Italy To Improve Taxation Of Investment Funds

by Ulrika Lomas, Tax-News.com, Brussels

26 November 2007

A junior minister in the Italian government has revealed legislative proposals designed to make investment funds based in Italy more attractive from a tax perspective.

Deputy Economy Minister, Roberto Pinza told Thomson Financial that a government committee which includes the authorities, regulators and the finance industry, has recommended that changes to tax legislation should be brought about to make the Italian funds sector more attractive compared with other European Union members, such as Luxembourg.

Unlike other EU countries, which tend to tax income when it is received in the fund, Italy taxes funds when investments mature. This has discouraged the sale of locally-registered funds, Pinza's aides stated, according to the report.

However, the legislative amendments were not included in the 2008 budget, which survived a confidence vote in the lower house of parliament on Tuesday, following Senate approval in the previous week.

This budget proposed to reduce the Italian budget deficit to 2.2% of gross domestic product in 2007, down from 2.4% of GDP, thanks to an increase in tax revenues over the past year, the result of Prime Minister Romano Prodi's widespread crackdown on tax evasion.

Prodi also increased the top rate of tax in his 2007 budget, but has surprised many by proposing a 5% corporate tax cut to 28% in the 2008 budget.

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