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In particular, asset management products are the prevalent financial products for Italian investors even though Italian household investments are more focused on banking bonds and government securities. Notably, monetary and hedge funds decreased, whereas bond funds represented the prevalent share in the Italian market. With regard to the financial results of the asset managers of open-ended funds and individual portfolio managers, they closed the last financial year with increased profits of approximately 37 per cent , 35 mainly owing to the positive performance of collection compared to the.

Conversely, private equity fund profits continued to suffer from the difficulties in raising capital. Following the implementation of the Solvency II framework, and in light of the appeal of asset management products for Italian investors see Section I , the measures adopted by the Italian regulator in terms of eligible investments were particularly favourable to the insurance Industry.

IVASS has also introduced new rules for determining the average rate of return of separately managed accounts, allowing insurers to temporarily suspend the accounting of gains and losses deriving from the trading of derivatives, and to hold the revenues gained during favourable economic cycles for distribution to policyholders during less favourable accounting periods.

These assets excluding the technical provisions concerning linked policies and pension funds are mainly invested in government bonds On a separate note, in Italian insurers experienced a reversal of the negative trend of unit linked policies' volumes. In addition, IVASS shone a spotlight on the phenomenon of 'dormant' life policies, 40 requiring insurers to take actions to improve the processes for verifying the deaths of insured people and identifying beneficiaries.

Over the past 30 years, the Italian pension system has undergone significant reforms 42 aimed at progressively controlling public expenditure and setting up private sources of retirement income in addition to the mandatory state pension system. An initial set of rules comprehensively regulating supplementary pension schemes was introduced in 43 and radically reformed in Legislative Decree No. The reform's cornerstones were voluntary, and defined contributions, individual capitalisation mechanisms and the transferability of positions from one pension scheme to another.

Currently, private pension funds are in place in Italy. The sums contributed to private pension schemes must be managed according to the principles of prudence, transparency, investment diversification, risk fragmentation and cost containment see Ministerial Decree No. In the past three years, the prolonged expansive monetary policy, characterised by low interest rates, stimulated a portfolio diversification resulting in a decrease in AUM invested in sovereign bonds from Italian workers are becoming increasingly aware of the advantages of private pensions, whose market is steadily growing in terms of participants and AUM also because of the widespread distribution network used and the reduced costs to be borne by investment fund managers.

Despite this growth, the participation rate in private pension funds is still modest approximately However, the Italian regulator has some concerns in light of investors' low levels of expertise, which could damage them if aggressive sales strategies are adopted by pension funds. To encourage participation in private pension schemes, COVIP 48 has taken specific measures in the past few years, including a ban on the exclusive or automatic reliance of pension schemes on credit rating agency ratings; 49 a simplification of the bureaucratic burdens related to certain corporate actions and extraordinary transactions; and incentives to mergers so as to reach sizes that ensure efficiency and economies of scale.

To safeguard investors' interests and an SGR's independence, the assets of real estate UCIs are valued by external and independent appraisers however, this valuation is not binding on the fund managers. The development of real estate funds was initially hindered by a set of regulatory and operational constraints, which have since been gradually removed.

The history of Italian real estate funds can therefore be divided into two different phases: to , when the real estate fund market was dominated by retail products; and from to the present day, during which time the number of funds reserved to qualified investors increased sharply as at 30 June , only 7 per cent of the existing real estate funds are retail-oriented. Broadly speaking, the real estate market is slowly recovering from the negative tendency of the past few years; therefore, in the asset management sector benefited from this market improvement, and asset management products are thus expected to perform better in the near future.

Most investments by real estate funds in Italy in concerned assets in Milan and Rome that are becoming more and more appealing to foreign investors. This trend is likely to continue, and may be further amplified if the uncertainties regarding the future value of real estate assets in London persist. In fact, the UK real estate market may well experience a negative trend following the country's exit from the European Union. UCIs can also be set up as hedge funds, thus enabling them to invest in a wider range of eligible assets than UCITS, and derogating from the Bank of Italy's general rules for risk containment and fragmentation.

