ITALY Trends and Developments Contributed by: Paolo Ludovici, Marlinda Gianfrate and Luca Tortorella, Gatti Pavesi Bianchi Ludovici
the basis of the maximum percentage of the distributions from the investment vehicle that this portion represents in light of the provi - sions of its constituent documents. Carried interest does not have to be fully accounted for in the tax period in which it is distributed, but must be allocated pro rata over the dura - tion of the investment based on the maximum participation percentage as set out in the investment vehicle’s constituent documents. In case of delegation or sub-delegation by the asset or investment manager to third parties of certain management functions, analysis of whether the independence criteria are met must be carried out with regard to who de facto car - ries out the managerial activities, lacking the guarantees granted by the aforementioned Euro - pean Directives. Remuneration of the asset or investment manager must be at arm’s length and documented in a transfer pricing documentation: requirements and accepted methodologies In general terms, fund management remunera - tion occurs by definition at arm’s length, as it is contractually agreed upon between the manage - ment company establishing the fund and third- party investors at the time of subscription. When implementing an investment strategy in a foreign country, non-resident asset managers typically rely on local expertise through resident man - agers, advisory firms or their own permanent establishment. In cases involving intra-group services, the remuneration of the entity operat - ing in Italy follows transfer pricing rules, ensur - ing that a portion of the overall fee is allocated to Italy based on the functions performed, risks assumed and assets utilised.
For the purposes of applying the IME regime, the asset or investment manager acting in the name of or on behalf of the foreign investment vehi - cle, or direct or indirect subsidiaries thereof that carry out intra-group transactions, must prepare and declare the possession of proper transfer pricing documentation aimed at demonstrating that the remuneration achieved is compliant with the arm’s length principle. To shed light on how to interpret such a require - ment, on 28 February 2024 the IRA issued a regulation containing guidelines for adequate remuneration (to be documented) for services performed in Italy by the asset or investment manager (the “Guidelines” ). The Guidelines state that – in general terms – arm’s length remuneration is determined by employing the most appropriate method from among those described in the OECD Transfer Pricing Guidelines. This assessment considers the specific facts and circumstances of the case, the economic characteristics of the services, the quality of the information available and the degree of comparability between the services under scrutiny and those deemed comparable. In this regard, the Guidelines make a distinction between two type of services and the method applicable for the determination of the arm’s length remuneration: • investment management services; and • support services related – and instrumental – to investment management activities. Investment management services include: • investment management activities, such as the purchase, sale or trading of financial instruments, including equity interest, credits and derivatives;
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