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Tax Pills

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.

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URL: https://www.fiscooggi.it/tax-pills/articolo/individual-long-term-savings-plans-known-as-pir-the-revenue-agency-clarifies-the