Reserved AIFs may carry out a wide spectrum of investment strategies that are not limited to the typical policies of hedge funds. In light of the higher risks to which hedge fund investors might be exposed, the Italian regulator introduced a set of limits affecting the distribution of and investment in these funds. For example, a fund's regulation must expressly set out the maximum level of leverage and flag the risks of the investment.

Owing to these structural constraints, hedge funds have developed more slowly in the Italian market compared to other countries and are still mainly targeted to institutional investors. Since , amendments to the applicable framework have been introduced to support the hedge fund sector.

The provisions requiring the establishment of a special purpose SGR to set up and manage hedge funds were repealed, thus opening up the market to any legal entity licensed as an SGR, and boosting restructuring and merger transactions. Despite these measures, the Italian hedge fund market is still in a comparatively weak position with limited fund offers.

More specifically, at the beginning of foreign hedge funds showed a cautious attitude towards investing in Italy. However, since the election, hedge funds seem to be ready to invest in the Italian market again. However, the revision of the regulatory framework still needs to be accompanied by a change in the cultural approach to alternative investments. Traditionally, Italian investors tend to be risk-averse, and although this helped them protect their assets during the financial crisis, it has also hindered Italy's ability to compete in innovative market segments such as that of hedge funds.

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Notwithstanding the rapid development that preceded the financial crisis, the Italian market is significantly undersized compared to France, Germany, Spain and the UK: domestic funds are suffering from the high market volatility and the limited willingness of institutional investors to invest in private equity funds.

However, according to the AIFI, in investments in the Italian private equity and venture capital market reached the third-highest amount of the past 10 years, despite the lack of mega deals i.


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Despite positive results in , divestments regarding the private equity sector continued to grow both in terms of the amount and number of exits, and were characterised by a new exit channel: sales to special purpose acquisition vehicles. This increase was strongly influenced by the activity of some domestic institutional funds that reached important closings during the year. Notably, the low interest rate environment caused buyouts to generally be the preferred stage for investments, and the one into which the largest portion of resources continued to flow i.

Market operators are optimistic about the future economic scenario, and thus have encouraged measures aimed at providing venture capital for Italian start-ups. The tax regime currently applied to investment funds, including the tax treatment applied to their investors, was amended a few years ago.

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The underlying principles of the new tax regime for investment funds are no taxation at the level of the investment vehicle and taxation at the level of the investors at the moment of distribution. Certain significant exceptions may apply to investors in real estate investment funds REIFs. The main changes include a more restricted definition of investment fund, particularly the concepts of plurality of participants and independence of the management company from the investors.

As indicated in the government report on Law Decree No. In particular, the report emphasised that the aim of the amendments was to limit the application of the REIF tax regime to widely held funds and funds that pursue public interest objectives. The applicable REIF tax regime depends on the status of the investor i. A REIF is not subject to corporate income tax IRES and regional tax on business activities, and therefore benefits from a favourable tax regime in connection with its investment activities.

In general terms, any income, including capital gains on the sale of immovable property or equity interests in real estate companies, as well as income from property leasing i. Further, income from certain ancillary financial investments is not subject to withholding tax at source. Law Decree No. This amendment would allow REIFs to access treaty benefits.


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In this respect, the Italian tax authorities have stated that tax treaties are usually applied on a reciprocal basis. The Italian tax authorities have pointed out that the beneficial tax regime, as previously described, applies to institutional REIFs irrespective of compliance with the concept of a mutual fund e. Income received by investors in REIFs upon redemption of units or a periodic distribution of proceeds is, in principle, subject to withholding tax at a rate of 26 per cent by the management company or the relevant Italian qualified intermediary, which is levied as an advance payment of the total tax due from investors that receive proceeds in connection with business activities inter alia , Italian-resident companies, public and private entities or trusts that carry out a business activity, or non-resident companies with a permanent establishment in Italy to which these proceeds are attributable.

