Long-term individual savings plans now available to asset managers in Italy

Individuals looking to invest in Italian and European industrial and commercial companies will be eligible for important tax incentives: an exemption from taxes on the proceeds from those investments. The incentive is applicable for investments made over a minimum five year period.

Under the new rules, there will be an exemption from the usual 26% substitute tax on (i) capital gains; and (ii) other income generated by individuals in Italy (not via commercial activities) deriving from investments made in long-term savings plans.

Long-term investment savings plans must meet the following requirements to benefit from the exemption: (i) a minimum five year investment period; (ii) at least 70% of the investment portfolio must comprise equity or debt securities issued by Italian companies (or EU companies with an Italian branch) or shares in UCITS compliant with such requirements; (iii) 30% of the issuers of said securities are SMEs; (iv) each investor does not invest more than €30,000 per year or €150,000 on the aggregate via a professional investment manager, a life insurance company or under a capitalisation contract with a professional financial intermediary; and (v) the concentration risk in any individual investment is limited to 10%.

The exemption would not apply to financial income or capital gains for investors who hold a “qualifying interest” (ie when a holder's voting rights exceed 20% or 2% for listed companies or whose stake exceeds 25% or 5% for listed companies).

PIR plans may also be created by non-Italian entities licensed to carry out asset management services in Italy through an Italian branch or on a cross-border basis, subject to the appointment of an Italian tax representative.

The underlying financial instruments must be held for at least five years otherwise the income generated from the investment disposal, as well as all the income rendered during the actual investment period, will be subject to ordinary taxation, without the application of the exemption.

Capital losses, losses and negative differences generated by (i) the disposal of financial instruments held in the plan; and (ii) the reimbursement of financial instruments held in the savings plan may be deducted from capital gains, positive differences or proceeds from subsequent transactions carried out as part of the savings plan that are subject to taxation.