Investment Management Exemption’s Debut in Italy

The 2023 Budget Law (Law No.197/2022 of December 29, 2022) introduced a new provi regarding foreign investment funds, making significant changes to Article No. 162 of Presidential Decree No. 917/1986 (“TUIR”, the Consolidated Act on Taxation) and to the configuration of a permanent establishment in Italy of the aforementioned funds. The legislation seeks to provide greater certainty for foreign investors and, in so doing, attract more investment to Italy.

However, its application is subject to the issuance of a decree by the Ministry of Economy and Finance to establish the implementing provisions of the new rules.


Overview of the new provision

The amendments to Article No. 162 of the TUIR aim to exclude the configurability of an Italian permanent establishment (“PE”) in the case of foreign investment vehicles since the investment managers, whether resident in Italy or not, carry out activities in Italy on their behalf.

With reference to the definition of a personal “PE”, the new paragraph 7-ter of Article No. 162 of the TUIR provides that, under certain conditions, an investment manager who, habitually and also with discretionary powers,

  • Enters into contracts for the purchase/sale/trading of financial instruments, in the name or on behalf of the foreign investment vehicle (or its direct or indirect subsidiaries), or
  • Contributes to the execution of the transactions referred to the first point above, including through preliminary or ancillary transactions,

is regarded as an independent agent of the foreign investment vehicle.

The conditions mentioned above and set forth in the new paragraph 7-quater of Article No. 162 of the TUIR are as follows:

  1. The foreign investment vehicle and its foreign subsidiaries must be resident (or located) in a country or territory that provides for an adequate exchange of information with the Italian authorities (i.e., the States included in the list referred to in the Ministerial Decree of September 4, 1996, so-called ‘White-List States’);
  2. The foreign investment vehicle must meet the independence requirements established by a decree to be issued by the Minister of Economy and Finance;
  3. The manager operating in Italy (a) must not hold offices in the administrative or controlling bodies of the investment vehicle and its direct or indirect subsidiaries, and (b) must not hold an interest in the economic results of the foreign investment vehicle of more than 25 percent (also taking into account profit-sharing due to entities belonging to the same group);
  4. The manager’s remuneration for services rendered to other group entities must be determined by reference to the remuneration agreed upon between independent parties (arm’s length principle), and must be supported by appropriate documentation for transfer pricing purposes. The Tax Authority is expected to provide guidelines for the application of this requirement through a specific Provision.

In addition to the above, the 2023 Budget Law introduces paragraph 9-bis to Article No. 162 of the TUIR, regarding the non-configurability of a material PE in Italy of the foreign investment vehicle and its subsidiaries. Specifically, it is provided that, again if the above conditions are met, the stable place of business at the disposal of a resident enterprise that carries out its activities there, using its own personnel, is not considered to be a material PE of the foreign investment vehicle, merely because the activity of the resident enterprise brings a benefit to the said investment vehicle.


The introduction of the new provision is more than welcome, as it aims to resolve a technical open point for foreign investment vehicles that transfer their key personnel to Italy or operate through an Italian resident company. The rule in particular acts on the definition of permanent establishment, both personal and material, an issue that is always of great interest to investors and one that Italy is increasingly aligning with the regulations of other European countries.

However, it is necessary to wait for the Ministerial Decree and clarifications from the Tax Administration in order to better define the scope of the regulations. In particular, it would be useful to clarify how to calculate the profit sharing indicated in condition (3) above, or the possibility, with regard to condition (4), to file a petition to the Tax Agency in order to obtain confirmation about the compliance of the manager’s remuneration, according to the arm’s length principle.


LDP provides Tax, Law and payroll  scalable and customised services and solutions. LDP Professional have also matured a significant expertise in  M&A, Corporate Finance, Transfer Price, Global Mobility Consultancy and Process Automation. 

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