The 2021 Budget Law
The 2021 Budget Law confirms the Government's main lines of action.
Paramount are healthcare resilience, supporting businesses and families, investments with over €50 billion over 15 years and preserving job market, with a specific focus on young people and women. The Budget Law envisages important reforms, such as the single and universal child allowance (unified family support scheme) and the personal income tax.
This is a highly expansionary manoeuvre, amounting to almost 40 billion euro in terms of net borrowing: about 24 billion euro coming from the measures included in the Budget Law, plus more than 15 billion euro of the Next Generation EU programme’s resources.
The main goal is supporting the recovery.
Fiscal stimulus takes into account the evolution of the Covid-19 pandemic. The strategy to overcome is made with the following ingredients: investment, education, welfare, health, and employment. We aim to relaunch growth, absorb the economic and social impact caused by the emergency, and kick-starting the transformation of the country, in the path of innovation, sustainability, cohesion and equity.
To make the National Health Service even more efficient, in 2021 there will be additional resources to enroll doctors and nurses, interventions to restructure the healthcare supply in hospitals and throughout the territory and a 400 million euro fund to purchase the necessary stocks of vaccines and drugs. VAT on anti-Covid vaccines, swabs and tests will be cancelled.
Resources have been allocated to implement the tax reform and for the completion of the tax wedge cut, which came into effect in 2020. The single child and universal allowance will start in July and the personal income tax reform will enter into force from 2022. The universal income scheme is refinanced and the ‘Most Deprived’ fund is strengthened.
With regard to labour policies, there will be three years decontribution at the 100% rate for hiring young people up to 35 years of age, as well as for hiring women, with no age limits. A further 5 billion euro will be allocated to finance and implement the exemption of 30% social security and welfare contributions paid by private employers of the South for their employees. A new social safety net, the Extraordinary Indemnity for Income and Operational Continuity (ISCRO), will broaden protections in favour of those registered for VAT within the separate management (partite Iva in gestione separata).
For companies, the moratorium on loan repayments is further extended, the Central Guarantee Fund for SMEs is refinanced, with coverage extended to 90% and 100% until June 2021, and Sace's (Italian Export Credit Agency) intervention is strengthened through 'Garanzia Italia' program, which is also extended to medium-sized enterprises with up to 499 employees.
The 'Transition 4.0' program is strengthened and extended for two years; the "new Sabatini" is refinanced for 370 million euros to further boost companies’ investments and the tax credit for investments in the regions of Southern Italy is extended for 2021 with an allocation of one billion euros. The same extension is guaranteed to the measures for the internationalization of companies, with two billion euros.
The 110% super bonus for energy and earthquake redevelopment works is extended until June 30, 2022 and extended to December 31, 2022 for works already undertaken, and will also affect the interventions for the removal of architectural barriers.
As regards to schools and education, the recruitment of 25,000 support teachers is funded with about 1 billion euros when fully operational. A recruitment plan for nursery schools is also launched, connected with the plan for new kindergartens, which will be financed with the Next Generation Eu program and to the measures ensuring gratuity for the majority of families that has been financed by the last budget law.
In terms of investment, to strengthen territorial cohesion, an initial additional allocation of resources to the Fund for Development and Cohesion is provided for the 2021-2027 programming cycle, for a further total of 50 billion euros for the 2021-2030 period. The criteria and procedures for programming, financial management and monitoring of the 2021-2027 resources are also defined, in analogy with the previous programming period.
- National Health Fund: the endowment has been increased by € 1 billion, totalling around € 121 billion by 2021.
- Recruitment of health professionals: through an allocation of approximately € 650 million, 3,000 doctors and 12,000 nurses will be recruited to implement the immunisation plan. The measures adopted in 2020 regarding the recruitment of doctors and nurses on fixed-term contracts have also been confirmed for 2021.
- Allowances for doctors and nurses: around € 850 million per year will be allocated to health professionals (of which around € 500 million for doctors, up to € 335 million per year for nurses' allowances to be paid as of 1 January 2021, and € 100 million for other health professionals).
- Fund for the purchase of anti-Covid vaccines and drugs: € 400 million have been allocated for 2021. VAT on anti-Covid vaccines, as well as on swabs and tests, has been abolished.
- Enhancement of rapid antigen tests by general practitioners and paediatricians: an additional € 70 million has been allocated for 2021 in addition to the € 30 million allocated in 2020.
- Healthcare construction: € 100 million have been allocated for 2021 (€ 2 billion over 15 years) for the renovation and technological modernisation of buildings.
