12 October 2023
PIRs (Piani Individuali di Risparmio) are a form of investment provided for in the Italian legal system, with the 2017 Stability Law, and are aimed at directing Italians' savings toward small and medium-sized Italian companies so as to "self-finance" the national economy.
The advantage that PIRs offer the investor is loud and clear: total tax exemption on investment returns. In other words, you will not have to pay 26 percent tax on both income and capital gains produced by the investment. In addition, RIPs are exempt from inheritance tax but remain subject to stamp duty (0.2 percent per year of market value).
In order to obtain this benefit, certain rules must be followed since the PIR is not a financial product but a "legal container" of investment instruments: only if this container is properly filled and maintained then the tax benefit is available.
Unfortunately, we cannot be the ones to declare that the rules have been complied with ourselves; the Italian state requires a financial intermediary to do so. For this reason, opening a PIR can only be done under the administered savings regime, that is, within a specific contractual relationship for opening a PIR. This will obviously entail costs on the part of the intermediary.
Crowdfunding investments aimed at Italian startups, SMEs or real estate companies are perfect candidates for inclusion in PIR. Since they are small and unlisted companies, they generally comply with the composition rules.
So, if by crowdfunding we have invested or plan to invest in at least 5 companies in equal parts, here we have a perfect alternative PIR portfolio (or at least 10 companies for an ordinary PIR portfolio) to which, if we wish, we can also add other securities for the unencumbered part.
In this way we add to the tax advantage of equity crowdfunding of deducting 30% to 50% of the amounts invested also the tax advantage of not paying taxes on returns and having a much higher net return.
A PIR can be built in two modes: the "ready-to-use" mode and the "do-it-yourself" mode. In the "ready-to-use" mode, the intermediary sells a PIR legal container that has already been filled with securities chosen by the intermediary, the most common example being a PIR-compliant mutual fund.
In the "do-it-yourself" mode, it is the investor who chooses the securities to put in the PIR container, and the intermediary will simply verify that the rules are followed over time. This is the mode that can be used for crowdfunding investments and can be done through a fiduciary mandate vis-à-vis the intermediary, which must be a company registered with the Register of Trust and Auditing Companies.
The costs of this mode can be: a one-time fixed cost for opening the relationship, an annual recurring cost in a fixed amount and/or as a percentage of the value invested. Costs may be higher in the case of alternative RIPs.
To assess the convenience of opening a PIR one must put costs and benefits in the balance: the costs are those of the trust mandate, the benefits are the tax benefits. The tax benefits will have a magnitude proportional to the absolute return we expect to make from our crowdfunding investment. This depends on both the total capital invested and the success of the businesses we have chosen. So, the greater these two components are, the more irrelevant the cost burden of RIP becomes.
Warnings pursuant to Article 19(2)
crowdfunding services provided by Mamacrowd are not covered by the Deposit Guarantee Scheme established in accordance with Directive 2014/49/EU*; securities and instruments eligible for crowdfunding purposes that can be acquired through this crowdfunding platform are not covered by the Investor Compensation Scheme established in accordance with Directive 97/9/EC**.
* Directive 2014/49/EU of the European Parliament and of the Council on Deposit Guarantee Schemes.
** Directive 97/9/EC of the European Parliament and of the Council on investor-compensation schemes.
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