As is now well known, all expenses resulting from the 19% tax discount in the tax return, starting in 2020, will no longer be able to be made with the use of cash, subject to the loss of the deduction itself.
With this article we will try to understand the scope of the rule and the effect it will have on end consumers, bearing in mind that in fact it has already come into force, since it concerns the deductibility of expenditure made from 1 January 2020.
Essentially, the 2020 Budget Act stipulates that from January 1, 2020, the 19% deduction for Irpef purposes is due to the fact that the expenditure is incurred through traceable payment instruments.
In the first analysis, since as mentioned The rule that has come into force from 1 January 2020, it is important to point out that it is already in place and therefore it is necessary to be careful to carry out these expenses with traceable payment instruments, if you do not want to lose the deduction in the tax return for the year 2020 (which will then be prepared in 2021).
As a result, this rule will also result in the re-retention of the traceable payment copy.
But above all, it is also important to understand what expenditures fall under the obligations imposed by the new legislation, which focuses on the commissions 679 and 680 of Law 160 of 27 December 2019, and that is what I will try to do in this article.
Let’s take a closer look at the new legislation
Section 679 of Article 679. 1 of the 2020 Budget Act stipulates that “For the purposes of personal income tax, The deduction from gross tax to the extent of 19 per cent of the charges outlined in Article 15 of the Single Income Tax Text, referred to in the decree of the President of the Republic 22 December 1986, No 917, and in other regulatory provisions rests on the condition that the burden is borne by bank or postal payment or by other payment systems provided by Article 23 of the Legislative Decree 9 July 1997, No. 241″.
The first thing to clarify is that the new rule on the traceability of tax deductions relates to deductions under art. 15 of the TUIR, so tax deductions are excluded under the other items of the TUIR (e.g. eco-bonus, restructuring bonuses, etc… but also fixed ones and not at percentage ex art. 16, such as those for rentals).
The following paragraph 680 of Art. 1 of the 2020 Budget Act stipulates that “The provision in paragraph 679 does not apply to deductions in relation to the costs incurred for the purchase of medicines and medical devices, as well as deductions for health services provided by public facilities or private facilities accredited to the National Health Service.”
Before you see the full list of tax deductions under art. 15 of the TUIR with an obligation to trace, I also find it useful to clarify what are these new methods of payment mandatory in order to be able to enjoy the 19% tax deduction on the expenditure incurred.
Art. 23 of D. Lgs. 241/1997 indicated in the 2020 Budget Act relates to “Payment by means other than cash” and essentially establishes that the allowed payment methods are:
debit cards or ATMs;
bank and circular cheques;
other traceable payment systems such as wire transfer.
These payment methods, with the necessary preservation of the copy or evidence of the traceable payment, next to the expense voucher (talking receipt or invoice or receipt, etc.), allow the taxpayer to benefit from the deduction 19% tax on sustained expenditure.
Through art. 15 of the TUIR, we try to understand all deductions affected by the obligation to pay traceable or prohibit the cash payment of the expense for the purpose of the deduction.
Tax deduction 19% for interest expense first home mortgages.
The letter (a) of paragraph 1 of Article 1. 15 of TUIR provides for the deduction of 19% of interest expense and related ancillary charges. Traceable payment is required from 2020. Just as traceable payment is required for expenses relating to first home mortgage interest under the letter b), also in paragraph 1 of Article 1. 15.
Mandatory traceable payments also for the 19% deduction on mortgages for the construction of the real estate unit to be used for the main dwelling under section 1ter of Art. 15 of the TUIR.
19% tax deduction for medical expenses.
The obligation to trace deductions also relates to medical expenses and health costs deductible under the letter c) of paragraph 1 of Article 1. 15 of the TUIR.
Only “the purchase of medicines and medical devices, as well as deductions for health services provided by public facilities or private facilities accredited to the National Health Service” remain payable in cash.
19% tax deduction for veterinary expenses.
This deduction, provided for by the letter encore) of section 1 of Article 1. 15 of the TUIR has been reformulated since 1 January 2020, extending the deduction limit to EUR 500 per year.
Veterinary expenses are also deductible only with traceable payment.
Tax deduction for expenses incurred for interpreting services by deaf-mute persons, under Act 26 May 1970, No. 381.
