Depreciation in Italy
Depreciation refers to the annual reduction in value of a company's tangible and intangible fixed assets.
In Italy, depreciation is regulated both in the civil code and in the Income Tax Consolidation Act
(in particular Articles 102 and 103 of the Income Tax Consolidation Act).
Under civil law and tax basis
Under civil law, depreciable assets must be depreciated as soon as they are ready for use.
The distribution is made over the expected useful life.
For tax purposes, the Income Tax Consolidation Act determines the extent to which depreciation is deductible as a business expense:
- Tangible capital goods, investment goods, fixed assets (e.g., machinery, vehicles, office equipment): Section 102 Income Tax Consolidation Act
- Intangible capital goods, investment goods, fixed assets (e.g., patents, trademarks, software): Art. 103 Income Tax Consolidation Act
Since commercial and under tax law regulations can differ, temporary differences
between the commercial and tax balance sheets often arise.
Depreciation rates and depreciation tables
The depreciation rates permitted for tax purposes are taken from the depreciation tables.
These tables differentiate between industries and types of assets and specify a maximum rate per year.
Key points in practice:
- In the year of acquisition, only half of the annual rate may generally be applied to tangible fixed assets (half-year rule).
- Low-value assets with an acquisition value of up to €516.46 can be depreciated in full immediately in the year of purchase.
Tangible and intangible capital goods, investment goods, fixed assets
Tangible capital goods, investment goods, fixed assets
Typical examples:
- Buildings and structures
- Machinery, technical equipment, production facilities
- Vehicles, office equipment, hardware
Depreciation begins in the financial year in which the asset is ready for use and is calculated using
the maximum rates specified in the tables.
Intangible capital goods, investment goods, fixed assets
Typical examples:
- Usage rights and copyrights, patents
- Trademark rights
- Licenses, concessions, software
- Goodwill
Special tax limits often apply to intangible assets, e.g.:
- Certain rights: depreciation only up to a specified percentage per year
- Trademarks and goodwill: often very long depreciation periods (e.g., 18 years)
Depreciation methods in Italy
The following depreciation methods are permitted and commonly used in practice:
- Straight-line depreciation
The same percentage is applied each year. This method is the most widely used.
- Declining balance depreciation
Higher depreciation rates in the first few years, then decreasing. It is only used in certain cases
or under special regulations.
- Performance-based depreciation
Depreciation is based on actual use, e.g., number of units produced or operating hours.
It is rather exceptional and must be compatible with the maximum tax rates.
Plausibility, documentation, and consistent application are crucial for tax recognition.
Significance for earnings and taxes
Depreciation has both accounting and tax implications:
- In the income statement, it reduces the annual result.
- In the balance sheet, it reduces the book value of the assets and reflects their performance.
For tax purposes, depreciation reduces the tax base for corporate income tax and regional taxes,
within the permissible limits. For more detailed information, please refer to our glossary entries on
corporate income tax and personal income tax.
Frequently asked questions about depreciation in Italy
1. When can I start depreciation on a new asset?
From the financial year in which the asset is ready for use. The delivery date is not decisive.
2. Do I always have to depreciate at the maximum rates in the tables?
No. The tables set tax limits. Under commercial law, a different economically justified
expected useful life can be applied.
3. What happens if I depreciate more than is permitted for tax purposes?
The commercial balance sheet remains unchanged. For taxes, the excess amount is corrected
off-balance sheet and is only deductible in later years.
4. Can low-value assets be depreciated immediately?
Yes, immediate depreciation is possible up to a value of €516.46 per asset.
5. How is intangible assets such as software depreciated?
Fixed tax rules apply to intangible assets, e.g., limited maximum rates or prescribed expected useful lives.
Under commercial law, a realistic, different expected useful life can be chosen.