The 26 per cent withholding tax is levied as a final payment in all other cases. It is not levied on proceeds paid to Italian UCIs or pension schemes identified by the law. Distributions of amounts formed with capital contributions are not subject to any income taxation at the level of the investor but reduce the tax basis of the units for a corresponding amount. Non-institutional REIFs' units are not entirely owned by institutional investors.

The tax regime applied to institutional REIFs also applies to non-institutional REIFs that meet the notion of a mutual fund according to regulatory law. The tax regime applicable to Italian-resident investors in non-institutional REIFs depends on whether the unitholder owns more than 5 per cent of the units and whether the investor falls within the definition of an institutional investor. Italian-resident investors other than institutional investors that own more than 5 per cent of the units of a non-institutional REIF are taxed, on a 'look-through' basis, on the income realised by the REIF.

The tax regime applicable to institutional REIFs and to their institutional investors also applies to investors that do not own more than 5 per cent of the units and to institutional investors, irrespective of the units owned in a non-institutional REIF. Therefore, 26 per cent withholding tax applies as an advance or final payment depending on the status of the investor. In the event of transfer of units by an individual who holds less than 5 per cent of the fund units, capital gains are subject to the same principles that apply to sales of units of institutional REIFs.

In the event of transfer of units by an individual who holds more than 5 per cent of the fund units that are taxed on a 'look-through' basis , for purposes of determining the relevant capital gain, the tax cost of the transferred units is increased or decreased, respectively, by the income or losses attributed to the investor, and is also decreased, up to the amount of the management results attributed, by the proceeds actually distributed to unitholders. This is similar to the tax treatment applicable to capital gains realised from 1 January to 31 December by Italian-resident individuals through the sale or disposal of a 'qualified' shareholding not held in connection with a business activity.

If the units are held in the context of a business activity, the relevant capital gain is included in the aggregate taxable income ordinarily subject to personal income tax. The tax regime applicable to non-Italian resident investors in REIFs remains substantially unchanged irrespective of whether the REIF is classified as institutional or non-institutional. Proceeds received as a periodic distribution or redemption of REIF units by non-Italian investors are, in principle, subject to 26 per cent withholding tax that is levied as a final payment of taxes due in Italy. However, proceeds received by certain qualified non-Italian resident investors e.

In addition, tax treaty provisions remain applicable if certain conditions are met. Article 13 of Legislative Decree No. These changes were also necessary in light of the fact that the transposition of the AIMFD enables Italian SGRs to set up and manage real estate funds abroad under the EU free provision of service regime. Therefore, regarding income deriving from quotas held in foreign REIFs received by resident persons, the same taxation treatment provided for participants to Italian REIFs that own quotas greater than 5 per cent of the fund shall apply, including the transparency regime for participants other than 'institutional investors', listed in Article 32 3 of Law Decree No.

In cases where a resident owns a fund stake greater than 5 per cent, taxation on the fund generally on cadastral income coupled with quota holders taxation as a result of the transparency rule gives rise to double taxation. In the said scenario it stands to reason that, in the absence of a specific rule, the application of the transparency regime implies application of the exemption regime at the level of the foreign REIF at least on the portion of income from immovable property attributed to the Italian quota holder by operation of the transparency principle.

The profits of UCIs are exempt from income tax and corporation tax.

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UCIs receive investment income gross of withholding tax and applicable substitute taxes, with certain exceptions. In particular, UCIs remain subject to the withholding at source of interest and other income from bonds, similar securities, and finance bills that are not negotiated in regulated markets or multilateral negotiation systems of the EU and European Economic Area States included in the white list issued by non-listed resident companies, as well as the withholding on income from atypical bonds.

However, certain categories of income realised by UCIs are subject to withholding tax. A withholding tax of 26 per cent applies to investment income deriving from participation in a UCI. The withholding is assessed on:. The 26 per cent withholding tax is levied as an advance or a final payment of taxes due, depending on the tax status of the investor. The 26 per cent withholding tax is levied as a final payment of tax payable by Italian individual investors that hold units other than in connection with a business activity.