The deduction is provided by the c-ter letter of paragraph 1 of Article 1. 15 of the TUIR and there is a traceable payment requirement for this deductibility.
Deduction for funeral expenses.
The 19% deduction is provided by the letter d) of paragraph 1 of Article 1. 15 of the TUIR and allows funeral expenses to be deducted up to 1,550 euros.
To do this, you must make payments with traceable tools from 1 January 2020.
Deduction for university expenses.
The 19% deduction for expenditure on the attendance of university education courses at state and non-state universities, provided for by the letter e) of article 1 of Article 1. 15 of the TUIR is one of the tax deductions with obligation to pay with traceable instruments.
Deduction for school expenses.
The 19% deduction for the expenditure on the attendance of kindergartens in the first cycle of education and secondary school in the national education system, provided for by the letter e-bis) of article 1 of Article 1. 15 of the TUIR, is among the deductions with the obligation to track the payment of the expenditure incurred.
So goodbye to cash payments for those who want to benefit from the 19% deduction.
Deduction for minor expenses with LEARNING DIC.
The deduction for expenses incurred for minors or adults, diagnosed with specific learning disorder (DSA) until the completion of secondary school, for the purchase of compensatory instruments and technical aids and “It’s a good thing that we’re going to be able to do that,” he said. 15 of the TUIR, is among the tax deductions with a traceability requirement.
Deduction 19% for children’s music school expenses.
This is a new tax deduction, under the new e-quater letter, of article 1 of Article 1. 15 of the TUIR, which will only come into force from 2021 and allows taxpayers with an income of up to 36,000 euros, to be able to benefit from the 19% deduction up to 1,000 euros of spending on annual enrolment and the subscription of children aged 5-18 to remain institutions of high artistic, musical and choreographic education (AFAM) legally recognized under the Act 21 December 1999, No 508, to music schools registered in regional registers as well as to choirs, bands and music schools recognized by a government, for the study and practice of music.
This tax deduction can also be obtained only by paying for the expense with traceable instruments.
Deduction 19% on insurance premiums that are subject to the risk of death or permanent disability of no less than 5% or of non-self-sufficiency in the completion of the acts of daily life.
This deduction is provided by the letter f) of paragraph 1 of Article 1. 15 of the TUIR and is one of the tax deductions with obligation to be paid with traceable instruments, so premiums should be paid only in these ways.
Deduction 19% premiums insurance against calamitous events.
This deduction, under the letter f-bis) of article 1 of Article 1. 15 of THE TUIR, is due if it relates to residential real estate units.
In order to qualify for it, premiums must be paid with traceable instruments.
Deduction 19% expenses for maintenance, protection or restoration constrained things.
The 19% deduction, which is under the letter g) of section 1 of Article 1. 15 of the TUIR for the costs incurred by those obliged to maintain, protect or restore property bound under Act 1 June 1939, No. 1089, and the decree of the President of the Republic 30 September 1963, No. 1409, to the extent that it is actually only if the payment is made with traceable tools.
Deduction 19% sports expenses of boys.
The tax deduction under the letter i-quinquies in paragraph 1 of Article 1 is also subject to tax deduction. 15 of the TUIR relating to the expenses, amounting to no more than 210 euros, incurred for the annual registration and subscription, for children aged 5 to 18, sports associations, gyms, swimming pools and other facilities and sports facilities intended for the amateur sports practice are part of the obligation to track deductions.
Deduction 19% rent students offsite.
The deduction under the letter i-sexies in paragraph 1 of Article 1 is also subject to the deduction. 15 of the TUIR on the rents of off-site university students (graduate course at a university located in a municipality other than the one of residence, at least 100 kilometers away from the latter and in any case in a different province, per unit real estate located in the same municipality where the university is based or in neighboring municipalities) is only due if the payment of the rent is made with traceable instruments, as well as the case of rents abroad.
Also the 19% deduction of the lease fees for properties to be used as main residence for young people under 35 years, provided by the letters isexies.1) and isexies.2) of section 1 of Art. 15 of the TUIR is only due if the fees are paid with traceable instruments.
Deduction 19% for the expenses of the personal service workers.
The deduction under the letter i-septies, also in paragraph 1 of Article 1. 15 of the TUIR on expenses, amounting to no more than 2,100 euros, incurred for personal care workers in cases of non-self-sufficiency in the completion of the acts of daily life, if the total income of the taxpayer does not exceed 40,000 euros, only if the expenses are paid with traceable instruments.
