The South of Italy becomes a Special Economic Zone

With effect from 2024, the Italian Government established a new single Special Economic Zone for the South of Italy (hereinafter the “Single SEZ”, in Italian known as “ZES Unica”). Enterprises operating or planning to establish within the Single SEZ will benefit from significant administrative simplifications and substantial tax incentives. In the context of a broader redefinition of trade routes and global value chains, the Single SEZ offers an important opportunity to attract investments and activities towards the energy and digital transitions of our times.  

This article outlines the main features of the new measures, focusing on the key governance aspects, the relevant administrative simplifications, and the applicable tax incentives.

1. Governance Aspects

The new Single SEZ covers the entire territories of all the Regions of the South of Italy (i.e., Abruzzo, Basilicata, Calabria, Campania, Molise, Apulia, Sicily and Sardinia).

A SEZ Coordination Committee (in Italian “Cabina di Regia”) has been established, with the responsibility of guiding, coordinating, supervising, and monitoring the Single SEZ, with a web portal to facilitate access to relevant information relating to the Single SEZ and the related benefits.¹

The technical support to the Coordination Committee is provided by a dedicated Technical Secretariat (in Italian “Segreteria Tecnica”), with representatives appointed by the relevant administrations.

Furthermore, in order to provide support to the competent political authority in coordinating the Government’s strategic actions and preventing organized crime infiltration, the SEZ Special Office (in Italian “Struttura di missione SEZ”) has been established. This Special Office is renewable until 31 December 2034, and its responsibilities encompass: (i) steering the Technical Secretariat (“Segreteria tecnica”) of the Coordination Committee, (ii) assisting the political authority in charge of SEZ matters, on the basis of directives from the Coordination Committee, (iii) coordinating and implementing the activities outlined in the Strategic Plan of the Single SEZ (see below), (iv) carrying out monitoring tasks, at least every six months and on the basis of indicators provided by the SEZ Coordination Committee, of the measures and incentives granted in the single SEZ, also to verify the progress of the activities, the effectiveness of the incentive measures granted and the achievement of the expected results as indicated in the Strategic Plan, and (v) collaborating with the relevant administrations to define the activities aimed at preventing organized crime infiltration. In order to ensure the efficient and timely execution of the measures related to the Single SEZ within the National Recovery and Resilience Plan, until 31 December 2026, the SEZ Special Office can exercise the functions of contracting entity (“stazione appaltante”). The SEZ Special Office can also cooperate with the National Agency for the Attraction of Investments and Business Development - INVITALIA S.p.A..

A Strategic Plan for the Single SEZ is in the making at the level of the Prime Minister's Office (by the SEZ Special Office), with the participation of the local administrations concerned.²  The Strategic Plan will include details regarding the economic sectors to be promoted and those to be strengthened, as well as regarding priority investments including those aimed at the industrial reconversion for energy transition, and the implementation methods. A special section of the Strategic Plan will be addressed the investments and priority interventions, which are necessary to remove the disadvantages of insularity in the regions of Sicily and Sardinia, in line with the Italian Constitution.

To ensure a uniform relaunch process of the productive activities in Southern Italy, the SEZ Digital One-Stop Shop is established, within the Special Office (known in Italian as “Sportello Unico Digitale S.U.D. ZES”).

The “S.U.D. ZES” will be assigned the functions of the Service Desk for productive activities (known in Italian as “SUAP”), in particular in relation to:

(i) administrative procedures related to economic activities, construction, expansion, termination, reactivation, location, and relocation of productive activities;

(ii) administrative procedures related to productive building interventions, including private initiative-led land transformation projects and interventions on existing buildings. It also covers interventions necessary for the construction, modification, and operation of economic activities;

(iii) administrative procedures concerning the construction, expansion, or renovation of facilities for sports events or cultural events of public entertainment.

Transitional provisions (relating to the submission of the relevant applications) are in force until the Digital One-Stop Shop is fully implemented.

2. Administrative simplifications

Within the Single SEZ, a special procedure is introduced to obtain the so-called “single authorization”, which is an all-encompassing authorization title for the realization of the relevant project.

