During the last few years, the Italian Government has implemented various reforms in order to attract foreign investors
in as many industries as possible. One of these industries is the investment funds sector
, including real estate and pension funds. The main laws governing investment funds in Italy
- the Unified Financial Act of 1988;
- the Securities and Exchange Commission Act (Commissione Nazionale per la Società e la Borsa), shortly known as CONSOB;
- the Bank of Italy Act, which was amended in 2015.
Types of investment funds in Italy
choosing to open an investment fund in Italy
have plenty of choices. Among these, the Italian legislation recognizes the following types of investment funds
Open-ended funds are further divided into:
- undertakings for collective investment in transferable securities, shortly known as UCITS funds;
- alternative investment funds (AIFs).
Closed-ended funds are divided into:
All types of Italian investment funds fall under the supervision of the Italian National Bank and the CONSOB.
How to set up an investment fund in Italy
The first thing when opening an investment fund in Italy
is choosing a structure to operate under and appoint a manager who is authorized under the Alternative Investment Fund Manager Directive. The most employed structures used to open investment funds in Italy
are investment firms with fixed or variable capital, our Italian company registration agents
can offer details about. Investment firms can be registered as joint stock companies in Italy
The companies managing the funds are required to fulfill certain capital conditions, among which:
The minimum capital required to launch an investment fund in Italy is 1 million euros. Authorization for setting up the investment fund must be obtained with the Italian National Bank.
Requirements for investment funds in Italy
All types of Italian investment funds must be registered by using one of the following structures:
A fund may invest its assets in the following:
It must be known that real estate investment funds may only be registered as closed-ended funds. Also, one of the most popular types of investment funds in Italy is the hedge fund. This falls under the category of reserved alternative investment funds.
Retail funds in Italy
Those who want to set up an investment fund in Italy can register it as a retail fund, which is a type of vehicle in which the risks taken by the investors are limited. Retail funds can be set up as closed-ended funds or as open-ended funds.
Further on, the open-ended funds can be registered as:
• undertakings for collective investment in transferable securities (UCITS);
• alternative investment funds (AIF), following the EU’s directive for alternative investment fund managers (AIFM).
The main regulatory bodies for this category of funds are the Bank of Italy and the Italian Securities and Exchange Commission (CONSOB). They have different responsibilities in regulating the financial market. For example, the CONSOB will supervise transparency and fairness issues, while the Bank of Italy will verify aspects referring to financial stability or risk matters; our attorneys in Italy can offer further details.
Hedge funds in Italy
The Italian market also provides hedge funds, which are sub-categories of the reserved alternative investment funds. As a general rule, they are addressed to professional investors who have no restrictions in implementing their investment policies. Another important aspect is that such funds can carry out different investment policies at the same time, providing more opportunities to obtain a high return.
They are also regulated by the CONSOB and the Bank of Italy
and they have to follow the same transparency rules available for retail funds
When registering a fund in Italy, the investor should establish the fund’s regulations, which will further be analysed by the Bank of Italy. The businessman should provide a set of information, such as the fund’s name, its duration, the management company, the custodian bank and terms referring to the participation in the fund.
Taxation of the Italian open-ended funds
Both local and foreign investors can set up open-ended or closed-ended funds. The main characteristic of an open-ended fund refers to the fact that the investors are allowed to issue an unlimited amount of shares.
The taxation of the investment funds in Italy is performed in a different manner than in the case of commercial companies. If a corporate entity is imposed with the corporate income tax, the investment fund is not required to pay this tax, as the local legislation prescribes a full exemption on this matter.
However, the investors are imposed with the withholding tax on distribution proceeds applicable at the rate of 26%, but the tax is not available for the collective investment schemes which fall under the regulations of the Italian Unified Banking Act.
Foreign investors opening an investment fund in Italy should know that they are subject to the same withholding tax rate, but only in certain conditions, on which our attorneys in Italy can offer more details. It is important to know that non-resident investors can also benefit from a lower withholding tax, if they are the direct beneficiaries of the double taxation treaties signed by Italy with other contracting states.
Taxation of closed-ended funds in Italy
Closed-ended funds do not benefit from the same regulations available for the open-ended funds, as the investors are allowed to issue only a certain amount of shares. However, this type of fund is also exempted of the corporate income tax, but the main difference refers to the taxation of the investors.
Resident investors opening closed-ended funds established as real estate vehicles, who own less than 5% of the net assets of the fund, are imposed with a 20% withholding tax on distribution proceeds.