New investment management exemption in Italy

The purpose of this provision, which is also present in other jurisdictions, is to prevent entities managing investments in Italy on behalf of non-resident vehicles (asset managers) from acquiring the status of an Italian permanent establishment for those vehicles.

The exception provided by the investment management exemption, in addition to exceptions already provided by the negative list of domestic provisions for material permanent establishments, is also applicable to personal permanent establishments, and operates essentially in both areas.

Regarding the second area, it is envisaged that entities (including non-resident ones) that habitually enter purchase, sale, or trading contracts in the name of, or on behalf of a non-resident investment vehicle, or otherwise contribute with preliminary or ancillary operations to the purchase, sale, or trading of shares, financial instruments, derivatives, and credits, shall be considered independent. Essentially, this provision further clarifies the concept of an independent agent, which refers to an intermediary with legal and economic independence who acts on behalf of a non-resident entity within the scope of their ordinary course of business.

The second amendment aims to prevent the identification of a material permanent establishment of a foreign enterprise in Italy because of the normal existence of a fixed place of business of its investment manager. Accordingly, it is specified that such a fixed place of business shall not be considered at the disposal of the foreign investment vehicle merely because the activities conducted there benefit said vehicle.

However, the investment management exemption is subject to several conditions:

1. The first condition refers to the location of the non-resident vehicle. It must be resident or located in a state or territory belonging to the whitelist to ensure the effectiveness of any controls.
   
   
2. Secondly, the non-resident investment vehicle must meet specific independence requirements established by a decree from the Ministry of Economy and Finance.
   
   
3. Thirdly, the individual carrying out activities in Italy on behalf of the non-resident investment vehicle must not hold positions in the administration and control bodies of the investment vehicle, and its direct or indirect subsidiaries and must not hold a stake in the economic results of the vehicle itself exceeding 25%.
   
   
4. Finally, the fourth condition concerns the remuneration of the asset manager. The asset manager must receive remuneration for activities carried out in Italy, supported by the documentation required for transfer pricing.

Based on the wording of the law, it is clear that these four conditions must be met not only to exclude the status of dependent agent of the asset manager, but also to exclude the existence of an Italian physical permanent establishment.