The Special Economic Zone for the South of Italy: Free Trade Zone with opportunities for local and foreign investments.

Antonio Lanotte, Tax Advisor and Senior Auditor

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Table of Contents

Abstract.

1. Introduction.

2. Benefits for companies located in the ZES.

3. The web portal of the Single Economic Zones of Southern Italy.

4. Conclusive remarks.

Abstract.

The ?Sud Decree or “Decreto Sud” approved by the Council of Ministers last 7 September introduces the “Special Economic Zone (ZES)” in the Mezzogiorno (Abruzzo, Basilicata, Calabria, Campania, Molise, Apulia, Sicily, Sardinia) for the period from 2024 to 2026. On 7 September, the Council of Italian Ministers approved the so-called “Decreto Sud”, entitled “Urgent provisions on cohesion policies and for the relaunch of the economy in the areas of southern Italy”. This is a provision containing urgent provisions on cohesion policies and for relaunching the economy in the areas of southern Italy. The objective of this provision is to create incentives for the growth and economic consolidation of the areas of southern Italy, to make them more suitable for the development and growth of the production system. Among them, the reunification into a single Southern, Special Economic Zone, encompassing the regions of Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sicily, and Sardinia.

1. Introduction.

The Special Economic Zones (ZESs) in Italy are designated geographical areas in which companies can benefit from a series of physical and administrative advantages. ZESs were created to promote economic development, attract investment, and create new jobs in regions that are particularly disadvantaged or in need of economic stimulus. The D.L. Sud approved by the Council of Ministers on 7 September provides for the introduction of a single ZES for the entire Mezzogiorno of Italy. This with effect from 1 January 2024. The Special Economic Zone comprises the territories of the regions: (Abruzzo, Basilicata, Calabria, Campania, Molise, Apulia, Sicily, and Sardinia). The objective is to provide greater cohesion and economic revitalization in the southern areas of Italy. For this, the Government has made available an amount of around 4, 5 billion euro over three years, for the years 2024, 2025, and 2026. The final allocations will be made when the decree is converted into law. The procedures will be managed by a steering committee set up at the Presidency of the Council of Ministers, which will be responsible for the direction, coordination, supervision, and monitoring?of the single ZES, which will be chaired by the Ministry for European Affairs, the South, Cohesion Policies and the PNRR (Italian Next Generation Eu). The steering committee will have a three-year duration and will consist of a coordinator, 2 general managers, and 4 non-general management level offices. Among the tasks assigned to the mission for the ZESs include guiding and coordinating the government's strategic action, coordinating with the technical secretariat, and carrying out the preliminary activity relating to the proposals for updating the strategic plan. In addition, the tasks assigned to this new structure also include the activities of institutional communication and publicity of the Single Southern ZES.

2. Benefits for companies located in the ZES.

As stated in the Government's press release, within the ZES area, companies already in operation and those that will set up will be able to benefit from various types of advantages (special conditions), such as, for example, the provision of a single authorization for the start-up?of production activities and the recognition, until 2026, of a tax credit in the maximum amount allowed by the 2022-2027 Regional Aid Map for the acquisition of new capital goods intended for production facilities. In particular, the introduction of a new tax credit for investments that, in essence, follows the one currently governed by Article 1, paragraphs 98-108 of Law No. 208/15 and Article 5 of Decree-Law No. 91/17. The tax credit is envisaged to the maximum extent allowed by the regional aid map between 2022 and 2027 and is available to companies that, from 1 January 2024 until 31 December 2026, undertake the acquisition of new capital goods destined for production facilities located in the assisted areas of the regions Campania, Puglia, Basilicata, Calabria, Sicily, Sardinia, and Molise and in the assisted areas of the region Abruzzo.

Eligible investments are investments that are part of an initial investment project as governed by Article 2(49), (50), and (51) of Regulation (EC) No 651/14 of 17 June 2014, relating to:

1. The purchase, also by means of financial leases, of machinery, plant, and equipment various equipment intended for already existing production facilities or those being set up in the territory;

2. To the purchase of land and the acquisition, construction, or expansion of capital assets to investments. The value of the land and buildings may not exceed 50% of the total value of the subsidized investment.

The tax credit is proportional to the share of the total cost of the eligible assets, up to a maximum, for each investment project, of 100 million euros. The tax credit can therefore only be used in offsetting through model F24 (Italian tax module) in accordance with Article 17 of Legislative Decree No. 241/97. In order to obtain the credit, a request must be made through a specific application to be submitted to the Agenzia delle Entrate (Italian Revenue Agency).

3. The web portal of the Single Economic Zones of Southern Italy.

The regulation also provides for the opening of a single dedicated web portal. The aim of the site is to provide all information on the benefits recognized to enterprises in the special economic zone and ensure accessibility to the digital one-stop-shop ZES, the "S.U.D. ZES". In particular, the portal has competences on:

1. Administrative procedures relating to economic and productive activities of goods and services;

2. Administrative procedures for the construction, expansion, cessation, reactivation, location, and relocation of production facilities;

3. Administrative procedures relating to building intervention including land transformation interventions at the private initiative and interventions on existing buildings and those necessary for the realization, modification, and operation of productive activity;

Administrative procedures for realizing, extending, and renovating structures dedicated to sports or cultural events.

4. Conclusive remarks.

Special Economic Zones (“ZESs”) are a strategic tool for the economic development of certain Italian areas in need of a special boost. By offering a series of physical incentives, administrative simplifications, and employment incentives, ZESs can act as catalysts for direct investment and job creation. ZESs offer an attractive and potentially advantageous environment for businesses, but as always, it is essential to check and plan carefully to maximize the benefits of these incentive programs. For those considering investing in a ZES, it is advisable to stay up-to-date on the latest news and regulatory developments in this regard, in order to make informed and strategic decisions. For confirmation of this and the other measures of the “Decreto Sud”, despite the government's known anticipations, it is necessary to wait for the Decree will have to be converted into law and then the publication of the official text in the Italian Official Gazette “Gazzetta Ufficiale”.