Tax law changes favour international investors

Recent changes to Italian tax law have created a more favourable regime for closed-end funds (fondo chiuso), which have traditionally been the most suitable Italian structure for venture capital and private equity activity. Italian closed-end funds are typically subject to a 12.5% annual substitutive tax, however in the past, foreign investors were exempt from any further taxes. In addition, if they were resident in an approved country, which had signed a tax treaty with Italy, they were entitled to a full refund of their tax quote paid by the closed-end fund. The recently-implemented changes mean that for a country to be approved, it has only to prove that it has an adequate exchange of information with Italy. Tax requirements have now been simplified, freeing up investment for foreign investors not resident in a tax haven, and approved by Italy. Also included are investors based in approved countries whilst not officially resident there, which can include insurance companies, pension funds, institutional investors and SICAVs. The reformed tax laws introduced by the Italian tax authorities are expected to favour private equity and venture capital players in particular, as they will now be able to include Italian closed-end funds in their investment portfolio without fear of being penalised by heavy taxes.

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• Topics
• Southern Europe