IT
EN
The participation of managers and workers in the share capital always generates a financial income when there is coincidence of interest with the other investors.
With the tax ruling no. 403 of 28 July 2023, the Italian Tax Authority ruled on the issue regarding the applicability of the so-called "carried interest" tax-advantaged regime (provided for in Article 60 of the Decree Law 50/2017) also in cases in which managers and employees subscribe equity financial instruments, with a total investment of less than 1 percent of the company's equity. With the tax ruling under comment (which follows the line already traced by the previous Circular No. 25/E/2017), the Tax Authority has, however, clarified that the tax regime in question can be applied even if the aforementioned requirements are not met, provided, however, that the incomes deriving from the equity investment should have, even for managers and investing workers, the nature of a remuneration for the investment made and not a nature of an incentive, possibly related to their work activity.
In order to encourage a virtuous alignment of interests between managers/employees who invest in the company and other shareholders, the rule under comment establishes that the incomes received by employees and managers, deriving from their equity participation - including the participation through the subscription of equity financial instruments, with stronger equity rights - shall not be treated as a work income, but rather as a capital income or a different income (with financial nature).
This is a favourable rule, which, by creating a presumption, finds automatic application when certain requirements are met:
In case of a change of control, the revenues only accrue on the condition that the other shareholders (or participants in the investment) have already realized, through the sale of their share, a sale price at least equal to the capital invested;
The Tax Authority's view is that this would not constitute an obstacle to the application of the carried interest regime, since the regime is applicable whenever the investment, even in terms of amount, is suitable to guarantee the effective alignment of interests between investors and managers/employees, as well as a real exposure, on the part of the latter, to the risk of loss of the invested capital, a characteristic that, normally, distinguishes the investment from a mere incentive.
For this purpose, the Tax Authority has reminded that it is also essential to consider any special clauses, which could affect the manager's/employee's risk position, up to completely neutralizing it (such are, for example, clauses that guarantee the manager/employee with the full return of the invested capital, regardless of the company's performance).
The Tax Authority, then, gave its opinion also regarding the specific way in which the subscription of the equity financial instrument would have been made in the case at hand. The company had, in fact, provided, to partially cover the investment made by their managers/employees, with the disbursement of a low-interest loan.
Therefore, the investment made by the managers/employees would have taken place under favourable conditions, since at least part of the funds invested would have been made available to the subscriber, by the investee company itself, at an advantageous condition, compared to a normal bank loan.
Even this particular way of financing investors would not, however, according to the Tax Authority, preclude the application of the tax regime under comment.
The Tax Authority, in fact, noted how, in the case at hand, the managers/employees who would subscribe the equity instruments were called to actually participate, despite the loan received, with "their own" resources, in the company's economic risk, since there were no clauses that could exclude, upon certain conditions, the repayment (in whole or in part) of the funds financed by the company.
Also in this respect, the manager/employee can, therefore, according to the Tax Authority, be assimilated to the other investors, who use bank loans, in order to be able to carry out their investment.
However, unlike such, other, investors, the manager and workers financed by the company would have enjoyed, in this particular case, a very favourable interest rate on the loan received ("well below the market rate").
This differential ("between the amount of interest calculated at the Official Reference Rate, and the amount of interest calculated at the rate applied from the company") has, therefore, to be considered as a fringe benefit, pursuant to Article 51, TUIR.
The low-interest loan, provided by the company, while not precluding the application of the "carried interest" regime, would, in fact, according to the Tax Authority, represent a salary encouragement, subject to the tax regime of work incomes.
In conclusion, with the recent tax ruling, the Tax Authority has established that, regardless of the legal presumption, the tax regime of the "carried interest" can be applied even in the absence of some of the requirements provided by the law, under the condition that, however, there is full coincidence of interests between the managers/employees who invest in the company, and the other investors; a situation to be verified on a case-by-case basis.
It is, therefore, absolutely essential, for the purposes of obtaining the application of this regime, that the articles of association, or the equity financial instrument's regulation, shows this coincidence of interests, so that the drafting of these documents is a key moment for obtaining the benefits deriving from the application of this regime.
Avv. Iacopo Bissi
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