The single authorization replaces all the permits and authorizations ordinarily needed for the establishment, construction, commissioning, transformation, restructuring, reconversion, expansion, or transfer, as well as the cessation or reactivation of economic, industrial, production, and logistical activities. Projects related to these activities are deemed to be of public utility, non-deferrable, and urgent and related to the sectors identified in the Strategic Plan.

The new procedure does not apply for the following:

• energy plans and infrastructure;
• works and activities within the territorial jurisdiction of airports;
• investments of strategic importance;
• economic activity projects, i.e., the establishment of industrial, manufacturing or logistics activities that require a self-certified declaration for the commencement of the activities (In Italian, “Segnalazione certificata di inizio attività”, “SCIA”).
• the establishment of electronic communication networks within the Single SEZ.

On a purely procedural level, following the submission of the application to the SEZ Digital One-Stop Shop (and subject to any documental integrations that may be necessary), must convene a simplified steering committee (in Italian, “conferenza dei servizi semplificata” - i.e,. a meeting among all the administrations competent for the issuance of permits/authorizations required for the approval of a specific project) within three working days. This steering committee is subject to the following provisions:

(i) all the administrations involved shall issue their decisions within a mandatory 30-day timeframe (which can be extended to 45 days, except for administrations responsible for environmental protection, landscape-territorial protection, cultural heritage protection, health protection, or public safety, which may have longer deadlines as per European Union law);

(ii) generally (except certain instances), the competent administration must hold a telematic meeting within 30 days after the deadline for issuing decisions by each administration. This meeting involves all the competent administrations, and is concluded with the issuance of a final grounded decision, taking into account the potential impacts of the project and the objectives of the Single SEZ Strategic Plan;

(iii) the competent administrations may file an objection against the reasoned final decision of the services conference. In any event, if the administrations did not participate in the meeting or, despite participating, did not express their position, or expressed an unjustified dissent or referred to issues that were not evaluated by the conference, their unconditional consent shall be deemed to be acquired;

(iv) if another simplified steering committee is necessary on the next level of planning, all deadlines are halved, and any further authorizations, consents and opinions, however denominated must be issued within 60 days from the request.

The final reasoned decision of the steering committee supersedes all other authorizations, approvals, and opinions however denominated, and allows the realization of all the works, services, and activities envisaged in the project. If required, it also implies the modification of the urban town plan and declares the project’s public utility, urgency and non-deferability. Moreover, the final decision of the steering committee explicitly includes the environmental impact assessment and any qualification issued for the project implementation and operation.

If the administration does not timely reply to the filed application, such silence is equivalent to an explicit approval of the project.

Furthermore, if conflicting evaluations of the administrations involved led to the authorization denial, the coordinator of the SEZ Special Office may request the competent Ministers to intervene to refer the matter to the Council of Ministers for a comprehensive assessment and harmonization of public interests. The Prime Minister’s Office convenes a preliminary meeting within the following 10 days, with the participation of the administrations that have expressed conflicting evaluations. The participants of this meeting, under the principal of loyal cooperation, shall formulate proposals to find a shared solution to replace, fully or partly, the denial of the authorization. If an agreement is not reached and, in any case, no later than 15 days after the meeting is held the matter is referred to the Council of Ministers and placed, as a rule, on the first meeting’s agenda following the expiry of the time limit for reaching the agreement.

This procedure also applies to projects concerning economic activities or the establishment of industrial, production, and logistical activities, submitted by public or private entities within the jurisdiction of the Port System Authorities (in Italian, “Autorità di Sistema Portuale”). In the case of private-initiative projects, the SEZ Special Office forwards the application and documentation, through the SEZ Digital One-Stop Shop, to the competent Port System Authority, which becomes the responsible administration for convening the services conference and issuing the Single Authorization.