- Specialist training contracts for junior doctors: a total of € 537 million will be allocated from 2021 to 2025.
- COVID ‘Cassa integrazione’ wage supplement schemes: a € 5.3 billion fund has been set up to fund further coverage of the Covid CIG standard fund to supplement earnings up to March and the ‘Cassa in deroga’ (exceptional fund to supplement earnings) and the ‘assegno ordinario’ (wage subsidy allowance) schemes up to June. Access to the wage supplement schemes will be free of charge for firms, and layoffs will not be allowed until 31 March.
- Fixed-term contracts with no specified reason: until 31 March 2021, said contracts can be renewed for a maximum of 12 months and only on a single occasion.
- 100% contributions reduction for young people under the age of 35 for 36 months (48 months in the South): up to a maximum of € 6,000 per year have been allocated for hires in 2021-22, with an allocation of € 200 million for 2021, € 620 million for 2022, and € 775 million for 2023.
- Tax relief for women (who have been unemployed for more than 6 months): 100% relief for 36 months for a maximum of € 6,000 per year for the 2021-22 two-year period, with a total budget of around € 170 million up to 2023.
- Contributions reduction in the South: about € 5.6 billion have been earmarked for 2021 for the implementation of the contributions reduction for all workers in the South, amounting to 30% of the contributions paid up to 2025, 20% in 2026-27 and then 10% in 2028-29.
- 'White year' for the self-employed: an exemption from payment of social security contributions has been introduced for VAT holders and professionals belonging to professional associations affected by the pandemic, with an allocation of € 1 billion for 2021. The measure is aimed at individuals who generated an income of no more than € 50,000 in 2019 and recorded a drop in turnover or fees of no less than 33% in 2020 compared to the previous year.
- ‘ISCRO’ (Extraordinary Indemnity for Income and Operational Continuity) for VAT holders registered with the INPS separate management scheme: a new experimental benefit providing support for six months, from € 250 to € 800 per month, has been introduced for 2021-23. In order to receive ISCRO, it is necessary to have generated, in the year preceding the application, an income of less than 50% of the average self-employment income earned in the three previous years; to have filed a tax return not exceeding € 8,145; to have paid contributions and to have been registered for VAT for at least four years.
- Establishment of a fund for active policies and the reform of social safety nets with a budget of € 500 million for 2021. The reform of outplacement allowances and active policies has been introduced, which can also be used by workers covered by CIG or NASpI and DIS-COLL for more than 4 months.
- Expansion contracts for enterprises with more than 250 employees have been introduced, together with a change in the rule for calculating vertical cyclical part-time hours to facilitate part-time workers' access to pensions (a total of around € 138 million in 2021, € 126 million in 2022, and € 38.5 million in 2023).
- Integration of the fund for the renewal of public service contracts: € 400 million per year will be allocated as of 2021.
- A fund for staff recruitment in Public Administration has been established in addition to those provided for under current legislation. Approximately € 0.5 billion have been allocated for the 2021-2023 three-year period, with an allocation of more than € 300 million as of 2024.
- The Social Fund for Employment and Training has been allocated an additional € 600 million for 2021 and € 200 million for 2022.
- The "Transition 4.0" tax credit has been enhanced and extended for two years, with an allocation of more than € 20 billion over the 2021-25 five-year period (mainly covered by the Recovery and Resilience Facility) to encourage and support businesses with regard to technological transition and environmental sustainability, while boosting private investment. The new version of the tax credit will therefore apply to investments made from 16 November 2020 to 31 December 2022 (June 2023 for the delivery of goods ordered by December 2022 and with a down payment of at least 20%).
- The R&D tax credit in the South has been enhanced and extended up to the end of 2022, with a benefit of up to 45% of investment for small enterprises.
- The tax credit for investments in southern Italy has been extended up to the end of 2022 (over € 1 billion per year in 2021 and 2022). A credit of up to 20% is envisaged for small enterprises that purchase new capital goods for production facilities.
- Establishment of funds to incentivise business activity at various levels: in particular, a total of approximately € 540 million will be available as early as 2021, to be divided among the Technology and Land Fund, the Women's Business Support Fund, the Creative SMEs Fund, the Investment Fund for SMEs in the Aeronautics and Green Economy sector, and the Fund for the Development and Support of Agricultural, Fishing and Aquaculture Industries.
- SME listing bonus: tax credit for consultancy fees relating to the listing of small and medium-sized enterprises has been extended to the end of 2021.
