ITALY Law and Practice Contributed by: Emidio Cacciapuoti, Giorgio Bobba and Davide Massiglia, ADVANT Nctm
form, and are liable to Italian corporate income tax (IRES), generally applied at a rate of 24%. Italian tax law establishes that proceeds real - ised by Italian alternative funds are exempt from IRES. As a consequence, proceeds realised by alter - native funds arising from their investments will be received gross of any Italian withholding tax or substitutive tax (with some exceptions – eg, under certain conditions, interest from certain unlisted bonds), and will not be subject to Italian income taxes. Italian AIFs are not liable to Italian local operat - ing profit tax (IRAP), ordinarily applied at a rate of 3.9%. Based on the wording of Italian tax law, and according to the interpretation of the Italian tax authorities, Italian alternative funds (even those under contractual form) are entitled to the appli - cation of the double taxation treaties entered into by Italy, and may request that the Italian tax authorities issue a tax residence certificate supporting their status for such purposes. How - ever, the actual application of the double taxa - tion treaties depends on the interpretation of the Management fees invoiced by the management company to the funds are exempt for Italian value-added tax (VAT) purposes (no Italian VAT will be charged on management fees), but fees due to the depository may trigger some VAT leakage. Indeed, the Italian tax authorities have taken the view that certain services rendered by the depository (eg, custody services and man - datory supervision services) will trigger VAT at a rate of 22%, and some others (eg, net asset sourcing state. Indirect Taxes
value calculation) will be treated as VAT-exempt. As a consequence, Italian VAT applied by the depository in the first case will not generally be recoverable in the hands of the funds. The Italian tax authorities have clarified that ser - vices that are “strictly connected” and specific to, and essential for, the management of AIFs (eg, certain fees charged by advisory compa - nies or placement agents) are treated as exempt. According to the Italian tax authorities, certain services (eg, compliance, internal audit and risk management) can be considered as VAT-exempt where such services are rendered under an “outsourcing” process for regulatory purposes ( esternalizzazione di funzioni ). Operations carried out by real estate funds (pur - chase/sale/lease of real estate properties) may be subject to VAT, depending on the nature of the transaction. The management company of the investment fund is deemed to be the taxable person for VAT purposes for the activities carried out by the fund. The fund’s VAT liability is deter - mined separately from that of the management company and that of the other funds managed by the same management company. The tax treatment of proceeds arising in the hands of alternative fund investors depends on both the type of proceeds and the type of inves - tors. Tax Regime of Investors Into AIFs (Other Than Real Estate Funds) Any amount received that can be regarded as capital reimbursement is not subject to taxa - tion. In this regard, the actual qualification of the sums distributed must be verified based on the information provided by the management com - pany itself upon the relevant payments.
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