ITALY Law and Practice Contributed by: Emidio Cacciapuoti, Giorgio Bobba and Davide Massiglia, ADVANT Nctm
provisions of any applicable double taxation treaties). Foreign “institutional investors” without a perma - nent establishment for tax purposes in Italy are exempt from the 26% withholding tax, provided that they are established in a White List Country. The definition of “institutional investors” for the purposes of the exemption at hand (which differs from the one applicable in respect of non-real estate investment funds) includes: • foreign pension funds and foreign investment funds; • international bodies established on the basis of international treaties that are valid in Italy; and • central banks or entities that manage the state’s official reserves. According to the interpretation of the Italian tax authorities, foreign investment funds are entitled to the exemption when the following require - ments are fulfilled: • the foreign investment funds can be com - pared, regardless of their legal form and their liability to tax, to Italian regulated AIFs from a substantial standpoint having the same purposes; and • the foreign investment funds (or their man - agement companies/advisers) are subject to regulatory supervision. Capital gains realised upon the sale of real estate fund units by Italian resident investors holding fund units as private assets and by non-resident investors are subject to 26% substitutive tax. If the units are held in the context of a business activity, the relevant capital gain is included in the taxable base, and ordinarily subject to IRES/ personal income tax.
The 26% substitutive tax on capital gains does not apply to the following non-resident investors: • investors who are the beneficial owners of the income and are resident for tax purposes in White List Countries; • “institutional investors” established in White List Countries – the same definition applies as for the exemption from withholding tax on proceeds from Italian non-real estate invest - ment funds described above under “Tax Regime of Investors Into AIFs (Other Than Real Estate Funds)”; • entities or international bodies set up in com - pliance with international treaties that are in force in Italy; or • central banks or organisations that also man - age official state reserves. The exclusion of Italy’s right to taxation in respect of capital gains realised by a non-resident tax - payer upon the sale of a participation in an Italian real estate fund can also be granted under any applicable double taxation treaties. Carried Interest Schemes Italian tax law provides that, if certain require - ments are met, proceeds realised by Italian tax-resident individuals under carried interest schemes will be treated as income from capital and therefore subject to substitutive taxation, to be applied at a rate of 26%. The applicable legal provision does not intro - duce a special regime but rather clarifies the circumstances under which the carried interest proceeds have a financial nature, regardless of the existence of an employment relationship between the unitholder and the fund (or its man - ager/adviser).
275 CHAMBERS.COM
Powered by FlippingBook