- Fund for the internationalisation of enterprises: SIMEST's 394 Fund has been refinanced with € 1.36 billion up to 2023. In addition, approximately € 670 million have been added to the Italian Ministry of Foreign Affairs' Integrated Promotion Fund.
- Transformation of deferred tax assets (DTA) into tax credits: incentive to encourage business clusters, for a potential pool of about 7,000 companies that will be able to convert about € 3 billion DTAs.
- The "Nuova Sabatini" measure has been simplified and streamlined, with a single refund instead of a 6-year one, and an initial budget of € 370 million.
- Tourism package: exemption from the first IMU property tax instalment for 2021 (also in the entertainment sector) and extension to 30 April 2021 of the tax credit on rents for tourist accommodation businesses, travel agencies and tour operators.
- Car bonuses: in order to promote the recovery of the automotive market and renew the car fleet, incentives for the purchase of hybrid or electric vehicles, including the latest generation of Euro 6 vehicles, with the scrapping of cars that are at least 10 years old, have been extended with € 420 million for 2021.
- Catering: in order to support the catering sector, the activities of which have been severely restricted due to the pandemic, the take-away and home delivery of ready-made meals will be subject to a 10% reduction in VAT.
- Retail: for the electronic storage and transmission of data on receipts, a rationalisation of the penalty ststem has been introduced with a view to a gradual application of sanctions based on the violation committed.
- Extension of key liquidity support measures to 30 June 2021: in particular, extension of the tax credit on losses in case of capital increase and extension of the SME Equity Fund.
- Refinancing of the Central Guarantee Fund for loans to SMEs with extension of coverage to 90% and 100% up to June 2021: € 300 million in 2021 and € 500 million in 2022 and € 1 billion in 2023, € 3 billion in the period from 2024 to 2026. Extension to 15 years if the amortisation of loans up to € 30,000 with a 100% guarantee.
- SACE's “Guarantee Italy” programme has also been extended to medium-sized enterprises with between 250 and 499 employees, which, as of 1 March 2021, will be able to access guarantees on the same terms and conditions as those previously granted by the SME Fund.
- School and university construction: investments amounting to € 3.85 billion in budget appropriations over 15 years (approximately 2.35 billion for university construction and € 1.5 billion for school construction).
- Recruitment of 25,000 support teachers: one billion net balance over two years, € 1.2 billion per year when fully operational. Subsidies for state-recognized private schools for students with disabilities have been re-financed.
- Expansion of school staff with a 1,000-unit increase in teaching staff.
- Non-teaching staff: conversion to full-time employment of more than 4,400 employees.
- Measures to support research: € 65 million increase in the FOE (Ordinary Fund for Research Institutions) allocation as of 2021; establishment of the Fund for the Promotion of the NRP, with € 450 million in the 2021-2023 period.
- Extension of the No-Tax Area for students with an ISEE of up to € 20,000: € 165 million per year as of 2021. Funds to support the payment of rent for students with an ISEE of less than € 20,000 will be provided.
- Music Academies: € 85 million per year allocated as of 2022 for AFAM recruitment and operation.
- Research Investment Fund: financed with € 300 million in 2021 and € 750 in the three-year period.
- Cinema Fund: € 240 million per year allocated when fully operational.
- Single Entertainment Fund: about € 50 million per year allocated when fully operational.
- Museums: € 67 million allocated for 2021 and € 57 million allocated for 2022.
- € 350 million allocated to public and non-public school transport in 2021, divided as follows: Regions (200) and Municipalities (150).
- Increase in the resources of the Municipal Solidarity Fund for the improvement of social services: € 217 million in 2021, to be increased to € 650 million per year as of 2030.
- Nursery schools: resources increased by € 100 million as of 2022, to be increased to € 300 million per year as of 2026.
- Local bodies: € 600 million will be allocated in 2021, of which a further € 500 million to compensate for revenue losses. Investments amounting to € 6.75 billion over 15 years, aimed at securing the territories of Local Authorities and the bridges and viaducts of provinces and municipalities, as well as at reducing geographical gaps (€ 4.6 billion over 15 years), will be made.
- Autonomous provinces: € 300 million per year to be allocated as of 2021.
- Stabilisation of the tax wedge cut for incomes above € 28,000 up to € 40,000: an additional € 3.3 billion for a total annua allocation of over € 7 billion for stabilisation as of 2021.
