On 7 December 2016 the Italian Senate approved the Government’s 2017 Budget Law proposal (legge di stabilità) already approved by the House of Representatives on 28 November. This new law allows asset managers to establish tax-exempt investment plans at no extra costs for individual retail investors (piani individuali di risparmio or PIR), the Italian equivalent of the French plans d’épargne and the UK individual saving plans.
Under the provisions of the new law, these PIR plans are exempt from the 26% substitute tax on capital gains and financial income (excluding those included in the taxable basis for Italian individual income tax purposes and taxed at progressive rates) as long as (i) investment in such plans are held by individuals for more than five years, (ii) at least 70% of the investment portfolio consists of equity or debt securities issued by Italian companies (or EU companies having an Italian branch) or units or shares of UCITS complying with such requirements, (iii) 30% of the issuers of such securities are SMEs, (iv) each investor does not invest more than €30,000 per year or €150,000 in the aggregate through a professional investment manager or a life insurance wrapper or capitalization contract entered into with a professional financial intermediary and (v) concentration risk in one single investment is limited to 10%. The special tax treatment would not apply to financial income and capital gains to investors holding “qualifying interests” (i.e., interests attributing to the holder a percentage of voting rights higher than 20% - or 2% in case of listed companies – or representing a percentage of share capital exceeding 25% - or 5% in case of listed companies). For the computation of the qualifying interests thresholds, the shares or rights held by relatives and through controlled companies must be included.
As indicated above, the special tax treatment is conditioned on a minimum 5-year holding period; an individual taxpayer disinvesting prior to the 5-year “vesting” period loses the tax exemption and the 26% substitute tax (plus interests) would be levied with retroactive effect but without penalty. In addition, each investor may only invest in one individual investment plan.
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. Non-EU, non-licensed asset managers may act as advisors to licensed asset managers.
The market estimates that the introduction of PIR plans may lead to the creation of at least 20 new asset managers or the expansion of the Italian desks of existing asset managers.