In the case of public-initiative projects, the competent Port System Authority, acting as the competent administration, directly acquires any application and the necessary documentation, including the unique project codes (in Italian, "Codici Unici di Progetto") to be monitored through the information systems of the State General Accounting Department and the Ministry of Economy and Finance, and convenes the steering committee, informing the SEZ Special Office through the SEZ Digital One-Stop Shop, and issues the single authorization.

3. Tax incentives

3.1. In general

For the taxable year 2024, enterprises that acquire instrumental assets for productive facilities located within certain areas of the Single SEZ may benefit from a subsidy in the form of a tax credit.³ The actual amount of the tax credit varies depending on the level of investment intensity, the Region in which the investment is made, and the size of the taxpayer concerned.

Furthermore, within the Single SEZ, free customs zones may be established. More in detail, the SEZ Mission Structure may propose, also on the initiative of the Port System Authorities or the competent Regions, a relevant free customs zone and its scope that shall be approved by the Director of the Customs and Monopolies Agency, in accordance with the objectives of the Strategic Plan of the Single SEZ. The following paragraphs outline the main features of the tax credit for the Single SEZ.

3.2. Eligible enterprises

Italian tax resident companies and Italian permanent establishments of non-resident companies, as well as non-commercial entities, can benefit from the SEZ tax credit on their eligible investments. Companies operating in the steel, coal, and lignite industry, transport (excluding the warehousing and transport support sectors) and related infrastructure, energy production, storage, transmission and distribution, and energy infrastructure, broadband, as well as the credit, finance, and insurance sectors are not eligible for the tax credit. Further, the tax credit does not apply to companies in liquidation or winding-up and to companies in arrears as defined in Article 2(18) of Commission Regulation (EU) No 651/2014 of 17 June 2014.

3.3. Eligible investments

The investment shall form part of an “initial investment project”, as defined by Article 2, points 49, 50 e 51, Commission Regulation (UE) No. 651/2014 of 17 June 2014, relating to the purchase, also by leasing contracts, of new machinery, plant, and equipment for productive activities that either already exist or are to be set up in the relevant territory. Eligible investments also include the purchase of land and the acquisition, construction, or extension of buildings which are instrumental to the investment project. The value of the land and buildings may not, however, exceed 50% of the total value of the overall investment.

According to the applicable EU Regulation, an initial investment is an investment in tangible and intangible assets related to the setting-up of a new establishment, extension of the capacity of an existing establishment, diversification of the output of an establishment into products not previously produced in the establishment or a fundamental change in the overall production process of an existing establishment; or an acquisition of assets belonging to an establishment that has closed or would have closed had it not been purchased, and is bought by an investor unrelated to the seller and excludes sole acquisition of the shares of an undertaking.

In this regard, it is worth noting that the Italian Revenue Agency has clarified that the reference to the notion of productive activities and establishment does not prevent the application of the tax credit to enterprises outside of the industrial sector. In other words, also investments made by a consulting business could qualify for the benefits of the SEZ.

3.4. Additional conditions for investments

Beneficiaries shall maintain their activities in the area where the investment has been made for at least five years after the realization of the investment. In addition, the amount of the tax credit is redetermined by the competent authorities, by excluding the costs of assets taken into account but (i) not put in operation within the second tax period following the one in which they were acquired or completed or (ii) disposed, sold to third parties, used for purposes unrelated to the relevant investment, within the fifth tax period following the one in which they were put into operation.

3.5. Amount of the tax credit

The tax credit is determined by applying a given percentage to the costs incurred for the eligible investments made from 1 January 2024 to 15 November 2024, with a minimum amount of EUR 200,000 and a maximum amount of EUR 100 million for each investment project. For investments made through leasing contracts, the cost incurred by the lessor for the purchase of the assets, which does not include maintenance costs, is considered. The tax credit rate ranges from 15% to 60% depending upon the Region where the eligible investment is made and the size of the relevant taxpayer (as identified in Commission Recommendation No. 2003/361/EC, 6 May 2003).⁴  The table below summarizes the different applicable percentages.⁵

3.6. Nature of the tax credit

The tax credit can be used to offset debts related to different taxes, such as VAT or mandatory social security contributions, without the application of the annual limit of EUR 250,000 ordinarily applicable. The tax credit must be reported in the tax return for the tax period in which it is recognized and in the following tax returns until the credit is wholly used. The offset is done through the filing of the specific form needed for the payment of taxes (so-called F24 form). A Ministerial Decree is the making to define the procedures to reserve and benefit from the tax credit, as well as the related audits and controls, also to ensure that the total amount of budgeted resources is not exceed (the Budget Law for 2024 provides for an overall spending limit of EUR 1,8 billion for year 2024).

