Among the most recent supporting measures to new businesses in our country, great attention should be paid to the Simple Investment Companies (commonly called “SIS”), introduced by art. 27 of the Growth Decree (Legislative Decree 34/2019), as special corporate investment vehicles, for collective savings management, designed to stimulate national economic growth through the concrete facilitation of private financial support to Small and Medium Enterprises (“SME”), which have always been the fulcrum of the Italian productive fabric.
Together with other measures recently adopted, the SIS simplify and effectively facilitate the raising of capital outside the traditional banking channel, favoring – hopefully – the development of private investments in new business realities, and in particular in newly established SME.
To this purpose, firstly responds the legislative configuration of the SIS as an entity which is structurally intended to operate below the relevance thresholds for the subjection to the Bank of Italy’s and Consob’s regulatory powers, resulting in lower constrains to the relevant discipline, and, therefore, in the benefit of an operative regime which is simpler than that provided by the law for other institutional entities dealing with the collective savings management.
In this sense, the first paragraph of the aforementioned art. 27, revising article 1, paragraph 1 of the TUF, introduces, in the new letter i-quarter), the normative definition of SIS, as an Italian Alternative Investment Fund (FIA), set up in the shape of SICAF, which, in order to manage directly the assets raised, through the issue of shares or other participatory financial instruments, must comply with the following conditions:
- first of all, the company name must contain the indication of “fixed capital share simple investment company “;
- must have net assets not exceeding 25 million euros;
- as an exception to the provisions of art. 35-bis, paragraph 1, letter c) of the TUF, must have a share capital not lower than that provided for by art. 2327 cod. civ. for the S.p.A., which means at least 50 thousand euros;
- must have its registered office and general management in Italy;
- must adopt a bylaws indicating the exclusive purpose of directly investing the assets raised into unlisted PMI on regulatory markets that are in the testing (seed financing), constitution (start up financing) or start-up (early- stage financing);
- cannot, under any circumstances, resort to the use of financial leverage and therefore must not buy or sell financial assets for an amount greater than the capital held;
- must take out a professional civil liability insurance adequate to the risks deriving from the activity carried out.
Therefore, taking into consideration its structural and operative characteristics, the SIS represents a particular manager of private capital, to be fully included in the category of close Collective Investment Organizations (“OICR”), albeit with a view solely to the SME World.
This framework is of importance, since it allows to consider fully applicable, also to the SIS, several decisive tax incentives, expressly provided in relation to other institutions and/or entities (characterized by the same economic policy purposes), from which also the SIS can benefit, precisely because of the functional similarities found in the respective legal qualifications.
We refer, first of all, to the general income tax reduction provided for by art. 73, co. 5- quinquies of the TUIR, which, generally speaking, assigns to the OICR the status of “Lordist” subject, as a subject entitled to receive capital incomes (different from those expressly excluded from the facilitation) “gross” of the related substitute tax or withholding taxes otherwise applicable to them.
Furthermore, again in consideration of the structural, operational and functional constraints placed on the SIS, there are no difficulties in believing that the investments made through this vehicle can also benefit from the tax reliefs introduced (and gradually increased) by the D.L. 179/2012 and subsequent amendments, like the (direct and/or indirect, according to the relevant art. 29) investments in Start Up and innovative SMEs.
In this last perspective, in the year of the investment, investors will therefore be able to benefit from a deduction (from income tax due, where they are natural persons; or from corporate incomes to be taxed, where they are legal persons) equal to 30% (percentage raised to 40% for all 2019) of the invested capital.
Again, since it is the same normative definition that brings the SIS into the broader category of fixed capital investment societies (the so-called “SICAF”), there are no difficulties even in believing that – pursuant to art. 31 (as amended by art. 1, paragraph 219, of the 2019 Budget Law no. 145 of 2018), paragraph 4, no. 98/2011 – the SIS can also benefit from the tax exemption of the profits deriving from the management of funds received from its investing shareholders.
Finally, a further incentive to use the SIS (and so, to investments through such a vehicle) can come from the carried interests tax rules (for details please visit: www.carmini-law.com/carried-interest-e-nuovi-strumenti-partecipativi/), which allow to grant particular profit share instruments to managers and/or employees, whose earnings – subject to conditions set forth by art. 60, Law Decree no. 50/2017 – shall be qualified and taxed as capital or other financial income (subject to substitutive tax), instead of as employment incomes (generally more heavily taxed with progressive rate).
In conclusion, given the extremely favorable tax situation described above, the SIS (like many other measures adopted in recent years) really stand as an excellent investment opportunity, which, with the right attention to the respect (not always easy to verify without the intervention of an up-to-date professional) of the legal requirements and conditions, can allow important economic returns, all the more because a great part of them are tax exempt, for a specific legislative choice.
Author: Mario Manfredi
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