Vigillante activities of the OICR UE/SEE: OICR discrimination against property in Italy?

The Law of December 30, 2020 No. 178 ("Budget Law for 2021"), Article 1, paragraphs 631 and 633, introduced the exemption from tax on dividends from sources in Italy and, at the same time, the non-taxability of capital gains from the sale of qualified participations in Italian companies to foreign collective investment organisms by right under Directive 2009/65 / EU ("UCITS Directive"), or, although not compliant with that directive, whose manager is supervised in the foreign country in which it is organized in accordance with Directive 2011/61 / EU ("AIFM Directive"), provided that such entities are organized in Member States of the European Union ("EU") or in countries that have acceded to the Agreement on the European''economic area ("EEA") that ensure adequate information exchange with Italy ("Observed EU/EEA JIICs").

Previous legislation (cf. Article 27, paragraph 3, DPR No. 600/73, before the amendments introduced by the above-mentioned paragraph 631) provided for withholding tax at the rate of 26% on dividends paid by Italian companies to also EU/EEA Supervised JRCs, while capital gains received by the same controlled EU/EEA JRCs from the sale of qualified participations in Italian companies, prior to the provisions introduced by paragraph 633, were subject to a representative tax of 26% in accordance with Article 23, paragraph 1, letter f) of the NCIU and Article 5 of Federal Law No. 461/97 (while capital gains from the sale of non-''qualified participations were already exempt under Article 5, paragraph 5, of Federal Law No. 461/97).

The change in legislation is due to the fact that the previous heterogeneous approach to the non-taxability of dividends and capital gains from sources in Italy for Italian JIICs and, conversely, the taxation of such dividends and capital gains of EU/EEA controlled JIICs was contrary to the principle of free movement of capital enshrined in Article 63 of the Treaty on the Functioning of the European Union ("TFEU"). The European Union Commission has already initiated an investigation and dialog with the relevant Italian authorities, persuading the Italian legislator to stop discriminating between EU/EEA controlled JRCs and Italian''FIICs.

Although there remains inequality in relation to controlled JRCs outside the EU and EEA, but whose manager is not located in an EU member state or EEA accession country, the above legislative changes have at least eliminated previous discrimination at EU and EEA level and avoided opening an infringement procedure which, sooner or later, would have led to the same end result.

It seems, however, that there may still be (unjustified) discrimination for the Revenue Agency even within the EU and EEA. In fact, in two cases (the most recent being Response No.

In other words, the Revenue Agency with this clarification seems to want to interpret the exemption introduced by the Budget Act 2021 as limited only to EU/EEA JIICs other than real estate JIICs, excluding (and continuing to discriminate against) real estate JIICs.

As if to deny that the previous regime also discriminated against foreignreal estate JINCs as compared to Italian JINCs. This, by the way, is an innovation of 2023: in the previous answer No. 327 of May 11, 2021, concerning the exemption of dividends from'The Revenue Agency did not specify anything regarding foreignreal estate JIICs.

However, it is not clear how such an interpretation can arise, which, moreover, contradicts the text and purpose of the regulation and therefore contradicts the already mentioned principle of free movement of capital, which has become the basis for the free movement of capital.

It is not clear, however, where such an interpretation could arise, which, moreover, contradicts the text and purpose of the regulation and, consequently, contradicts the already mentioned principle of free movement of capital, which was the basis for the legislative changes.

It would be desirable for the Revenue Agency to issue a clarification confirming the application of the new provisions to all EU/EEA controlled JIICs, whether immovable or not. After all, if what is being criticized here was the Revenue Agency's own belief, it should have included''the relevant documents required for obtaining favorable conditions as stated in the already mentioned response No. 409 dated August 1, 2023, also the self-declaration of the manager of the EU/EEA controlled JRC that it is not an immovable JRC in this case. But that did not happen.

And, therefore, we hope that the above clarification is only the result of a misunderstanding and not a wish to see in the new provisions a continuation of the (unjustified) discrimination between foreignreal estate JRCs and Italian ones.