Enhanced depreciation/tax credit for capital assets: renewable energy power generation plants

20 January 2023


With regard to the eligibility of assets for the purposes of the enhanced depreciation and/or tax credit regime, for an asset to be eligible, it must meet the following criteria:

  • that the asset is instrumental for the subject that benefits from it. Circular 4/E of 30/03/2017 states: “The reference of the rule to ‘instrumental’ assets implies that investment goods must be characterized by the requirement of ‘instrumentality’ with respect to the activity carried out by the company benefiting from the incentive.”
  • that the asset is new
  • that the asset falls within those listed in the classification provided in Annex A and Annex B to Law No. 232 of 11 December 2016 (Budget Law 2017)
  • that the asset is interconnected
  • that the tangible asset falls within the classification in Annex A among the “Instrumental goods whose operation is controlled by computerized systems or managed through appropriate sensors and actuators”.

Eligible Entities

The rule extends the possibility of benefiting from the incentive to all entities earning business income, regardless of the type of activity conducted; this means that the incentive can also be used by those producing energy or providing services, provided that the eligible asset meets all other required criteria.

An electricity production plant may represent an investment in tangible assets made by:

• a company whose registered business activity (identifiable through the ATECO code) exclusively involves the production and sale of energy • a company whose business activity is that specified in Article 2135 of the Civil Code: cultivation of land, forestry, animal husbandry, and related activities (i.e., agricultural enterprises)

Special Purpose Companies Producing and Selling Electricity Exclusively

It is evident that if the incentive is used by a company exclusively producing and selling electricity, the electricity production plant undoubtedly qualifies as a production plant. Therefore, when classifying it among the assets listed in Annex A, it necessarily falls under the category of “Instrumental goods whose operation is controlled by computerized systems or managed through appropriate sensors and actuators.” Furthermore, when evaluating the subcategories, a solar power plant can be categorized under one of the contemplated categories.

Regarding the second part of the definition, i.e., the fact that the product is realized through the transformation of materials and raw materials, in this specific case, we are referring to photovoltaic plants whose principle of operation is based on the photovoltaic effect, which converts solar energy into electricity through photovoltaic cells. A solar cell or photovoltaic cell is a solid-state (semiconductor) electrical/electronic device that converts the energy of incident sunlight into electricity via the photovoltaic effect. It is a type of photoelectric cell, whose electrical characteristics, such as current, voltage, and resistance, can vary when exposed to light. The photovoltaic cell is the constituent element of photovoltaic modules, also known as solar panels. Therefore, a photovoltaic plant simply produces electricity (product) by transforming the raw material, which in this case is solar energy.

Agricultural Enterprises

As indicated by the Ministry in the FAQs that follow, concerning renewable energy installations, these are considered akin to special purpose companies.

  1. In FAQ 6.2 of MISE regarding the Sabatini Law, it is stated that the same (which finances see FAQ 6.3, investments functional to business activities) is eligible only for companies engaged in electricity production (35.11) or agricultural enterprises (see FAQ 6.22 even if they do not have 35.11); for companies other than these, the installation must be part of an investment in instrumental assets for the activity conducted (see also FAQ 6.11).
  2. FAQ 6.22 reads: “the production of energy from renewable sources carried out by agricultural enterprises is considered a related activity and therefore productive of agricultural income according to Article 2135 paragraph 3 of the Civil Code (see also Circular 32/A and resolution 98/E).
  3. Given the above, it is unequivocal that MISE states that photovoltaics are instrumental only for special purpose companies or agricultural enterprises, and the Revenue Agency reaffirms that for agricultural enterprises, it is an instrumental asset to the activity conducted (photovoltaics and biomass).

Edited by – Studio Iniziativa – www.studioiniziativa.it

Taken from Green Company Magazine (Volume 8) – see all magazine issues

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