Overview: the previous regulation
Law Decree no. 63/2024 ("Agriculture Decree"), converted into Law no. 101 dated 12 July 2024, introduced new provisions concerning the fiscal treatment of income deriving from the production and sale of photovoltaic energy by agricultural enterprises.
The main changes involve the tax treatment of energy produced from new photovoltaic systems with ground-modules. The new tax provisions will apply to photovoltaic systems which start operating after 31 December, 2025.
The existing system provides that up to a certain so-called agricultural threshold, income deriving from the production and sale of energy as part of an agricultural enterprise can be considered as agricultural income and taxed accordingly. The income exceeding the agricultural threshold provided by the current fiscal legislation is taxed following the ordinary rules, and therefore as business income or, alternatively, a flat tax regime.
For the purpose of defining the relevant agricultural threshold:
- Article 2135, § 3 of the Italian Civil Code provides that the activities aimed at providing services through the prevalent use of resources and equipment used in carrying out the core business of the agricultural companies could be considered agricultural activities;
- Article 56-bis, § 3 of the Italian Income Tax Consolidation Act ("TUIR") then provides that with regard to the activities aimed at the provision of services referred to in article 2135, §3 of the Italian Civil Code, the taxable base is determined by applying a profitability coefficient equal to 25% of the taxable operations for VAT purposes.
With regard to the specific case of production of electricity and thermal energy, article 1, § 423 of Law no. 266/2005 provides that, without prejudice to the fiscal provisions regarding the excise duty, the production and sale of electricity and thermal energy from renewable agroforestry sources, up to 2,400,000 kWh per year, and photovoltaic sources, up to 260,000 kWh per year carried out by agricultural enterprises, are treated as activities related to the agricultural business pursuant to article 2135, § 3, of the Civil Code and are considered as generating agricultural income.
New tax regulation introduced by the Agricultural Decree
Paragraph 2-ter of Article 5 of the Agriculture Decree provides - through the addition of paragraph 423-bis to article 1 of the Budget Law 2006 (Law no. 266 of 2005), - that the production and sale of electricity and thermal energy carried out through photovoltaic systems with ground-modules for the part exceeding the agricultural threshold provided for in paragraph 423, will be taxed pursuant to the rules provided for the ordinary business income.
Based on the new provision introduced by the Agriculture Decree, the option for a fixed rate taxation of 25% on the taxable operations for VAT purposes for the part exceeding the agricultural threshold (260,000 thousand kWh per year), will be allowed only for the old plants and for the new plants that will come into operation before 31 December 2025.
The main innovation consists in the fact that for ground-mounted photovoltaic systems coming into operation from 31 December 2025, the taxpayer will no longer have the possibility to opt for the application of the 25% coefficient when the aforementioned thresholds are exceeded.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.