Stop capital gains tax

Stop capital gains tax

24 May 2021







Good news for those who invest in innovative startups and SMEs. On 20 May, the Council of Ministers approved the "Sostegni bis" decree-law , which introduces, among the tax breaks and measures designed to relaunch the country, the temporary elimination, until 2025, for individuals only, of the tax on capital gains, i.e. the tax on capital gains deriving from the sale of investments in start-ups and innovative SMEs. The decree, which has not yet been published in the Official Gazette, establishes that until 2025 capital gains tax will not be levied on capital gains arising from the sale of investments in the capital of start-ups and innovative SMEs (acquired through the subscription of capital increases and held for at least three years).

In addition, capital gains deriving from the transfer of interests in the capital of companies pursuant to Article 5 (excluding partnerships and similar entities) and Article 73, paragraph 1, letters a) and d), of the TUIR should not be subject to taxation, if and to the extent that, within one year from their realization, the same capital gains are reinvested in innovative start-up companies or innovative SMEs, through the subscription of capital increases.

The effectiveness of the provisions described above is subject to the authorization of the European Commission, which must be requested by the Ministry of Economic Development.

What is the capital gain

The capital gain is the (positive) difference between the sale or redemption price of a financial instrument (e.g. quotas of srl, shares, bonds, etc.) and its purchase or subscription price. The gain, and therefore the capital gain, is realized only when a financial instrument is sold at a higher price than the purchase price. The capital gain is subject to a capital gains tax at a fixed rate of 26%.

The capital gain is subject to taxation. Upon exiting the equity of a startup (or SME) the investor is required to pay 26% on the difference between what he has invested and the realizable value of the same investment at the time of exit.

The Sostegni bis Decree, in the cases mentioned above, abolished the obligation to pay 26% to the tax authorities on the gain on the exit of the investment.

The Decree Law Sostegni bis. Advantages and other measures

In recent years Italy has seen the growth of its ecosystem of startups and innovative SMEs, as confirmed by the data of the Ministry of Economic Development last April, but there is still work to be done on the funding front. There is no longer any doubt that these businesses play an important role in the social and economic growth of a country: they increase the availability of jobs, stimulate innovation and create healthy competition.

The stop of taxation on capital gains until 2025, by simplifying the transfer of money between individuals, will hopefully encourage investments by savers, giving a boost to the real economy. It is also expected the arrival of public funds provided by the Next Generation EU, for digitization and ecological transformation that require entrepreneurial drive and innovation. These elements are not lacking in the Italian business system.

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