This work aims at providing general insight into the main instruments and opportunities available to foreign investors wishing to do business in Italy particularly through Italian private capital funds. In particular, this work is intended as an introductory guide for foreign investors to the main tax issues they will most likely encounter upon deciding to invest into Italian companies.

This booklet is divided into 5 chapters.

The first chapter provides a brief overview of the most common legal structures used by Italian private capital funds.

The second chapter aims at describing the tax treatment of (I) the Italian private capital funds and (II) foreign investors' profits realized through investment in Italian private capital funds.

The other three chapters show the Italian tax system focusing on Italian company taxation and deal structuring. More in details, the third chapter provides a brief overview on the main taxes, both direct and indirect, that generally apply to corporate taxpayers in Italy. The forth chapter contains a brief overview on common investment schemes that can be used by private equity investors when structuring their acquisition, considering that the investment is usually structured as follows:

  • Step 1: purchase of an Italian intermediate company ("BidCo");
  • Step 2: funding of BidCo;
  • Step 3: acquisition of target;
  • Step 4: post-closing phase;
  • Step 5: exit phase.

The fifth chapter aims at providing a general overview of Italian main management incentive schemes with reference to Italian residents (cash bonus, SOP, attribution of special class of shares or warrants).


CL Circular letter issues by Italian Tax Authorities
DTT Double taxation treaty entered into force in Italy
IRES Italian corporate income tax introduced by Presidential Decree 917/86
IRAP Italian regional income tax provided by Legislative Decree 446/97
ITC Italian Tax Code provided by Presidential Decree 917/86
GOI Gross Operating Income
LBO Leveraged Buy-Out
NID Notional interest deduction (i.e. "ACE")
TA Italian tax Authorities
TC Transaction costs occurred during the acquisition
VAT Value added tax
WHT Withholding tax


1.1 The legal structures used by Italian private capital funds

This chapter provides a brief overview of the most common legal structures used by Italian private capital funds. Following the implementation of Directive 2011/61/UE on alternative investment fund managers (AIFMD) that introduced an harmonized regulatory framework over the rules applicable to alternative investment fund managers (AIFMs) of alternative investment funds (AIFs), the most common legal structures used by Italian private capital funds are:

  • SGR


The most common legal structures used by Italian private equity funds are the closed-end investment schemes for investing directly or indirectly (through holding companies) into private companies. Usually, a management company ("SGR"), responsible for the establishment, the investment management decisions and the administration of funds, manages them. The main characteristics of the closed-end investments funds are:

  • separation between funds and management company, in order to secure a faster investment choice;
  • duration of the fund that allows investors to achieve results within a short time period;
  • fund's closed end term that allows investors to exit from the funds at specific times.

Investment funds set up by SGR are similar to common law schemes (as partnership managed by a regulated management company) even if SGR are more strictly regulated.


The Legislative Decree no. 44, of March 4th 2014, implementing the AIFMD, introduced a new form of collective investment, the fixed-capital investment companies (SICAF), that may be also used to set up private equity investment vehicles.

A SICAF is a closed-end investment company organized in the form of a joint-stock company subject to the same provisions applicable under the Italian law to closed-end investment funds. It can be managed by a board of directors or by an external management company (such as an SGR).

The main characteristics of SICAF are:

  • it must be established as a joint-stock company with administrative and registered offices in Italy;
  • its corporate purpose must be limited to the collective investment of the capital collected through the issue of shares or participating financial instruments;
  • SICAF shareholders should have certain good standing requirements. The directors and statutory auditors must satisfy certain professional and independence requirements.

Both SGR and SICAF represent the legal structures used to set up investment vehicles.

1.2 Different types of investment funds

The different types of investment funds most commonly established are: private equity, venture capital and private debt funds.

1.2.1 Private equity funds

Private equity funds are investment funds with a specific focus on development, growth, buy out and turnaround operations.

