In 2023 Italy amended the domestic permanent establishment (“PE”) definition provided by Article 162 of Italian Income Tax Code by introducing the so-called “Investment Management Exemption” (hereinafter “IME”), which constitutes a PE “safe harbor” for asset managers of foreign investment vehicles.
The IME concerns both the agent PE and the fixed place PE hypothesis.
With regard to the agent PE hypothesis, under the IME individuals, whether or not resident in Italy, who, in the name and/or on behalf of a non-resident investment vehicle (or of entities directly or indirectly controlled by this latter) habitually conclude contracts related to the purchase and/or sale and/or negotiation, or in any event contribute to the purchase, sale or negotiation of financial instruments, are considered to be independent from the non-resident investment vehicle provided that certain conditions are met.
The “presupposed” independence of the agent, implies ex lege the absence of a PE in Italy, under the following conditions:
- the foreign investment vehicle and its controlled entities are located in a “white list” country (i.e. allowing for an adequate exchange of information with the Italian authorities);
- the foreign investment vehicle meets certain independence requirements (see below);
- the asset/investment manager who performs activities in Italy (i) must not hold any directorship or managing office in the corporate bodies of the foreign investment vehicle and of its controlled companies, and (ii) must not be entitled (directly or indirectly) to more than 25% of the profits of the foreign investment vehicle overall;
- the Italian tax resident asset/investment manager, or the PE of the non-Italian tax resident entity, has received a remuneration that is supported by adequate transfer pricing documentation.
Subject to the same requirements set forth for the agent PE exemption, the IME applies also in the fixed place PE hypothesis. So, a fixed place of business is not deemed to be at the disposal of the foreign investment vehicle merely because the activities of the resident enterprise performed in its Italian place of business are to the benefit of such investment vehicle.
The Decree of the Ministry of Economics and Finance dated February 22nd 2024 has provided the implementing rules as request by the law specifying:
- the independence requirements of foreign investment vehicles. In particular, the following foreign investment vehicles can be considered as “independent”:
- EU UCITS compliant with Directive 2009/65/EC (UCITS Directive) or whose manager is subject to supervision in the Country in which it is established on the basis of Directive 2011/61/EU (GEFIA Directive);UCITS and other entities located in a State allowing for an adequate exchange of information, with assets collected from a plurality of investors on an autonomous basis
- and who are (or whose manager is) subject to prudential supervision mechanisms similar to Italy.
- the independence requirements of asset/investment manager (or the Italian PE of the foreign entity) operating in Italy. They can be considered as “independent” from the foreign entity when:
- do not hold any office in any of the managing or controlling bodies of the foreign investment vehicle or of its non-Italian direct and indirect controlled entities;
- are not entitled to a share of the profits of the foreign investment vehicle (and of its controlled entities) exceeding overall 25%.
The implementing rules recently approved complete the IME legislative background and must be welcome in the perspective of increasing Italy's attractiveness to foreign financial intermediaries, granting them the opportunity to locate asset managers, as well as their employees and/or collaborators, in Italy without the risk of creating a permanent establishment.
If you wish to discuss these topics, please contact:
WTS R&A Studio Tributario
