Prepared by Pasquale Salvatore, Marco Ruzza, Raimondo Rossi e Matteo Esposito.
The epidemiological emergency of last weeks has been reflected in the significant falls recorded in the financial markets, which have registered a generalized drop down in share prices and returns. This prompted many investors to sell the financial assets held, although in a loss position.
For Italian tax resident “private” investors (i.e. individuals holding financial investments not in the course of a professional or business activity), from a tax perspective, the capital losses should be duly monitored in order to assess any possible offsetting against envisaged capital gains.
Specific rules are provided for investments in shares and financial assets issued by non-Italian entities subject to privileged tax regimes and for other specific financial investments that are subject to different tax rates or that have to be fully included in investor’s taxable base. Accordingly, it appears in any case appropriate to execute a specific analysis on financial assets held in order to properly define the related tax treatment.
In this context, for example, the investor – depending on the different regime adopted – could be not allowed to offset a negative positions deriving from redemptions of investment fund’s units (e.g. UCITS) with envisaged future capital gains related to the same kind of investment, that are classified as capital income. Conversely, these capital losses could be offset with capital gains deriving from derivatives entered, for example, for hedging purposes (refer to Circular letter no. 21/E/2014).
In addition, the investor should consider the chronological basisin the realization of capital losses and capital gains, in particular in relation to the regime adopted.
Tax declaration regime (Regime della dichiarazione)
The tax declaration regime (art. 5, D.Lgs. no. 461/1997) is the “natural” regime applicable to most part of capital gains. Capital gains and financial losses are declared by the investor in her/his own annual tax return.
The investor is required to apply the 26% substitutive tax on the amount resulting from the difference between eligible capital gains and financial losses. The substitutive tax shall be paid within the deadline set for individual income tax balance payment.
Under the tax declaration regime, the offset of capital gains and capital losses takes place within the annual tax return and unused available capital losses can be carried forward for four years to offset any future capital gains.
Administered assets regime (Regime del risparmio amministrato)
The administered assets regime is an optional regime for investor (art. 6, D.Lgs. no. 461/1997), for which the investor has to give a specific mandate to an authorized intermediary. In principle, the regime provides for the application of the 26% substitutive tax on realized capital gains, on a cash basis.
All tax accomplishments related to the financial assets, including the reporting to the tax authorities and the payment of the substitutive tax are executed by the intermediary.
Realized capital losses are offset with capital gains realized on a progressive chronological basis in the course of the year by the investor. Unused available financial losses surplus can be carries forward for four years and used to offset any future capital gains.
Managed assets regime (Regime del risparmio gestito)
The managed assets regime is an optional regime for investor (art. 7, D.Lgs. no. 461/1997), for which the investor has to give a specific mandate to an authorized intermediary. In principle, the regime provides for the application of the 26% substitutive tax on an accrual basis to the increase in value of the financial assets managed.
All tax accomplishments related to the financial assets, including the reporting to the tax authorities and the payment of the substitutive tax are executed by the intermediary.
The taxable base on which the substitutive tax is in general determined on as the difference between the market value of managed financial assets at the end and at the beginning of the year. The managed assets regime provides for the determination of an overall taxable base of capital income and capital gains (qualified as “other income”) accrued on financial investments and the application of the substitutive tax on an accrual basis.
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