1.2.2 Venture capital funds

Venture capital funds are investment funds focused on start-up and small-medium-size enterprises with strong potential growth. These investments are generally characterized as high-risk/high-return opportunities. In addition to business angels, equity crowdfunding and other seed funding options, venture capital is attractive for new companies with short operational experience, too small to raise capital in public markets and unable to secure bank loans. In return for the high risks taken when investing in small and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the companies' ownership (and, consequently, value).

1.2.3 Private debt funds

Debt funds are funds that offer flexible debt instruments like bonds, loans, convertible debt instruments, shareholding instruments of debt, in relation to the requirements of each stock company. Using private debt funds, an Italian stock company could:

  • optimize its financial structure, for example replacing its short term debt with a medium long term debt (or bond), refinancing its medium-long term debt and the relevant expiry date;
  • increase its contractual power towards bank system, clients and suppliers;
  • find stable financial partners.

Usually, private debt funds require some guarantees such as share pledge and mortgage.

The products offered by private debt funds are different to the ones offered by private equity funds: in fact, private debt funds invest in debt capital while, on the contrary, private equity funds invest in equity. A debt fund provides a steady, but low income in relation to equity. Moreover, private debt funds and private equity funds invest in complementary rather than competitive markets.


This chapter provides a brief overview of the tax treatment of (I) the Italian private capital funds (including Italian AIFMs provided with an AIFMD passport) and (II) foreign investors' profits realized through direct or indirect investments in Italian private capital funds.

2.1 Italian private capital funds taxation

From a legal point of view, Italian SICAF, SICAV and Italian investment funds are defined as Italian OICR, pursuant to article 1, paragraph 1, letter l), of Decree 24 February 1998, no. 58 ("TUF"). According to article 73 of Presidential Decree no. 917 of 22 December 1986 ("ITC"), Italian investment funds are deemed to be resident in Italy for income tax purposes and they are liable to the Italian corporate income tax ("IRES").

The ITC also establishes that proceeds realized by Italian investment funds are exempt from Italian income taxes. Consequently, proceeds realized by funds from investments (dividends or capital gains) shall be received gross of any Italian withholding tax or substitute tax and shall not be subject to the Italian income taxes.

Based on the wording of the ITC, and according to the interpretation of the Italian tax authorities, investment funds are entitled to the application of the Double Tax treaties, entered into force in Italy. The SGR, in the name and on behalf of the funds, could require the issuance of the tax residence to the certificate Italian tax authorities.

SICAF is subject to the Italian regional tax on productive activities ("IRAP") according to articles 3 and 6 of Decree 15 December 1997, no. 446.

Private equity, venture capital and private debt funds are not subject to IRAP.

2.2 Italian tax treatment for foreign investors of Italian private capital funds

The tax treatment of proceeds arising in the hands of the funds' investors depends on both the type of proceeds and investors as well as on investor's tax residence.

White listed foreign investors

Both in case of capital income and capital gains realized through the sale of units, no taxation occurs if the recipient does not have any Permanent Establishment in Italy and:

  • for tax purposes, the recipient is resident in a country that grants Italy an adequate exchange of information (and is the beneficial owner of the income); or
  • is an "institutional investors" established in white listed foreign investors; or
  • is an international entity or body set up under international agreements in force in Italy; or
  • is a central bank or organization managing official State reserves.

An institutional investors could be: (I) an entity subject to regulatory supervision in the state in which it is incorporated; or (II) an entity, including tax transparent entities, not subject to regulatory supervision which has a specific expertise in financial instruments investments; or (III) an entity, including tax transparent entities, not subject to regulatory supervision, which has been set up with the sole purpose of managing investments for institutional investors subject to regulatory supervision, provided that both the institutional investors and the manager are tax established in white list countries.

Other foreign investors

A 26% final withholding tax is levied by the SGR on capital income, whilst a 26% substitutive tax is due on capital gains.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.