Alternative PIRs, a new instrument at the service of investors and family offices.

Italy has always been a Country with a strong vocation for savings, and it is no coincidence that, in 2020, there were almost 2,000 billion euros in the deposit accounts of Italian individuals.

However, the recent pandemic, together with the consequent situation of uncertainty and political and economic instability, have accentuated another characteristic of Italian savers: the aversion to investments (the amounts in deposits or current accounts, even if interest rates are almost zero, if not negative, are only minimally reinvested in economic activities or in the securities market).

In this context, for years now, the Italian government has gradually introduced a series of instruments to make investments in Italian companies more attractive for citizens, trying to set off a virtuous cycle, which, together with other measures to support the economy, could represent a development driver. Among these instruments, we can find the so-called long-term savings investment plans (known in Italy as "PIR"). This is a tool, introduced by the 2017 Budget Law, which acts as a "tax container" where savings can be allocated. The savings, once invested in financial instruments with certain characteristics (1), benefit from a non-taxable regime, for the purposes of direct taxation, on capital gains deriving from the sale of securities held for at least 5 years and from the exemption of these securities from inheritance tax. 

"Ordinary" PIRs (those originally created in 2017) were limited in their application, because of certain constraints in the type of financial instruments that could be included in the plan and the provision of a cap in the PIR maximum investable amount , equal to 30,000.00 Euros/year and 150,000.00 Euros in total.

Now these limitations have been overcome. Indeed the so called Relaunch and August Decrees have added to the ordinary PIRs, the so-called " Alternative PIRs", having the purpose of channeling savings towards small and medium Italian companies. 

The main innovations that characterize the Alternative PIRs (and that should make them particularly attractive) can be summarized as follows:

• individuals investors can hold both an ordinary PIR and an Alternative PIR (as an exception to the principle of unicity of the PIR provided by the 2018 Budget Law);
• for 2/3 of the year, at least 70% of the amounts allocated in the plan (the so-called qualified investments) must be invested in securities of companies resident in Italy and not included in the FTSE MIB or FTSE Mid Cap indices of the Italian Stock Exchange (following the intention of the Italian Legislator to channel investments towards small or medium-sized Italian companies);
• shares of S.r.l. (limited liability companies) can also be bound in PIR (2);
• the investment caps are higher, equal to 300,000.00 euros/year and 1,500,000.00in total;
• the investments can also be represented by loans provided to companies (3) (for instance, the ones from the peer to peer lending can be included in an Alternative PIR); the concentration limit (the limit of investment in securities of the same company) is raised to 20%.

Furthermore, the 2021 Budget Law (4) has recently provided an additional benefit to Alternative PIRs holders. Indeed, since the eventual capital losses cannot be offset with the capital incomes and the (exempt) capital gains deriving from the securities included in the PIRs, a tax credit, equal to the capital losses deriving from qualified investments made by December 31 2021, has been introduced for alternative PIRs established after January 1 2021. The amount of the credit cannot exceed 20% of the entire amount invested in the qualified investments and can only be used for tax compensation in ten annual quotas of the same amount.

PIR holders can also benefit from the tax credits provided for investments in the capital of innovative start-ups and Innovative SMEs (5) (as expressly indicated in the Italian Tax Agency’s Circular, for now, still subject to public consultation). 

Therefore, the investor and, in particular, family offices, have a new investment planning tool, which still requires attention, not only for its application mechanisms, but also for the necessary preventive analyses and possible negotiations which should be expected in the execution of the investment, as in every venture capital operation.

Published by: Dott. Paolo Visconti

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(1) In general, investments must met the following requirements:

• no more than 10% of the sum must be invested in financial instruments issued by the same party or the same corporate group (the so called "concentration constraint");
• at least 70% of the amounts allocated in the plan must be invested in so called "qualified investments" whose 25% (at least) must consist of shares of companies not included in the FITSE MIB index or foreign indexes (the so called "composition constraint").

(2) Through ordinary PIRs, it is possible to invest only in S.r.l. shares offered to the public, for instance through crowdfunding platforms.

(3) Indeed, the draft of the Italian Tax Agency's circular, constable online, narrows the field of the loans that can be included in the alternative PIRs, limiting them to those whose income is subject to a definitive withholding tax.

(4) Article 1, par. 219-225.

(5) For another article about tax benefits related to investments in innovative start-ups and SMEs, see our previous contribution https://www.carmini-law.com/the-partecipating-financial-instruments-regulatory-framework-and-field-of-application?lang=en-us