauses amounting to € 23.1 billion have been cancelled for 2020: € 22.7 billion in VAT increases and € 400 million in excise duties on fuel. This will avoid an additional burden for citizens, estimated at around € 500 per family. VAT increases have also been partially scrapped for 2021 (for € 9.4 billion, equal to around a third of the total) and for 2022 (for € 2.9 billion).
From 1 July, the tax burden will be reduced for employees, who will be able to benefit from a € 3 billion increase in net salaries in 2020, rising to € 5 billion from 2021. It will also be less expensive to hire apprentices: a three-year tax relief of 100% is available for employers with less than nine employees who hire people under this type of contract.
From September 2020, the €10 “superticket” surcharge on medical visits and clinical examinations will be abolished. More resources will be dedicated to Italy’s national health system: an extra € 5 billion in the next three years, € 2 billion of which in the first twelve months. There will also be an increase in resources for the construction of healthcare facilities and for the technological modernisation of the public healthcare system.
The so-called “Ape sociale” early retirement scheme has been extended until 2020. This benefit is paid to certain categories of people, such as the unemployed, partially disabled individuals, relatives of disabled people and workers with particularly onerous jobs, until they qualify for their pension, under certain conditions. € 700 million have been allocated for this measure between 2020 and 2025. The terms for the so-called “women’s option” have also been extended, making it possible for female workers who met certain requirements by the end of 2019 to benefit from this measure.
From 1 January, the kindergarten bonus shall double, reaching a total of € 3,000 for families with an “ISEE” (equivalent financial situation index) of less than € 25,000 and € 2,500 for families with an ISEE of between € 25,001 and € 40,000; for families with an ISEE of over € 40,001, the bonus shall be equal to € 1,500.
This will significantly reduce kindergarten costs for families, even making public or private nursery schools free for some Italian families.
The number of available places will also increase, thanks to a € 2.5 billion fund dedicated to making kindergarten buildings belonging to local authorities safe and to renovating them and building new ones.
The Baby Bonus shall be extended for all children born or adopted up until 31 December 2020, becoming a benefit that can be accessed by all. This “bonus” will be reformulated according to levels of income, up to a maximum of € 160 per month. Approximately € 350 million have been set aside for 2020, increasing to € 410 million for 2021. Compulsory paternity leave shall also be extended for 2020, with the duration increasing to 7 days.
A fund has been set up to grant interest-free loans for initiatives aimed at developing or consolidating agricultural enterprises run by female entrepreneurs in the sector. These loans shall be granted for up to € 300,000, for a maximum duration of 15 years including the grace period.
In order to promote professionalism in women's sport and to ensure female athletes are also covered by legal protective measures for professional sporting activities, women’s sports clubs shall be exempt from paying social security and welfare contributions for the years 2020, 2021 and 2022.
The tax credit for the purchase of new capital goods shall be extended until 31 December 2020 for municipalities in the regions of Abruzzo, Lazio, Marche and Umbria that were affected by the 2016 earthquake. This tax credit is equal to 25% for large enterprises, 35% for medium-sized enterprises and 45% for small enterprises.
The so-called “eco-bonus” has been confirmed for 2020. This allows for a 65% deduction from Irpef (personal income tax) and Ires (corporate income tax) for expenses incurred to upgrade and improve the energy efficiency of buildings. The 50% deductions for building renovations and for the purchase of energy-efficient furniture and appliances shall also be extended.
The exemption from Irpef (personal income tax) for cadastral and agricultural income from land, declared by owner-farmers and professional agricultural entrepreneurs registered with the agricultural social security scheme, shall be extended to 2020.
A 90% Irpef deduction has been introduced for documented expenses incurred in 2020 for construction work aimed at restoring or renovating building facades, including ordinary maintenance work. A 65% tax credit is available for anyone who makes donations towards the maintenance and restoration of existing public sports facilities and the construction of new public sports facilities.
A fund of over € 4 billion has been set up to implement a public investment programme between 2020 and 2023, able to develop and promote Italy's 'Green New Deal'. This also involves guarantees being granted for investment programmes, also as part of public-private partnerships, which aim to develop the circular economy and mitigate the risks deriving from climate change, among other goals.
Overall, approximately € 10 billion shall be set aside for growth and environmental sustainability over the three-year period. The strategy, in line with the Green New Deal announced by the European Commission, will bring additional appropriations of over € 59 billion over the next 15 years.
A fund has also been set up to relaunch central government investments for the development of the circular economy, decarbonisation, emission reduction, energy saving and environmental sustainability.
In addition, for the five-year period 2020-2024, € 500 million per year have been allocated to Italian municipalities, in the form of grants for investments in public works to improve energy efficiency and sustainable development.
In addition to the Green New Deal and the refinancing of the "New Sabatini” (subsidy for the purchase of capital goods), a number of other important measures have been introduced for businesses:
- € 350 million have been set aside for the two-year period 2020-2021 for the redevelopment and productive requalification of crisis areas;
- € 100 million have been allocated to a European microelectronics project for the two-year period 2020-2021;
- “economic growth aid” (“ACE”) has also been reinstated for 2020, representing a general tax incentive for the capitalisation of companies;
- the tax credit for SMEs to take part in international events in their sector has been extended;
- the processes to plan and implement measures financed by the Development and Cohesion Fund (“FSC”) have been simplified;
- the tax credit for “training 4.0” has been extended for all businesses and, with reference to certain investments, also professionals;
- a tax credit has been introduced for investments in research and development, ecological transition, technological innovation 4.0 and other innovative activities and for business competitiveness.
- € 540 million have been appropriated for the refinancing of the "New Sabatini" subsidy for the years 2020-2025. The aim of this measure is to grant micro, small and medium-sized enterprises subsidised loans to invest in new machinery, plants and equipment.
The tax credit for investments in new capital goods for companies in the south of Italy has been extended for 2020, with an allocation of approximately € 675 million.
The "Grow in the South” Fund has been set up to support small and medium-sized enterprises with registered offices and activities in Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily.
The “Stay in the South” incentive, financing business activities in the craft, industry, fishing and aquaculture sectors, or activities relating to the provision of services, including tourism services, has also been strengthened.
Approximately € 3 billion have been appropriated for schools, universities and research. Over € 1 billion shall go towards renewing contracts for non-managerial staff. In addition, € 390 million have been earmarked for the Italian Aerospace Research Agency, € 60 million for university buildings and € 31 million for scholarships. Over € 1 billion have also been allocated to central government and municipal administrations to spend on school buildings and universities, as well as to ensure that schools, roads and public buildings are safe and energy efficient.
Appropriations to grant contributions to municipalities for investments in infrastructure, public works and the safety of roads, bridges, viaducts and public buildings, as well as for work to improve the energy efficiency of public facilities, have been increased from € 4.9 billion to € 8.8 billion. The “Municipal Solidarity” Fund shall be increased: € 100 million in 2020, € 200 million in 2021 and € 300 million in 2022, reaching € 560 million per year starting from 2024.
Starting from 2021, a total of € 8.5 billion in grants will be awarded to municipalities for investments in urban regeneration projects and to reduce marginalisation and social degradation, as well as to improve the appearance of urban surroundings, the social fabric and the environment.
There shall be more resources for public sector employment. Overall, extra resources for over € 4.5 billion have been planned for the renewal of contracts over the three-year period.
In particular, with regard to security, approximately € 50 million in additional resources shall go towards paying overtime for police officers (Italy's State Police, Military Police, Finance Police, Penitentiary Police), starting from 2020. A fund has also been set up for the Italian National Fire Service, with € 65 million set aside for 2020, € 120 million for 2021 and € 165 million starting from 2022.