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Measures enacted by the Italian Government for the financial support of companies and the postponement of tax fulfillments – “Liquidity Decree”

  • Italy
  • General

14-04-2020

On April 8, 2020, the Italian Government approved the so called “Liquidity Decree” (Law Decree no. 23, entered into force as of April 9, 2020) mainly aimed at financially supporting companies in difficulty due to COVID-19 emergency, by means of a significant injection of liquidity (approximately Euro 400 billion).

The enacted measures deal with five main areas:

1.   Access to credit, support for liquidity, exports, internationalization and investments.

2.   Measures aimed at protecting the going concern.

3.   Strengthening of Golden Powers and financial transparency obligations.

4.   Tax measures for the postponement of tax fulfillments.

5.   Further provisions.

Liquidity Decree must be converted into law within 60 days from the date of its publication in the Italian Official Gazette. It is immediately effective, but some amendments may intervene before its conversion into law.

Please find below a brief analysis of the main measures adopted.

 

  1. 1.    Access to credit, support for liquidity, exports, internationalization and investments

1.1.  Access to credit and liquidity support for companies

The largest impact measure consists of the provision of a guarantee by the State through the company SACE, for a total amount of Euro 200 billion in favor of bank institutions which provide loans to companies.

The coverage of the guarantee may range between 70% and 90% of the financed amount, depending on the size of the company, and it is subject to several conditions (inter alia, the company - and the other companies of the group, if any - shall not approve dividend distribution for the subsequent twelve months and it shall allocate the amount received to support productive activities located in Italy).

In detail, the Liquidity Decree provides for:

  • A coverage equal to 90% of the financed amount for companies with less than 5,000 employees in Italy and a turnover lower than Euro 1.5 billion (a simplified procedure for accessing the guarantee is also provided).
  • A coverage equal to 80% of the financed amount for companies with over 5,000 employees and a turnover between Euro 1.5 billion and Euro 5 billion.
  • A coverage equal to 70% of the financed amount for companies with turnover higher than Euro 5 billion.

The guarantee cannot exceed 25% of the turnover recorded by the company in 2019 or the double of the personnel cost incurred in the same year and it is issued only with reference to loans with a maximum duration of 6 years.

For SMEs, the access to such a guarantee is subject to the condition that they have exhausted the credit issued by the SMEs Central Guarantee Fund.

1.2. Access to credit and liquidity support for SMEs

The Liquidity Decree provides for some derogatory measures, valid until December 31, 2020, aimed at strengthening the Central Guarantee Fund for SMEs (which replace those introduced by Cura Italia Decree), including, inter alia:

  • The increase in the maximum guaranteed amount for each company up to Euro 5 million.
  • The free issuance of the guarantee.
  • A coverage equal to 100% for new loans of an amount not exceeding Euro 25,000 obtained by SMEs whose business activity has been affected by the Covid-19 emergency (as per self-certified declaration), automatically and without any creditworthiness assessment, provided that the amount of the guarantee does not exceed 25% of the company's turnover and the loan does not provide the principal’s refund before 24 months and it has a maximum duration of 72 months.
  • A coverage equal to 90% (100% if combined with that issued by Confidi or other authorized entities) for new loans of an amount between Euro 25,000 and Euro 800,000 obtained by SMEs (which self-certify the suffered damages due to the Covid-19 emergency), with revenue not exceeding Euro 3,200,000, the release of which is however subject to a creditworthiness assessment. The coverage percentage is reduced to 90% in case of new loans of an amount between Euro 800,000 and Euro 5 million.

1.3. Export support

The Liquidity Decree also enhances public export support, committing resources for an amount equal to Euro 200 billion to such a area.

Specifically, a co-insurance system is introduced, according to which the commitments deriving from the SACE insurance activity are assumed by the State for 90% and by SACE for the remaining 10%.

 

  1. 2.    Measures aimed at protecting the going concern

The Liquidity Decree contains several measures aimed at ensuring the going concern of those companies which, before the crisis due to the spread of COVID-19, were in financial and economic balance and had a regular going concern perspective.

In detail, the Liquidity Decree allows:

  • Evaluating and adapting – in drafting the Financial Statements of the current year - the criteria of prudence and going concern in light of the situation emerging from the last closed financial statements;
  • Sterilizing the causes of company dissolution due to reduction or loss of share capital provided for by the Italian Civil Code;
  • Disabling the mechanisms, provided for by the Italian Civil Code, which place shareholders in a subordinate position with respect to creditors in the event of insolvency;
  • Postponing the entry into force of the Code of Business Crisis and Insolvency (Legislative Decree no. 14/2019) to September 1, 2021;
  • Introducing several measures aimed at avoiding that companies enter into bankruptcy and other insolvency procedures until the COVID-19 emergency lasts.

 

  1. 3.    Strengthening of Golden Powers and financial transparency obligations

3.1. Golden Powers

In order to empower the discipline of the special intervention powers of the State in the sectors of strategic importance, the Liquidity Decree provides for the extension of the objective intervention scope of the Golden Powers discipline. Specifically, it allows to require prior authorization for the relevant operations related, inter alia, to credit e insurance sectors.

3.2. Transparency obligations

The Liquidity Decree enhances the control powers of CONSOB (i.e. the independent authority which supervise the financial markets) through the expansion of the transparency obligations provided for by the Italian Consolidated Finance Act.

Specifically, CONSOB is allowed to temporarily lower to 5% the relevant thresholds for communications and also to increase the number of companies that are subject to it, including the companies with widespread shareholding.

 

  1. 4.    Tax measures for the postponement of tax fulfillments

The Liquidity Decree suspends the payments of VAT, withholding tax and social security contributions for April and May, 2020.

In detail, payments of VAT, withholding tax and social security contributions are suspended:

  • For companies with a drop in turnover of at least 33% with revenue lower than Euro 50 million.
  • For companies with a drop in turnover of at least 50% with revenue exceeding  Euro 50 million.
  • For companies which started operating from April 1, 2019.
  • For residents of the provinces of Bergamo, Brescia, Cremona, Lodi, Piacenza with a drop in turnover of at least 33%, the VAT payments, regardless of the revenue threshold of Euro 50 million, are suspended.

The payments are due on June 30, 2020 (as a lump sum or in 5 monthly installments).

The Liquidity Decree also provides for:

  • The extension of the suspension of withholding taxes on income from self-employment provided for by Cura Italia Decree at the expiring dates of April and May.
  • The extension to April 16, 2020 of the deadline for payments falling due on March 20, 2020.
  • The extension of the deadline for submitting the annual statement delivered by the withholding agent (“Certificazione Unica”) to April 30, 2020.
  • For 2020 tax period, the non-application of penalties and interest of underpayments of advance instalments relative to Personal Income Tax, Corporate Income Tax and Regional Tax, calculated by means of the forecast-based method, provided that the difference between the payment and the amount due does not exceed 20%.
  • The extension of the tax credit for the sanitisation of workplaces (introduced by the Cura Italia Decree) - equal to 50% of the related expenses incurred during 2020, up to a maximum of Euro 20,000 - also to those incurred for the purchase of personal protective equipment.

 

  1. 5.    Further provisions

Lastly, the Liquidity Decree provides for by:

  • The postponement of the deadline for the hearings of civil, criminal and tax proceedings pending from April 15 to May 11, 2020.

The suspension for the same period of the expiring terms for the fulfillment of any act of civil, criminal and tax proceedings

Disclaimer

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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