Tax credits: how to convert them into liquidity to support your business

For a business, effective cash flow management is often the key to coping with unexpected expenses and expanding its business opportunities. The sale of tax credits can be a strategic solution in this regard. Stefano Zuccherato, Head of Tax Credit & Distressed Financing of Banca Ifis, tells us more about it.

My company has significant tax credits on its balance sheet: how can I make the most of them without having to wait for the tax authorities?

If your company has accrued significant tax credits, one solution to consider is the assignment of tax credits. This enables you to convert an asset recorded on your balance sheet into immediate liquidity, without having to wait for the tax authorities to process your refund.

A range of tax credits may be assigned, provided that the relevant legal requirements are met and the credits are legally transferable.

The main categories include:

VAT, IRES and IRAP tax credits accrued by companies in good standing, in voluntary liquidation or subject to insolvency proceedings;
Tax credits relating to the film and audiovisual sector (Tax Credit), officially recognised by decree of the Ministry of Culture (MIC).

In addition, companies subject to insolvency proceedings may also benefit from a guarantee facility pursuant to Article 38-bis of Presidential Decree No. 633/1972 (Signature credit), which is required in order to obtain payment of a VAT refund.

The assignment of tax credits enables businesses to access funding more quickly, improving cash flow and freeing up capital that can be used for investment, business growth or day-to-day operations.

Each assignment is preceded by a technical and tax assessment of the credit to verify its existence, transferability and the supporting documentation. For this reason, it is essential to work with experienced specialists who, where the characteristics of the tax credits allow, can provide a transparent and proportionate commercial proposal. Banca Ifis supports businesses with these requirements through its dedicated business unit with extensive expertise in the tax credit sector.

How can financing against tax credits help my business improve short-term cash flow planning and investment decisions?

Financing against tax credits allows a business to convert a tax credit that would otherwise be collected at a future date into liquidity that is immediately available.

This enables businesses to:

improve cash flow management,
reduce financial exposure and plan their activities with greater confidence.

Having access to liquidity quickly can help businesses pay suppliers, employees and taxes, support new investments, seize market opportunities and finance growth projects without having to wait for tax refunds.

Greater predictability of cash flows also enables more effective financial planning and more efficient working capital management, helping to strengthen the business’s financial stability and competitiveness.

Would you like to find out about tax credit advances?

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What should businesses consider in order to manage tax credits efficiently without placing unnecessary pressure on their financial structure?

Managing tax credits efficiently requires continuous monitoring of their nature, value, supporting documentation and the expected timetable for their use or repayment. It is essential to assess the impact that these tax credits may have on the company’s liquidity and working capital, ensuring that they do not remain tied up for extended periods.

Another important consideration is determining whether the tax credits are transferable and establishing their economic value. To this end, it is advisable to seek the support of experienced specialists who can carry out a preliminary assessment of the type of tax credit, the available documentation, the company’s tax situation, and any other relevant factors, in order to disburse the advance and evaluate the advisability of selling the receivable to obtain upfront liquidity to support the company’s day-to-day needs.

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