With regard to proceeds paid to corporate investors or commercial entities that are resident in Italy for tax purposes, the 26 per cent withholding tax is levied as an advance payment of the total tax due. Proceeds are considered taxable business income, and are subject to IRES on a cash basis. Proceeds collected by non-resident investors upon a redemption or sale of units, or a periodic distribution of proceeds, are in principle subject to the 26 per cent withholding tax, which is levied as a final payment of taxes due in Italy provided that the non-resident investor does not have a permanent establishment in Italy to which the proceeds are attributed.

However, proceeds realised by certain categories of non-resident investors are exempt from the 26 per cent withholding tax. In this respect, a case-by-case analysis should be performed to identify qualified investors. If the exemption from the withholding tax provided under the relevant domestic provision does not apply, the 26 per cent withholding tax may be reduced under the provisions of an applicable tax treaty. SICAFs are closed-ended collective investment schemes set up as joint-stock companies with fixed capital. Article 9 of Legislative Decree No. In , Italy's economic growth strengthened considerably, driven by the global cyclical upswing and expansionary economic policies.

Public debt appears to be stabilising, but still remains high compared to the country's GDP. The latter rose sharply during , supported by domestic demand. Investment, which slowed in the first half of last year, has now increased again. In this context, the investment trend in Italy shows the increased interest of Italian investors in the asset management sector.

In terms of future challenges, the asset management sector will have to face the sudden development of fintech solutions. More specifically, even though GAFA Google, Amazon, Facebook, Apple is focusing on the payment service sector, these companies are now likely to gradually approach the asset management sector, relying on the huge amount of data they hold.

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In this context, market players in the asset management sector are considering developing partnerships with the fintech industry, which the Italian supervisors are scrutinising closely. Indeed, full compliance with this regime entails higher costs, and will increase the overall transparency of the burdens clients must bear when receiving investment services, thus implying lower profitability and more competition in the market. Finally, the data on developments in Italian asset management is encouraging; although the issue of a low level of financial expertise among Italian investors still exists, Italian authorities are encouraging various initiatives in this respect in addition to promoting their own initiatives.

Furthermore, certain gaps in the regulatory landscape — including those related to the fintech phenomenon — pose, on the one hand, a risk to macroeconomic stability and development, but on the other, an opportunity for market players in the asset management sector.

Consequently, extensive knowledge of the evermore sophisticated and complex European financial regulations is becoming increasingly crucial. The main changes concerned cooperation between ESMA and the competent national authorities, activities that can be carried out by a custodian, remuneration policies and sanctions for infringing the relevant legal provisions.

One amendment concerns under-threshold Italian management companies the prudential regulation of which has been simplified to ensure Italy is more aligned with other EU Member States. As to the diffusion of the SICAF option, given the particularly broad definition of AIF, as implemented in Italy, a number of Italian investment vehicles traditionally falling outside the scope of the rules concerning collective asset management have been reclassified as AIFs, with the consequence of their falling under the Bank of Italy's supervision.

Provided that certain conditions are met, the Bank of Italy has clarified that the following investment entities cannot be considered SICAFs, and, therefore, are exempt from the asset management regulations: listed special purpose acquisition companies, Italian listed real estate investment companies SIIQs and financial joint ventures that do not raise capital through equity issuance.

Remarkably, the Bank of Italy pointed out that the actual supervisory classification of the entities above is to be assessed on case-by-case basis see the Bank of Italy's Final Report on the Public Consultation on the Amendments to the Collective Investment Management Regulation, 21 January In , the average investor in asset management products was male, approximately 59 years old, resident in Northern Italy and made asset allocation choices focused on flexible funds.

Female investors increased their participation in investments funds approximately 47 per cent of unitholders are female , confirming the trend of the previous year see Assogestioni Research Paper No. The Regulation on the collection of risk capital via online portals was subsequently amended also by Consob Resolution 29 November , No. Previously, insurers had to cover their technical provisions with assets that met specific requirements, including the requirements to:.


