Italian Tax Agency Confirms Covid Relief Funds Impact Tax Loss Carryforwards
A recent ruling by Italy’s tax agency clarifies that financial aid provided to businesses during the Covid-19 pandemic will be considered “exempt income” when calculating future tax liabilities, possibly reducing the amount of past losses companies can offset.
The issue stems from uncertainty surrounding the fiscal qualification of contributions granted during the pandemic, specifically how these funds affect the carry-forward of tax losses. A parliamentary question (5-04589 of October 29, 2025) brought the matter to the forefront, prompting a response from the Revenue Agency that has now been formally confirmed by the Finance Commission of the Chamber of Deputies.
Companies have reportedly raised concerns not about eligibility for the aid itself, but about its ability to utilize accumulated losses. According to the Agency’s interpretation, Covid-19 relief qualifies as “exempt income” and must thus be deducted from the calculation of tax losses that can be carried forward, as stipulated by Article 84 of the Testo Unico delle imposte sui Redditi (TUIR).
This means businesses that received contributions and experienced a tax loss in the same period must reduce their loss amount by the value of the aid received. The Agency’s position is rooted in its reading of Article 10-bis of Legislative Decree no. 137/2020, the “Ristori decree,” which explicitly states that Covid-19 contributions do not contribute to the formation of taxable income.
“Contributions and allowances of any nature paid exceptionally following the COVID-19 epidemiological emergency…do not contribute to the formation of taxable income,” reads the decree,aiming to prevent taxation from diminishing the value of the aid provided during the crisis.
The Agency differentiates between “exempt income” – which arises from facilitative provisions – and income that is “excluded” for structural reasons, such as dividends already subject to taxation. A senior official stated that the intention behind Article 10-bis is purely facilitative, and therefore should not be subject to broad interpretation.
While Article 10-bis addresses the deductibility of passive interest and general expenses, it remains silent on the issue of tax loss carryforwards.This omission is key to the Agency’s interpretation.The Agency contrasted this with previous legislation,specifically Article 1,paragraph 310,of Law no. 244/2007, which explicitly addressed the treatment of contributions to public transport companies in relation to loss carryforwards, referencing Article 84 of the TUIR.
The Agency argues that because the legislature did not include a similar explicit exemption for Covid-19 contributions,the default position – treating them as exempt income impacting loss carryforwards – prevails. “If the legislator had intended to exclude such contributions from the loss reduction mechanism…it should have expressly provided for it,” the Agency’s response to the
Here’s a breakdown answering the “Why, who, What, and How” questions, transforming the article into a substantive news report:
Why: The Italian tax agency issued a ruling to clarify how Covid-19 relief funds should be treated when calculating tax liabilities, specifically regarding the carry-forward of tax losses. The ruling aims to ensure consistent request of tax law and prevent