4. Concluding remarks

The new Single SEZ is a powerful tool, with great potential. The establishment of the Single SEZ determined the cancellation of eight local SEZs which were set up in each region and which were starting to bear fruits. Useful lessons and relevant skills can therefore be identified and capitalised upon to make this initiative a success. When combined with other tools, such as the Large Investment Ruling (allowing enterprises to obtain full clarity regarding the tax treatment of an eligible investment plan) and the so-called reshoring incentives (50% corporate income tax reduction in favour of companies that, under certain conditions, bring back to Italy activities carried out in non-EU countries), the measure has the potential to change the economic landscape of the South of Italy. To do so, financial resources will have to be allocated also for income years subsequent to 2024, staff with the appropriate skills will have to be selected and empowered and different public authorities will have to work together efficiently and effectively.

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¹ It is established within the Prime Minister’s Office, chaired by the Minister of European Affairs, Southern Italy, Cohesion Policy, and the National Recovery and Resilience Plan. This Coordination Committee is entrusted with the responsibility of guiding, coordinating, supervising, and monitoring the Single SEZ. The Steering Group comprises the following members:

• the Minister of Regional Affairs and Self-Government,
• the Minister of Public Administration,
• the Minister of Civil Protection and Marine Policy,
• the Minister of Institutional Reform and Regulatory Simplification,]
• the Minister of Sport and Youth,
• the Minister of Economy and Finance,
• the Minister of Infrastructure and Transport,
• the Minister of Business and Made in Italy,
• the Minister of Labour and Social Policies,
• the Minister of Foreign Affairs and International Cooperation,
• the Minister of the Environment and Energy Security,
• the Minister of Agriculture, Food Sovereignty and Forestry,
• the Minister of Tourism,
• the Minister of Culture,
• Other relevant ministers depending on the agenda of each meeting, and
• Presidents of the regions within the territory of the Single SEZ, the President of the Union of Italian Provinces or his delegate and the President of the National Association of Italian Municipalities or his delegate.

² The Strategic Plan will be approved via a Ministerial Decree, following the proposal of the Ministry of European Affairs, Southern Italy, Cohesion Policies, and the National Recovery and Resilience Plan. This will be done in collaboration with the Ministry of Economy and Finance, the Ministry of Infrastructure and Transport, the Ministry of Business and Made in Italy, as well as the Minister of Civil Protection and Marine Policy. The plan will be approved after receiving the opinion of the SEZ Coordination Committee.

³ More in detail, the tax credit is available for the enterprises that make the acquisition of instrumental assets intended for productive facilities located in the entire territories of Basilicata, Calabria, Campania, Molise, Apulia, Sicily and Sardinia and in the assisted areas of Abruzzo as identified by the Guidelines on regional State aid 2022-2027.

⁴ For the determination of the tax credit amount, reference shall be made to the percentages applicable to the total cost of investments, as identified in the Guidelines on regional State aid 2022-2027, also taking into account the size of the relevant enterprise. In this respect, according to Commission Recommendation No. 2003/361/EC, May 6, 2003, the category of small and medium-sized enterprises is made up of enterprises that employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million. Within the small and medium-sized enterprises category, a small enterprise is defined as an enterprise that employs fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million.

⁵ It is possible to cumulate the tax credit with other de minimis aid and with other subsidies relating to the same expenses, to the extent that the overall benefit does not exceed the highest aid intensity or amount allowed under the relevant European provisions and that the aid intensity does not exceed the thresholds established for each Region by the Guidelines on regional State aid in force at the time the aid is granted.