- Tax reform: € 8 billion allocated for 2022 (along with € 7 billion for 2023), which includes the amounts of the universal allowance, to which the resources estimated as higher permanent revenues from improved tax compliance by taxpayers will be added. The decision to set up a single fund is consistent with the idea that the tax reform and the introduction of the universal allowance are two parts of a single scheme, which will also be implemented following different schedules.
- Single universal allowance for families with children, including the self-employed and the indigent, as of July: additional allocation of € 3 billion for 2021.
- Citizenship income: refinancing with approximately € 4 billion in total up to 2029, i.e., € 480 million per year when fully operational.
- Fund for the Most Deprived: refinancing with € 40 million to be allocated for food distribution in 2021, after the € 300 million allocated in 2020.
- Family caregiver: with an endowment of € 30 million per year for the 2021-23 three-year period, a fund has been set up to reward the social and economic value of non-professional care work. This rewarding of the social and economic value of the remuneration the various forms of domestic work is part of a tax relief system aimed at enabling the full deduction of expenses incurred for care work.
- Building renovations: extension up to 31 December 2021 of incentives for energy requalification, building renovation, the purchase of low-consumption furniture and household appliances and for the ‘Green Bonus’. The ceiling for the ‘furniture bonus’ has been raised from € 10,000 to € 16,000. Overall, there will be a net allocation of around € 700 million in 2022 and € 1.2 billion in 2023.
- Extension of the 110% super bonus: extension up to 30 June 2022 and deferment up to 31 December 2022 to complete works started before 30 June and paid for by 60%. Valid also for works for the removal of architectural barriers.
- IRPEF (Personal Income Tax) exemption for farmers extended to 2021 and deferment to 2021 of the increase in VAT compensation percentages for the supply of live animals of the bovine and porcine species.
- Plastic and sugar tax: moving of the entry into force to July 2021 as regards the plastic tax and to 1 January 2022 as regards the sugar tax, with a simultaneous reduction in penalties and an increase in the exemption threshold for the plastic tax.
- Money transfer: repealing of the tax for money transfers abroad.
- Tax simplifications: as of 2022, the collection of data through electronic invoicing, namely the so-called ‘esterometer’, will be abolished.
- Measures have ben envisaged to facilitate the application of the VAT non-taxable regime for transactions related to high-seas navigation and long-term chartering of recreational craft, and the guaranteeing of the VAT non-taxable regime for companies that, due to the Covid-19 pandemic, have been unable to operate international flights this year.
- Reduction in dividend taxation for non-business entities: profits received as of 2021 by resident non-business entities (or permanent establishments of non-resident entities) carrying out non-profit activities of general interest in specific sectors will contribute to the formation of income to the extent of 50% of the amount.
- Exemption of Italian source dividends and capital gains for foreign investment funds: the law aligns the taxation of dividends received and capital gains realised by UCIs established in EU/EEA Member States with that provided for UCIs resident in Italy.
- Tax credit for losses deriving from individual accumulation plans for SMEs up to 20% of the amounts invested, usable over 10 years and reserved to Italian residents with a 5-year investment minimum.
- Revaluation of land and unlisted holdings: natural persons other than entrepreneurs, non-business entities and non-residents will be able to recalculate, for tax purposes and on the basis of a special appraisal, the purchase value of land and unlisted shareholdings in their possession as at 1 January 2021, by paying, by 30 June 2021, a substitute tax at a rate of 11%.
- Tax evasion countering: a rule will be introduced to limit fraud involving the use of the VAT ceiling by means of an automatic prevention system based on the cross-referencing of the electronic invoicing system with the supplier's letter of intent.
- Childbirth allowance: confirmed for 2021; the duration of paternity leave has been increased to 10 days.
- Holiday bonus: extended until June 2021.
- Nursery schools: the expansion of the range of facilities already launched with the 2020 manoeuvre will continue with increased resources from the Municipal Solidarity Fund: € 100 million as of 2022, to be increased to € 300 million per year when fully operational. The Recovery Plan will reinforce these welfare interventions aimed at freeing women from care work and increasing their presence in the labour market.
- Social Pension Advance (APE) and “Opzione donna”: € 170 million allocated to extend both measures also for 2021. Over the three-year period, € 435 million will be allocated for Social Pension Advance (APE) and € 800 million will be allocated to “Opzione Donna” (for a total € 1.2 billion in the three-year period).
- Civil service for young people: € 200 million allocated for 2021.
- Non-self-sufficiency fund with € 100 million per year.