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In particular, pension funds are allowed to invest in derivatives and repurchase agreements for hedging purposes only, and provided that counterparties are highly creditworthy. A specific focus is placed on risk assessment, the setting of investment goals and investment policy decision-making processes. The fund regulation can also specify other categories of investors entitled to invest in the fund. The Decree broadens the white list to include 51 new countries, and reserves the right to remove countries that are not compliant with the exchange of information obligation. ITo meet this latter requirement, the foreign UCI or its asset manager must obtain an initial authorisation for the investment activity and must be subject to a continuing control over its activity.

Foreign UCIs, to comply with the prudential supervision test, need to provide a written statement issued by the competent foreign authorities confirming compliance with this requirement. However, it may happen that a foreign competent authority is not in a position or available to issue the above written confirmation. The ITA clarified with resolution No. In this scenario, where the relying adviser is controlled by or under common control of an investment adviser and a single form ADV which is the standard form used by investment advisers to register with both the Securities and Exchange Commission SEC and state securities authorities can be filed by the latter on behalf of itself and the other advisers i.

In the hands of investors that receive proceeds other than in connection with a business activity, such a qualification implies that capital gains form part of taxable income, regardless of the fact that the units are held in Italy and that those units are traded in a listed market. Only Moreover, guidance of the tax authorities confirms that tax treaty provisions remain applicable in regard to capital gains realised upon a sale of units when the relevant conditions are satisfied. Capital gains realised by non-resident investors that do not own more than 5 per cent of the units of the non-institutional REIF and therefore that are not treated as having an interest in a partnership are, in principle, subject to taxation in Italy as other income Articles 23 1 f and 67 1 c-ter of the Income Tax Code.

The same rules applicable for institutional REIFs apply. Indeed, non-Italian resident investors may benefit from an exemption from Italian tax based on domestic provisions in all cases, if the units of the REIF are listed on a regulated market; and in regard to units not listed on a regulated market if the foreign investor is resident for tax purposes in a state included in the white list, or if the foreign investor falls within one specific category that benefits from the exemption regime applicable to proceeds from REIFs.

Consequently, UCIs benefit from double taxation conventions and are not subject to withholding taxes otherwise applicable under Legislative Decree No. The Asset Tracing and Recovery Review. Being included in a Government Decree, the amendments at issue are already in force, but they need to be officially converted into ordinary law by the Parliament within 60 days to become permanent.

It is possible that further amendments will be added during the conversion, but we do not expect substantial changes. The Decree significantly simplifies and harmonizes the requirements to access the special regime at issue. While, previously, two separate classes of beneficiaries, with different features and requirements with which to comply, were identified — namely executives or managers versus individuals with a university degree - the new version of the provision does not make any distinctions, in terms of requirements and conditions to benefit from the special exemption, between classes of beneficiaries.

According to the new formulation of the provision, the special exemption will be open to any employee, self-employed worker, or entrepreneur who relocates to Italy to the extent that:. The Decree extends the tax incentive also to those individuals who move their residence to Italy and start a business activity in Italy. All of the above amendments concerning the amount of the exemption and its duration make the relocation of workers to Italy even more appealing than before. However, according to the current wording of the Decree which may be slightly corrected during the conversion into ordinary law by the Parliament please note that the new amendments - i.

Please note, finally, that the special tax regime for new resident workers is part of a more comprehensive package of measures that Italy has implemented in the past years to attract individuals. Besides the tax regime described above, indeed, other preferential tax regimes are open to:. If you would like to learn how Lexology can drive your content marketing strategy forward, please email enquiries lexology. Consequently, I find the news releases put out by the various law firms invaluable in keeping me up to date on developments in the law and recent case law.

The service that Lexology provides, through consolidating those various news releases and grouping them under the relevant categories, is a timesaver for me and allows me to do a quick daily scan of recent developments.