With large names like Gucci, Prada, Valentino, and Versace working inside its ranks, Italy’s style and textile business is the second largest manufacturing sector within the nation (after metallurgic). Using some 600,000 individuals and representing not less than 20 p.c of nationwide exports, the business generates 95 billion euros ($98 billion) in annual revenues, in accordance with Reuters, making it not solely one of many greatest segments of the Italian market (and that of the European Union), but in addition one which has benefitted from regular development in recent times, which is why it’s being given particular consideration in a brand new COVID-19-specific tax legislation.
Following its preliminary enactment in Might, Law Decree No. 34, or the “Rilancio Decree,” was revamped this month to incorporate various amendments in furtherance of its bigger purpose to offer company and tax measures to assist Italian corporations in mild of the sweeping manufacturing disruptions and better market volatility cased by the COVID pandemic. Among the many new additions to the legislation – which first went into impact on Might 19, 2020 and pledged an extra €55 billion in stimulus measures to assist “relaunch” the Italian economic system – is a particular provision that goals to offer tax credit for entities within the “textile, style and equipment sectors” in reference to their “remaining inventory inventories.”
In line with Baker McKenzie’s Mariassunta Pica, Bianca Bagnoli and Marzio Bucciol, the July 19, 2020 amendments embody one which states that for the 2020 fiscal 12 months, “Taxpayers finishing up enterprise actions within the textile, style and equipment sectors might profit from a brand new tax credit score equal to 30 p.c of the worth of the inventories on the year-end exceeding the common of the inventories booked within the three fiscal years previous the one in progress as of March 10, 2020.”
The legislation requires that to ensure that an organization to be eligible for a tax credit score, which is able to offset tax and social safety liabilities pertaining to the fiscal 12 months, “the inventories have to be evaluated by utilizing the identical methodology and standards each within the tax interval falling throughout the tax credit score and within the three earlier tax durations.”
A brand new modification is a transparent nod to the COVID-induced disruption to the state of the worldwide attire market, specifically as a result of interruption of provide chains, together with these for uncooked supplies, and an excess of order cancellations, which has had a big affect on Italian manufacturers and producers, alike. It comes on the heels of efforts by varied main Italian attire business commerce organizations and lobbying teams to push the nation’s authorities to allow style and luxurious manufacturers to renew work on the idea of the “lasting harm” that might be triggered to the county’s economic system and the viability of its attire sector on account of a possible “financial epidemic.”
Along with stunting the quarterly and annual development projections of corporations like Prada, whose CEO Patrizio Bertelli revealed in March that COVID had already “interrupted our development trajectory,” noting that the group “anticipating a damaging affect on this 12 months’s outcomes,” the widespread lockdown mandates in international locations throughout the globe have left brands with unsold inventory that is piling up, which is the place the newly-enacted Italian legislation seeks to offer some reduction.