Deduction 19% public transport subscription.
It is a deduction under the letter i-decies) of section 1 of Article 1. 15 of the TUIR which is responsible for the costs incurred in the purchase of subscriptions to local, regional and interregional public transport services in the amount of no more than 250 euros.
From 2020 this deduction can only be enjoyed if the subscription is paid with traceable tools.
Deduction 19% keeping guide dogs.
The deduction under section 1quater of Article 1quater is also included. 15 of the TUIR for the expenditure incurred by the blind to maintain guide dogs can only be used if the expense is paid with traceable instruments.
19% deduction on liberal disbursements: traceable payment obligation
Under the letter (h) of paragraph 1 of Article 1. 15 of the TUIR taxpayers may be entitled to a 19% deduction on a range of liberal disbursements: in favor of the state, regions, local authorities, local authorities or public institutions, of organizing committees specially set up by decree of the Minister for Cultural and Environmental Heritage, foundations and associations legally recognized as non-profit, who carry out or promote study, research and documentation activities of significant cultural and artistic value or who organize and carry out cultural activities, etc. In addition, there are also educational and promotional events of significant scientific and cultural interest, including studies, research, documentation and cataloguing, and publications relating to cultural heritage.
All liberal payments, for the purpose of deduction, must be paid with traceable instruments. The same way is provided for the assets sold to them, for which the 19% deduction under the letter h-bis) of paragraph 1, of Art. 15 of the TUIR.
Cash payments are also included in the obligation to trace deductions, amounting to no more than 2% of the total declared income, in favor of public institutions, foundations and associations that are legally recognized For-profit purposes, they carry out exclusively activities in the show, carried out for the construction of new structures, for the restoration and upgrading of existing structures, as well as for production in the various sectors of the entertainment, according to the letter i) Article 1 of Article 1. 15 of the TUIR.
Liberal cash payments for a total amount in each tax period of no more than 1,500 euros are also subject to the traceability requirement for the deduction of 19% in favor of amateur sports clubs and associations. (SSD and ASD).
This deduction is provided by the letter i-ter) of paragraph 1 of Article 1. 15 of the TUIR and already stipulated that the obligation to pay such payments should be carried out by bank or post office or in other ways established by decree of the Minister of Economy and Finance, to be adopted under Article 17, paragraph 3, of the 23 August 1988, No. 400.
19% deduction on liberal disbursements to schools anduniversities.
The deduction under the letter i-octies in paragraph 1 of Article 1 is also subject to the deduction. 15 of TUIR on liberal disbursements to schools of all order and grades, state and non-profit peers belonging to the national education system, as well as to higher technical institutions, high school institutions “It’s important to note that there is a long way to go before we can make a decision on this,” he said.
The payment must be made by bank or post office or through the other payment systems provided for by Article 23 of the Legislative Decree 9 July 1997, No 241, was already provided for.
Similarly, liberal cash payments to the Government Depreciation Fund, under the letter i-novies) of article 1 are also deductible with traceable instruments. 15 of the TUIR.
With a traceable payment requirement there is also the deduction of 26% for liberal cash disbursements, amounting to no more than 30,000 euros per year, in favor of non-profit social utility organizations (ONLUS), humanitarian, religious or “It’s not the first time we’ve had a debate on this,” he said.
In the opinion of the writer, it is therefore quite evident the rigidity of the rule in question, which in fact revolutionizes the world of deductions, including a limit for those with high incomes.
But beyond that, payments with traceable systems would now seem to be the only way to be recognized the deductions of the expenses listed above, with the only and exclusive exceptions of the purchase of medicines and medical devices, and the services rendered by public facilities or private facilities accredited to the National Health Service.
But it is precisely with regard to these two exceptions that we need to pay more attention, hoping as soon as possible that a circular from the Internal Revenue Service will intervene: in fact, it is not at all clear whether homeopathic medicines, veterinary medicines, preparations are included in the waiver (and therefore payable in cash).
Therefore in doubt and pending official clarification, the advice is to act in any case with prudence and also pay such expenses with traceable payment tools.
by Stefano Pignatelli
Chartered Accountant in Rome