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March 4, 2021

Ferrari reports revaluation of its trademark under Article 110 of Law Decree n. 104/2020

With Article 110 of Law Decree n. 104/2020 (Articolo 110 Del Decreto Legge n. 104/2020, Decreto Agosto), Italy enacted “Urgent measures to support and relaunch the economy” under the Covid-19 pandemic. The article allows for the voluntary revaluation of business assets and participations, with the application of a very favorable substitutive tax rate (3%).

The revaluation shall not exceed the values actually attributable to the assets taking into consideration their consistency, their production capacity, the effective possibility of economic utilization in the business as well as their fair values ​​and the prices negotiated in Italian or foreign regulated markets.

Last week, Ferrari N.V. filed its annual report for the year 2020 with the SEC. This is the first case in the public domain known to us where an Italian issuer reports a trademark step-up under this regime.

Accordingly, Ferrari S.p.A. benefited from the one-off partial step-up of its trademark for tax purposes, which resulted in the recognition in 2020 of deferred tax assets for €83.7 million and a substitute tax liability for €9.0 million, resulting in a one-off net tax benefit of €74.7 million. The deferred tax asset will be utilized over a 20-year period and the substitute tax will be paid in three equal annual installments starting in 2021. There was no cash effect in 2020.

The 3% substitutive tax of €9 million indicates that the revaluation oft he Ferrari trademark (the step-up) amounted to €300 million. The deferred tax asset of €83.7 million represents a tax benefit of 27.9% on the step-up (composed of 24% corporate tax rate and 3.9% Italian Regional Income Tax (IRAP). Ferrari N.V. does not disclose the total value of its trademark which was internally developed.

We expect more of these cases to be disclosed during the coming weeks. You can read the details of the revaluation in Ferrari’s 2020 20-F report here.

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