The Italian Government is trying to shake up the lending market by Law Decree No. 91 of 24 June 2014 (hereinafter, “Decreto Competitività”), which came into force on 25 June 2014.
Along the lines of other recent statutory provisions (with a focus on Law Decree No. 145/2013, so-called “Decreto Destinazione Italia”), the Decreto Competitività intends, including by means of tax measures, to boost access by Italian businesses to the huge pools of liquidity currently available in financial markets.
Some of the key provisions1 are the following:
Private placement – Securities owned by Collective Investment Undertakings (“CIUs”) and securitisation companies
- the private placement of bonds, financial bills of exchange and similar securities is facilitated. Indeed, even if such securities are not traded on regulated markets nor issued by the so called “Large Issuers” (i.e. banks and listed companies), if they are held by qualified investors2, the substitute tax regime under Legislative Decree No. 239 of 1 April 1996 on interest (and other proceeds) for this kind of transactions shall apply, instead of the 26% withholding tax under Article 26, paragraph 1, of Presidential Decree No. 600 of 29 September 1973;
- the same regime (substitute tax regime) shall apply to interest (and other proceeds) accrued on bonds, financial bills of exchange and similar securities paid to:
- CIUs, set up in Italy or in another EU Member State, (a) which invest more than 50% of their assets in such securities and (b) whose investors are solely qualified investors; or
- securitisation companies (a) which invest more than 50% of their assets in such securities and (b) if the notes issued by such companies are held by qualified investors;
New lending entities
- without prejudice to the principle of reservation applying to banking activities (as confirmed in the Technical Report attached to the Decreto Competitività), also insurance undertakings, SACE, securitisation companies and CIUs3 are allowed to finance businesses (other than micro-undertakings or individuals), subject to certain limits and provided that certain conditions are met4;
- an obstacle for Italian businesses to receiving loans from non-resident entities is now removed. Indeed, 26% withholding tax under Article 26, paragraph 5 of Presidential Decree No. 600/1973 shall not apply to interest (and other proceeds) arising from medium/long term facilities granted by lending institutions, insurance companies and CIUs (in relation to the latter, exemption is allowed if they are not “leveraged”)5. As a matter of fact, the tax burden relating to such facilities used to be transferred to borrowers by virtue of the “gross-up” mechanisms included in loan agreements. As to CIUs’ loans, it would be appropriate to include further clarifications in the text of the Decreto Competitività at the time of its conversion.
Further extension of the objective and subjective scope of the substitute tax regime applying to medium/long term facilities
Syndicated loans and transfer of receivables processes are facilitated, on two different grounds:
- objectively: the assignment of loans made in relation to loans benefiting from the substitute tax regime under Articles 15 et seq. of Presidential Decree No. 601 of 29 September 1973 (0.25% to be paid in one shot) and any subsequent assignments of the relevant receivables or contracts, together with the transfer of the relevant guarantees, shall fall within the scope of substitute tax;
- subjectively: the benefit of the substitute tax regime is extended also to medium/long term facilities granted by securitisation companies, insurance companies and CIUs, in accordance with the recent statutory provisions that have (a) extended the substitute tax regime to the issuers of certain types of bonds and (b) made such regime optional (instead of mandatory);
Further amendments to Law 130/99 – “Statutory Credit Enhancement”
- Law No. 130/99 on securitisation has been amended, in order to take into account the possibility for securitisation vehicles to grant loans and provide for “statutory credit enhancement” for those investing in bonds issued by securitisation vehicles. Indeed, the segregation of securitisation companies’ assets has been improved in favour of noteholders and hedging counterparties and to cover securitisation transaction costs.
Reduction of photovoltaic feed-in tariffs
Other measures seem to reduce, rather than increase, support to businesses and the production system.
In particular, Article 26 of the Decreto Competitività provides for the reduction of public feed-in tariffs for photovoltaic plants with rated value over 200 kW.
The owners of such plants who benefit from such tariffs may apply for a 8% reduction of the amount still owed to them by the GSE (Energy Management Authority). Should they not exercise such right, the incentive period will be statutorily extended to 24 years, against a reduction in the tariff value (reduction levels are set out in the Annex to the Decreto Competitività) resulting in a sort of financial updating of the public incentives already recognised to them.
In any event, even this provision may in the end improve lending to businesses, also by virtue of the other provisions of the Decreto Competitività (which, as mentioned above, widens the number of potential lenders, including non-Italian lenders to Italian businesses) and, at the same time, favour possible processes for the restructuring of receivable portfolios in the lending sector.