Encouragement for R&D and IPOs (Initial Public Offerings)

The implementation of new regulations envisaged in the fiscal reform, designed to reduce the tax burden on companies incurring expenditure for technological innovation, research and training is expected soon. In the meantime, Italian companies will enjoy fiscal benefits for research and development investments in 2004 through a partial reduction in tax on income arising from specific investments, achieved through decreasing the amount of the taxable profits. This mechanism also applies when a company declares a loss, as it can be deducted on profits in subsequent years. In practice, companies are allowed to increase the cost of their investments for tax purposes, and this will not alter the ordinary rules for depreciation.

Companies are entitled to benefit from expenditure incurred in R&D investments, participation in trade fairs held abroad, student internships (including school-leavers and graduates), listings on regulated markets (underwriting and placement fees, legal advice and advertising costs, initial listing fees, etc.). Small and medium-sized enterprises (as defined by the European Union) are also entitled to this benefit when they join together to form consortia in order to achieve IT innovation synergies within the ambit of chains of production or industrial districts.

In order to further encourage Italian R&D, researchers residing abroad who come back to work in Italy may benefit from a reduced income tax rate of 10% for the first three years.

For the newly-listed securities, lower taxation on expenditure is not the only benefit for 2004. Upon initial public offering on a regulated market, companies may also enjoy an additional 20% tax relief on the IRES rate for three years.