The Finance Act 2014 amended the tax regime applicable to financial leases for corporate income tax ("IRES") purposes, making it more favorable than before. Under Italian tax law, a lessee that does not follow IAS/IFRS to draft its financial statements can deduct the lease payments, regardless of the method used to account for the financial lease. Under the previous regime, which still applies to financial leases executed until December 31, 2013, the lease payments had to be deducted over a period that could not be shorter than two-thirds of the statutory depreciation period of the asset (or the entire statutory depreciation period in the case of leasing of motor vehicles). Moreover, if the leased asset was real property, the lease payments had to be deducted over a period that could not be shorter than two-thirds of the statutory depreciation period of the asset and that could not, in any case, be shorter than 11 years or longer than 18 years. Under the new regime, which applies to financial leases executed as of January 1, 2014, the lease payments must be deducted over a period that is not shorter than half of the statutory depreciation period of the asset (or the entire statutory depreciation period in the case of leasing of motor vehicles). If the leased asset is real property, the lease payments must be deducted over a period of no less than 12 years.
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