Law Decree no. 69 of 21 June 2013 (theDecree), published in the Official Gazette on 21 June 2013 would expand significantly the application of the “Robin Hood Tax” on electricity production companies, including renewable energy companies (solar, wind and biomass) originally exempt from the tax, by lowering the turnover and taxable income thresholds.
The “Robin Hood Tax” was originally introduced by Section 81, Paragraph 16 of Law Decree no. 112 of 2008, converted by Law no. 133 of 2008. It provided for a 6.5 per cent increase of the corporate income tax rate (IRES) payable by electricity production companies other than renewables with annual gross revenues exceeding Euro 25 million.
Earlier, Law Decree no. 138 of 2011, converted by Law no. 148 of 14 September 2011, eliminated the exemption for renewable energy companies and reduced the annual gross revenue threshold to Euro 10 million, provided the electricity production company had a taxable income of Euro 1 million.
The new Decree further reduces the gross revenue and taxable income thresholds so that the “Robin Hood Tax” would apply to any energy production company, including renewable energy companies, with:
- gross revenues in the preceding year of more than Euro 3 million
- taxable income for the same year of more than Euro 300,000
The additional tax only applies to legal entities that are organised as corporations and are therefore taxable pursuant to Article 73 of the Consolidated Income Tax Code, but does not apply to special purpose vehicles (SPVs) that are organised as limited partnerships.
If confirmed by the Italian Parliament, these changes will increase the IRES for a great number of renewable energy production companies that initially had been exempt from the “Robin Hood Tax.” In order to become definite, the Decree—which was enacted by the Italian Government—must be converted into law by the Italian Parliament. The timeline for conversion is 60 days, i.e., 20 August 2013, and the Italian Parliament is entitled to make amendments to the Decree. Provided that the Italian Parliament confirms the current wording of Section 5, Paragraph 1 of the Decree, renewable energy companies that exceed the new turnover and income thresholds in 2014 will have to pay the increased IRES of 34 per cent, instead of 27.5 per cent.
It is worth noting that the compatibility of the “Robin Hood Tax” with the Italian Constitution has been challenged and an action is currently pending before the Constitutional Court. In particular, the “Robin Hood Tax” would seem to be in breach of the principles of equality and contribution pursuant to economic capabilities. The Constitutional Court has not yet scheduled a date for the hearing so that it is impossible to foresee when a decision will be made.