2017 is the year of the Italian debut of the PIR Long-term Individual Savings Plans which provide tax breaks in the form of tax relief on capital gains for those who decide to invest in Italian companies for 5 years. Intended for retail investors, the PIRs represent a significant stimulus for the country's real economy, channeling household money towards productive investments and home-grown businesses and at the same time allowing the latter to find resources through an alternative channel to the banking one.
The change was provided for by the 2017 Budget Law and will allow Italy to align its legal system with that of other countries such as France and the United Kingdom, where instruments such as the Plan d'Epargne en Actions (Pea) and the Individual Savings Accounts (Isas) have already existed for years.
The first has already arrived on the market on January 9, it is Crescita Italia, a balanced fund proposed by Anima Sgr which will invest up to 40% in shares and the remainder in bonds. Many other products will arrive by the end of January which could be very attractive to a large number of savers. Before venturing into an investment that you do not know, however, it is good to investigate the matter better, in order to avoid incurring too high risks, running into nasty surprises.
PIR: HOW DO THEY WORK? THE GENERAL RULES
The individual long-term savings plan is a sort of "fiscal container"in which every saver will have the opportunity to place various types of financial instruments (shares, bonds, UCI units, derivative contracts) or sums of money, however respecting certain conditions which we will discuss shortly in order to take advantage of the tax breaks provided for by law. Recipients of the subsidy are only natural persons in relation to investments made outside the exercise of a business.
The Pir is individual, and therefore not co-disputable and can only be opened once in a lifetime. If the saver wants it, it can even be for life.
PIR: NO TAXES ON PROFITS
Anyone who decides to take advantage of an individual long-term savings plan will be able to enjoy a tax relief consisting in the exemption from taxation of income deriving from the investment made. In other words the main advantage will be that of being able to count on a detaxation of profits.
Going into detail, natural persons who keep the money in PIR for at least 5 years will not have to pay taxes on capital gains and returns (12,5% on coupons and profits relating to government bonds and 26% on shares and bonds).
On the other hand, income deriving from the possession of qualified shareholdings and those which contribute to forming the overall income of the investor are excluded from the benefit.
But be careful: if at the conclusion of the investment there will be no profits, but Prevention, the saver will have to respect the general rules of the funds for the tax credit. Furthermore, the "mini-asset" of 2 per thousand on the value of the portfolio at the end of the year must still be paid.
If the time conditions and the constraints on the composition of the assets established by law are not respected, the saver will have to pay ordinary taxes plus interest.
PIR: TIME CONSTRAINTS
The law provides that the saver respects a detention bond of 5 years in order to avoid speculative purposes and to guarantee the recipient companies that they can count on stable resources in the medium/long term.
PIR: THE COMPOSITION OF THE PORTFOLIO
Precise rules have been established relating to the composition of the Pir's assets. Going into details, at least 70% of the total value of the Pir must be invested in financial instruments issued or entered into by companies resident in Italy o in EU member states or in member states of the European Economic Area with permanent business in Italy. Of this 70 percent, at least 30% must be invested in financial instruments issued by companies other than those included in the FTSE Mib index of Borsa Italiana or in equivalent indices of other regulated markets. This means rewarding small and medium-sized companies. The remaining 30% of the portfolio can be committed to any instrument, including deposits and current accounts.
It is also necessary to specify another rule: the assets of the PIR cannot be invested for a portion exceeding 10% of its total value in financial instruments issued or stipulated with the same issuer or with another company belonging to the same group or in deposits and accounts currents.
PIR: PROPOSALS COMING SOON
Based on these rules, between January and February many companies will churn out their products. After Crescita Italia di Anima, which we talked about previously, it will arrive Saving Italy by Pioneer Investments, a balanced fund (a more aggressive one will arrive later) with 21% of the equity portfolio dedicated to mid and small cap companies, while the remainder will be invested in Italian corporate bonds.
Two funds will be offered to the market within the first half of next month Pir of Zenit sgr, a mixed bond and an equity with a higher risk profile. Finally, by the end of the first quarter of 2017, the funds of Bnp Paribas and Eurizon will also arrive.
PIR: HOW MUCH IS IT CONVENIENT?
Every natural person can invest a minimum of 500 euros and a maximum of 30 thousand euros per year, with an overall limit (i.e. over the 5 years envisaged) of 150 thousand euros. Payments can be made in installments.
Based on the calculations by Anima Sgr quoted by Corriere della Sera, if the saver obtains an annual return of 2% on an investment of 30 thousand euros for 5 years (150 thousand at the end of the five-year period) after 10 years he will have a profit of 25.818 and save 6.713 euro of taxes (4%) on the paid-up capital. Based on the same investment and the same return, but extending the time horizon to 30 years, the investor will be able to count on a capital gain of €111.256, saving €28.927 in taxes (19% on the paid-in capital).
But beware of costs: savers would do well to check that companies apply commissions in line with other products of a similar type on the market. Otherwise, there is a risk of eroding the advantage deriving from the tax relief on profits, reducing both earnings and savings.
