Annual tax credit of 80 million to pension funds that invest medium to long term

O Advisory > News  > Annual tax credit of 80 million to pension funds that invest medium to long term

Annual tax credit of 80 million to pension funds that invest medium to long term

After months in the making, the decree that offers a tax reduction to pension funds and social security funds that invest in the real economy has finally seen the light of day.  Minister Pier Carlo Padoan  signed the measure that allows these institutional investors to get a tax credit, for an annual value of 80 million euros, if they allocate a portion of their resources to stocks, bonds or shares  of collective investment undertakings, with a goal of medium-long term investment.  Pension funds and social security funds will have to have among their assets, for a period of at least five years,  securities in a wide range of production sectors,  “infrastructures of the following nature:  cultural, environmental, water, road, rail, ports, airports, health, public non-residential real estate, telecommunications, including digital, and production and transportation of energy.

The measure implements the provisions of the 2015 Stability Law, which had raised the tax on annual returns of these entities, except for shares relative to government bonds of OECD countries (still 12.5%). The tax benefit takes the form of a reduction of the rate paid on the annual performance management for the social security funds from 26% to 20%, while from 20% to 11% for pension funds. From an operational perspective, the institutional actors must pay the “full” amount of tax to the Revenue Agency, then ask for  the corresponding tax credit by filing an “F24” tax form.  In accordance with Article 5, paragraph 2 of the Decree, the surplus compared to the ceiling of 80 million euro per year will be deducted pro rata among all the parties who have so requested.

 Article 2,  paragraph 2 of the Decree gives only 30 days’ time  to the pension and social security funds to reinvest the securities which may have expired before the  5 year minimum threshold.

The measure is particularly important because for years pension funds and social security funds  have been searching for the best way to convey parts of their portfolio assets  in the real economy, estimated to be at least 2 to 3 billion a year.

For further information please contact info@oadvisory.com