The European Commission has approved three Italian aid schemes totaling €6 billion aimed at providing companies adversely affected by the coronavirus pandemic with liquidity and capital through tax credits and loans.
One scheme provides a subsidy by entitling private investors putting capital into companies affected by the pandemic to a tax credit of up to 20 percent of the invested amount. “Under the scheme, the aid will therefore be granted both to the investor (that receives the tax advantage) and the investee company (that receives the investment),” the commission said in a July 31 release.
The second measure provides a tax credit for affected companies of up to 30 percent of the amount of their capital increase, the release says. Under the third measure, subordinated loans funded by public support will provide liquidity and capital to small and medium-size enterprises.
The aid schemes were announced in May as part of Italy’s €55 billion “Relaunch Decree” — the third in a series of government aid packages meant to tackle the economic consequences of the COVID-19 pandemic — but they needed to be approved by the commission. Companies qualifying for aid must have turnover between €5 million and €50 million, according to government reports. Tax credits may be used starting in 2021, in the 2020 tax return.
“With these three schemes, with an overall budget of €6 billion, Italy will further support SMEs affected by the coronavirus outbreak by strengthening their capital base and facilitating their access to finance in these difficult times,” said Margrethe Vestager, commission vice president for competition policy, in the release. “The schemes aim at incentivizing private investors to help companies cope with the liquidity shortages they are facing as a result of the outbreak and continue their activity.”
The release says the schemes will be open to companies that faced “a severe reduction of revenues in March and April 2020” and agree to approve and implement a capital increase.
For the two tax credit schemes, aid must not exceed €800,000 per company, except for the primary agriculture sector and fishery and aquaculture sectors, which are subject to limits of €100,00 and €120,000, respectively, according to the commission. For the subordinated loan scheme, aid must not exceed 12.5 percent of the 2019 turnover of the company receiving funds. Aid in all three schemes is temporary and may be granted by the end of 2020, the release says.
In June the commission approved a €7.6 billion Italian aid scheme, which partially waives Italy’s regional corporate tax for a year and provides tax credits for businesses and self-employed workers. The measures were also announced as part of the Relaunch Decree.