Tax Pills

Where does all our tax go?
Changing times. Italy’s Revenue Agency has just launched the last information campaign advising that this year millions of citizens who will submit their annual tax return, will be also able to know how the taxes paid have been effectively distributed, either by accessing their “cassetto fiscale” or directly through the pre-filled personal income tax return.
Re-establish the sense that every single taxpayer is part of a larger project than his own door. That’s the project main objective, wanted, planned and realized by the Revenue Agency, is to improve  the sense of citizenship of millions of individuals, their feeling part, and protagonists, of a bigger project. People are too often considered only taxpayers, now they will start fully perceive their status as citizens, not only taxpayers.
The number of interested taxpayers - Approximately 30 million potential taxpayers are involved in the project, 20 of which have adopted the 730 tax-return model and another 10 million the Redditi-Income model.
How to access Revenue Agency information on how your taxes are spent - Starting from the second half of April, on the official website of the Revenue Agency, accessing your “cassette fiscal” or consulting the pre-filled fiscal statement through the web, millions of citizens will know for the first time in their history in dealing with fiscal issues how the taxes collected were effectively distributed thanks to a summary-record that contains the main item and sector of each expenditure.
Within the personal memory-note, you will find how much of the money taken from you in taxes goes on paying benefits, funding public health, social security, education, security, transport, culture, territorial protection and also the share of public debt yearly honored by the Country and, finally, how much tax revenue are addressed to the EU budget, in addition to general public administration services.
How does it works – The modality to illustrate the allocation of taxes has been elaborated on the basis of analytical data on public spending prepared by the Ministry of the Economy and Finance. In addition to IRPEF, a long list of other taxes, among which the tax credits for rent, the solidarity contribution and the substitute tax on premiums, are also included in the total of taxes considered, but only if applicable.
And to prove the point, in the note sent to the media has been explained the case of a single person. This taxpayer paid 10 thousand euros in taxes for 2016. Now, he will know that 2,125 euros have been spent for social security, 1,934 euros went to health, 1,090 euros to education, 882 euros to defense, public order and security, 832 to the services provided by the Public Administration and so on.
Looking inside the personal note - "In the hope of doing something pleasant, - reads the brief introduction directed to each taxpayer – the Revenue Agency wants to give you some information. An information page with which you can summarize how the State has allocated taxes related to your 2017 tax return, for the 2016 fiscal year. Contributing to your community is essential, - it concludes - but we believe it is also important being aware of how the fiscal resources are used ".
All the main items of expenditure of the State are, therefore, summarized in a table and in a "pie chart" through which the taxpayer can concretely verify the path made by the taxes according to their 2017 income tax return.

Individual long-term savings plans, known as Pir. The Revenue Agency clarifies the fiscal treatment to apply to these new investment instruments
The last clarifications published by the Revenue Agency are specifically addressed to savers and operators working on individual long-term savings plans, or Pir in Italian. Essentially, following the guidelines on the non-taxability regime applying on these specific investment arrangements introduced by the 2017 budget law published last October by the Ministry of Economy and Finance, the new Circular n.3 elaborated by the Revenue Agency provides in-depth details on the main characteristics of the new regime and, at the same time, identifies the solutions to some critical issues emerged during the exchange of views between the Ministry, the Administration and the main financial trade associations (ABI, ANIA, Assogestioni).

What are the Pir? - The law n. 232/2016 introduced in our system innovative tax-exempt long-term investment plans at no extra costs for individual retail investors (piani individuali di risparmio or PIR). The income generated by these financial products are not subject to taxation, therefore they are not taxed as capital and other income of a financial nature and are not subject to inheritance tax.

From savings to investment for companies’ growth – The main purpose of this new regulation is to channel the savings of households towards long-term productive investments, thus favoring the growth of the Italian business system and, to some extent, also improving the individual saving rate of potential investors. That’s why to qualify for the scheme, it is necessary to make investments in financial assets attributable to Italian and foreign companies (rooted in Italy), respecting certain composition restrictions, concentration limits and prohibitions, as well as maintaining investments for at least 5 years.

The Pir main conditions – Noticeably, under the provisions of the new law, these PIR plans are exempt from the 26% substitute tax on capital gains and financial income (excluding those included in the taxable basis for Italian individual income tax purposes and taxed at progressive rates) as long as:
  • investment in such plans are held by individuals for more than five years
  • at least 70% of the investment portfolio consists of equity or debt securities issued by Italian companies (or EU companies having an Italian branch) or units or shares of UCITS complying with such requirements
  • 30% of the issuers of such securities are SMEs
  • each investor does not invest more than €30,000 per year or €150,000 in the aggregate through a professional investment manager or a life insurance wrapper or capitalization contract entered into with a professional financial intermediary and concentration risk in one single investment is limited to 10%.
Finally, is also important to point out that the special tax treatment would not apply to financial income and capital gains to investors holding “qualifying interests”.

The five-year limit - As indicated above, the special tax treatment is conditioned on a minimum 5-year holding period. Therefore, an individual taxpayer disinvesting prior to the 5-year “vesting” period loses the tax exemption and the 26% substitute tax (plus interests) would be levied with retroactive effect but without penalty. In addition, each investor may only invest in one individual investment plan.

The scope of the regulation - In general, the new non-taxability regime introduced by the 2017 Budget Law concerns individuals who are fiscally resident in the territory of the State that obtain financial income outside the exercise of a business activity. On the other hand, from an objective point of view, the income from capital (article 44 of the Tuir) and the various income of a financial nature (article 67, paragraph 1) are involved. Among the main characteristics of the regime, is it right to mention again the prohibition to be holders of more than one Pir and the maximum limit of the amount invested, which cannot exceed the total value of 150 thousand euro, with an annual limit of 30 thousand euro. Furthermore, in order to benefit from the non-taxability regime, investments must be held for at least 5 years, as we said above. With regard to the fiscal obligations relating to the Pir, these are carried out exclusively by the intermediary with whom the Savings Plan is established or transferred.

Main fiscal impasses faced by the Revenue - In the document, the Agency addresses many critical issues and operational aspects. In particular, the most important clarification concerns derivative financial instruments, which are admitted under the Pir only under certain conditions. Another important clarification for the operators concerns the possibility of using the criterion of the overall weighted average cost in the event of disposal of the investments as an alternative to the average annual cost envisaged by the specific regulation.

How to behave in case of sale or reimbursement before 5 years - In the case of disinvestment before the five year period or non-compliance with the conditions established by law, the income received is subject to taxation according to the ordinary rules and without the application of sanctions. If the asset is sold or reimbursed, it is possible to remain in the preferential regime envisaged by the Pir if the reinvestment in other financial instruments is carried out within 90 days, in compliance with the investment restrictions envisaged by the regime. In the event of non-reinvestment, instead, the payment of taxes and interest must be made by the 16th day of the month following the month in which the deadline for reinvestment falls.

FiscoOggi è una pubblicazione dell'Agenzia delle Entrate - Ufficio Comunicazione
Testata registrata al Tribunale di Roma il 19.9.2001 con n. 405/2001
Direttore responsabile Claudio Borgnino