Conflavoro proposes tax relief for reinvested profits in Italy budget
Regulation3 min read
Conflavoro PMI presented a proposal at parliamentary hearings on Italy’s 2027 budget to exempt some retained profits from taxable income. Its “Utile Zero” plan would apply when profits are reinvested within two tax periods, with relief capped at 200,000 euros, 500,000 euros or 1 million euros according to revenue; the proposal identifies an increase in tax on online skill games as part of its funding.
Conflavoro PMI proposed tax relief for reinvested profits at parliamentary hearings on Italy’s 2027 budget, with a higher tax on online skill games among the proposed sources of funding.
The proposed five-percentage-point increase in the tax on online skill games would raise €150m a year from 1 January 2028, without affecting amusement machines. Conflavoro estimated that its Utile Zero proposal would cost €2.8bn in cash in 2028 and €1.6bn a year from 2029. Other proposed funding includes €800m a year from higher cigarette duties from 2028, €1.6bn in 2028 and €400m in 2029 from a special current expenditure fund, and €250m in each of 2028 and 2029 and €650m a year from 2030 from FISPE, a fund for economic policy measures.
Under the proposal, businesses using ordinary accounting could exclude profits placed in reserve from taxable income if they reinvest an equivalent amount by the end of the second subsequent tax period. The annual exclusion would be capped at €200,000 for businesses with previous-period revenue of up to €2m, €500,000 for revenue above €2m and up to €10m, and €1m for revenue above €10m. Businesses in their first tax period would have a €200,000 cap.
Eligible investments would include new capital goods, research and development, renewable energy and efficiency, software, artificial intelligence and staff training. Buildings, constructions and used goods would be excluded. The reserve would be unavailable for distribution until the end of the fourth subsequent tax period, while assets would have to remain in the business for three subsequent tax periods. Unreinvested profits would become taxable with interest but without penalties. Access would depend on compliance with social contribution and workplace safety obligations, with details provided in tax returns rather than advance applications, expert reports or certifications.
As an alternative for businesses using simplified accounting or without a taxable base, Conflavoro proposed an automatic investment tax credit for small and medium-sized businesses. The credit would cover 40% of costs up to €300,000 a year, rising to 50% for microbusinesses and southern Italy, and 20% on the portion up to €1m. Reservations would be processed chronologically within a spending limit, with entitlement arising when an order is accepted. Conflavoro estimated that the alternative credit would cost €600m in 2027 and €800m in each of 2028 and 2029, funded from a special capital expenditure fund.
The budget bill lacks measures to support capitalisation or reinvested profits, Conflavoro said. In 2024, research and development spending declined by 13.7% at small firms and 5.2% at medium-sized firms, but grew by 6.4% at large firms, according to ISTAT. A conditional corporate tax rate cut introduced for 2025 applied for one tax period; ISTAT microsimulation estimates indicate that it benefits 1.4% of corporations, predominantly businesses with turnover of at least two million.