Italy is preparing for a new chapter in industrial innovation with Transition 5.0, an initiative that promises to revolutionize the way companies operate by reducing energy consumption and encouraging the adoption of cutting-edge technologies. The new Decree Law 19/2024, published in the Official Gazette, puts an end to anticipations and inferences about the new Transition 5.0 Plan. In this article, we analyze the details of the decree.

What Does Transition 5.0 Offer?

PNRR measure M7 – Transition 5.0 Investment 15, funded with 6.3 billion euros of European funds from the REPowerEU, aims to incentivize innovation projects carried out in 2024 and 2025 that reduce energy consumption. The focus is on a set of investments in Industry 4.0, Photovoltaics and Training, aimed at optimizing Italian manufacturing facilities.

Tax Credit for All Businesses

The tax credit introduced to encourage digitization and green turnaround of resident companies is payable regardless of the size of the company and the regime adopted. The new incentive, governed by Article 38 of Decree No. 19/2024, is aimed at all resident enterprises and permanent establishments based in Italy, without discrimination on the basis of legal form, economic sector or tax regime. The only exclusions are for companies in a state of voluntary or compulsory liquidation.

An Enhancement of Industry 4.0

As is already known, investments “in new tangible and intangible assets that are instrumental to the operation of a business, as listed in Annexes A and B attached to Law No. 232 of December 11, 2016, and that are interconnected,” are eligible for the Transition 5.0 Tax Credit. Basically, the same assets already included in the National Transition 4.0 Plan can be accessed.

But Paragraph 4 goes on to clarify that this benefit is recognized “provided that, through the same, an overall reduction in energy consumption of the production facility located in the national territory, to which the innovation project refers not less than 3 per cent or a reduction in energy consumption of the processes involved in the investment not less than 5 per cent.”
The same subsection also extends the list of intangible assets (provided in Annex B) eligible for Transition 5.0 benefits. Indeed, Paragraph 4 lists:
  1. the software, systems, platforms or applications for plant intelligence that provide continuous monitoring and visualization of energy consumption and self-generated and self-consumed energy, or introduce energy efficiency mechanisms, through the collection and processing of data including from field IoT sensing (Energy Dashboarding);
  2. software related to business management if purchased together with the software, systems or platforms referred to in (a).

Photovoltaics Tax Credit

The tax credit varies according to the percentage reduction in energy consumption and the type of modules used, with incentives of up to 54 per cent. To qualify for the credit, a 20 per cent down payment is required within 30 days of booking with the GSE, followed by an ex-post verification. However, the 20 per cent down payment may be eliminated, so companies need to stay abreast of legislative developments.

As part of innovation projects that meet the requirements of the previous slide, investments in facilities for self-production of renewable energy for self-consumption, including facilities for energy storage,excluding biomass, are also eligible;

Only systems with photovoltaic modules indicated in DL 181/2023, Art. 12, paragraph 1, produced in the EU and classified according to the three levels of efficiency, referred to in the letters a), b), (c), which can be consulted in the ENEA Register (*);

The modules of the classes b) e (c), with higher cell-level efficiency, contribute 120% and 140% to the tax credit calculation, respectively

How Are Self-Manufacturing Solutions Facilitated?

The Transition 5.0 Plan, however, not only rewards 4.0 assets but also includes solutions for self-generation of energy from renewable sources and personnel training aimed at “the acquisition or consolidation of skills in technologies relevant to the digital and energy transition of production processes.” It should be pointed out, however, that there are a number of particularly stringent limitations in these areas, which we quote in full as stated in Paragraph 4:
  1. investments in new tangible assets instrumental to business operations aimed at self-production of energy from renewable sources for self-consumption, with the exception of biomass, including energy storage facilities. With reference to self-generation and self-consumption of energy from solar sources, only systems with photovoltaic modules referred to in Article 12, paragraph 1, subparagraphs a), b) e (c) of the decree-law of December 9, 2023, no. 181. Investments in facilities that include the modules referred to in paras. b) e c) contribute an amount equal to 120% and 140% of their cost, respectively, to the basis for calculating the tax credit. Pending the formation of the registry referred to in Article 12, Paragraph 1, of Decree-Law Dec. 9, Dec. 2023, no. 181, systems with photovoltaic modules that, on the basis of an appropriate certificate issued by the manufacturer, comply with the technical and spatial requirements set forth in subparagraphs a), b) e c) of the same Article 12;
  2. expenditure on staff training provided for in Article 31(3) of Regulation (EU) No. 651/2014 of the Commission, dated June 17, 2014, aimed at the acquisition or consolidation of skills in technologies relevant to the digital and energy transition of production processes, up to a limit of 10% of the investments made in the assets referred to in paragraph 4 and paragraph 5, letter a), and in any case up to a maximum of 300 thousand euros, provided that the training activities are provided by external entities identified by decree of the Minister of Business and Made in Italy referred to in paragraph 17 and in accordance with the procedures established therein.

How to Access the Transition 5.0 Benefit?

One of the main changes concerns the way the benefit is accessed, which is no longer automatic as was the case with Transition 4.0. Paragraph 10 of the Decree specifies that companies must submit an application “electronically, based on a standardized template made available by the Gestore dei Servizi Energetici s.p.a. (GSE).” This application must include the documentation required in Paragraph 11, along with a notice regarding the description of the investment project and its cost.

The GSE verifies the completeness of the documentation and transmits the list of eligible enterprises to MIMIT, ensuring that the total amount of eligible projects does not exceed the spending limits set at the national level.

Thereafter, the company must periodically report to the GSE on the progress of the allowed investment. Based on these communications, the amount of tax credit that can be used is determined, within the maximum limit booked.

Upon completion of the investment, the enterprise must send a notice of completion, accompanied, under penalty of forfeiture, by the certification provided for in subsection 11(b). At this point, the GSE will notify the Internal Revenue Service of the list of beneficiary enterprises and the amount of the relevant tax credit.

The drafting of certifications

To take advantage of the tax credit provided by Transition 5.0, specific certifications are required, divided into two categories:

  1. Ex-ante certification: This certification attests to the reduction in energy consumption expected through investments in the assets listed in Paragraph 4.
  2. Ex-post certification: This certification verifies the actual implementation of investments in accordance with ex-ante certification.

An implementing decree, issued pursuant to Paragraph 17, establishes the requirements of individuals authorized to issue these certifications, taking into account criteria of independence, impartiality, honorability and professionalism. Entities qualified to issue certifications include:

  • Energy Management Experts (EGE), certified by an accredited body according to UNI CEI 11339;
  • Energy Management Experts (EGE), certified by an accredited body according to UNI CEI 11339;

Certification that eligible expenses have actually been incurred and that they correspond to the accounting records prepared by the enterprise is also required. This certification must be issued by the person in charge of the statutory audit.

For companies not required by law to have a statutory audit, the certification must be issued by a statutory auditor or auditing firm.