ITALY Law and Practice Contributed by: Emidio Cacciapuoti, Giorgio Bobba and Davide Massiglia, ADVANT Nctm
• an “institutional investor” established in a White List Country. The definition of “institutional investor” for these purposes includes: • entities that are subject to regulatory supervi - sion in the state in which they are incorporat - ed or created (eg, foreign banks and insur - ance companies); • entities that have specific expertise in invest - ment in financial instruments (eg, foreign investment funds), including tax-transparent entities not subject to regulatory supervision; and • entities that have been set up with the exclusive purpose of managing investments for institutional investors that are subject to regulatory supervision, including tax-transpar - ent entities that are not subject to regulatory supervision, provided that both such institu - tional investors and the management com - pany of the entity are established in White List Countries. The exemption also applies to entities or inter - national bodies set up in compliance with inter - national treaties that are in force in Italy, and to central banks or organisations, as well as man - aging official state reserves. The White List Countries are numerous, and include the vast majority of countries of resi - dency/establishment of institutional players and international financial firms (eg, the EU, the UK, the USA, Cayman Islands, BVI, Liechtenstein, UAE, Singapore, Jersey, Guernsey). In order to obtain the above-mentioned exemp - tion from Italian taxation, non-Italian resident investors must deposit the units with an Ital - ian qualifying financial intermediary and submit
proper documentation and self-declaration to the management company, stating the fulfilment of the requirements to benefit from the exemp - tion. If there is a negative difference between the sale and the purchase price (increased by any cost or expense related to the acquisition of the fund units), the latter amount can be used to offset other income, with certain limitations, depending on the nature of the investor. Tax Regime of Investors Into Real Estate Funds Distributions of proceeds from real estate invest - ment funds to resident investors are subject to 26% (final or advanced) withholding tax, to be applied by the management company. Proceeds included in the positive difference between the redemption or liquidation value of a fund’s units and their average subscription or acquisition price are subject to the same tax treatment. No withholding tax applies to Italian non-mandatory pension and investment funds. In order to counteract tax-abusive structures, Italian tax law provides for certain anti-abuse provisions where the above regime does not apply to Italian resident investors (the fund is treated as tax-transparent – ie, the taxpayer is taxed on proceeds realised by the fund, regard - less of their actual distribution). This is the case where the investor holds (directly or indirectly) more than 5% of the fund. However, such anti- abuse rules will not be applicable if the investor qualifies as an “institutional investor” (eg, banks, insurance companies and investment funds). Non-resident investors are subject to 26% final Italian withholding tax (or the lower tax rate on outbound interest payments according to the
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