| Dear reader,
starting off the financial incomes fiscal novelties, the Banca di Roma wants to make you a present, aimed to give you an easy reference guide to know the new systems to be applied to financial inversions make by natural persons resident in Italy: what they are, to whom are directed, which are the advantages.
The Reform, carried out to relieve savers from fiscal considerations about the different investment alternatives, has reorganized the matter standardizing taxation of financial incomes, assets management and unit trusts by applying generally the rate of 12,5% (excepting the so called “qualified holdings”).
Reading the article, you will see that is not needed a special competence in fiscal and financial matters to understand the contents of the Reform: nevertheless we hope to guide you in a right way toward decisions, the most opportune for you, among the alternatives the new normative imposes.
Starting off on July 1st you can, for all your financial state bonds , shares and debentures operations, make use of the Banca di Roma both as an authorized mediator and for all the fiscal performances related to investments.
Advisors and financial experts of the Banca di Roma are at your disposal to counsel you and give you the better solutions by the means of the Assets Management, Romagest and Romivest Unit trusts and insurance products.
The fiscal reform, effected by Legislative Decree n. 461 November 21st 1997 and in force since July 1st 1998, foresees the taxation of all incomes proceeding from assets inversions.
In practice, the new fiscal system, introduces the taxation of the future capital gains, that is incomes from assets, and it places beside the taxation of the capital incomes (as dividend or interests on invested amounts).
Nevertheless the novelty for taxpayers regards mainly the taxation modalities.
Indeed the fiscal reform has introduced two new systems : the Administered Saving and the Managed saving, both allowing delegating banks the fiscal aspects of one's own savings management.
This way taxpayers must not anymore point out one's own incomes within the income tax return, with the twofold advantage to remain anonymous and to not to carry out calculations that are very often too complex.
The new systems offer the further possibility (particularly wide for the Managed Earning) to compensate profits and losses within the same relationship with Bank: advantages will be for whom governs one's own investments throughout a sole enduring relationship.
The adoption of the new systems is automatic : the waiver, if it, must be explicitly noticed within September 30th 1998 and, if concerning positions registered to more than one subjects, it must be undersigned by all the co-holders.
Who takes advantage of this system?
The Administered saving method is automatically applied in the case a natural person who does not practice trade has a custody, administration or trust deposit of securities relationship with the Bank.
How the taxation is?
The Bank applies the substitute tax of 12,5% to each positive differential capital gain (rising from derivative contracts or time contracts) or proceeds received by the client.
If between the purchase date and the sale one or the reimbursement of the financial instruments passes more than a year, the Bank applies the equalizator mechanism. It's a coefficient, yearly determined by an ad-hoc Minister of the Finance's decree, whose target is to make the taxation on the basis of the principle of the encashment (over 'effective' gains) equivalent to the one based upon the accruing principle (over the 'theoretic' gains), as it is for the Managed saving, as we'll see. Capital gains and losses calculation is carried out even when the taxpayer decides to transfer financial activities to other entitled to different persons relationships. If at the end of the taxation year there were a surplus of losses as regards to gains, it may be deducted in the follow taxation years, not later than the fourth.
The Administered saving is a real simplification of the financial securities taxation. Indeed the tax computation is made by the Bank, which is a qualified operator providing also the corresponding payment.
* furthermore the Administered saving method ensures the investor keeping anonymous. The capital gains accrued during the year must not be reported in the income-tax return since the substitute tax will have been already paid by the Bank.
* capital losses cannot compensate dividends or interests already submitted to deductions or substitute taxes.
* instead, the capital losses can be compensated by gains only if obtained later. Taxation, indeed, is carried out on the basis of single operations; so losses can be deducted from following gains , but, naturally not those over which taxes have been already paid.
* applying the equlizator mechanism, the capital gains made after one or more than one year from purchase are in fact taxed at a higher rate.
1 The case of a capital
2 If there are both gains
This way it is possible to compensate all the negative and positive components as regards to both capital gains (for example the value increase of a security ) and the unearned incomes (as dividends or interests)).
Who makes use of this system ?
The managed saving system is automatically applied to natural persons who do not practice trade and have not appointed other Banks (commonly called “administrator”) to manage assets.
How is taxation carried out?
Taxation is made according to the accruing principle; not only incomes and gains effectively realised are submitted to taxation, but also those accrued during the year. On consequence within this system, the equalizator mechanism is not applied.
The managing net outcome is the value deriving from the sum or the difference of two gross results, determined separately: are taken into account both all the capital incomes accrued during the year and the capital gains, accrued in the same period.
From the managing net outcome are excluded the capital incomes submitted to the deduction as tax account and the proceedings coming from quotas of unit trust and SICAV. Furthermore administrator calculates the managing result, managing assets related charges and fees net.
Whereas the net outcome of a tax year would be negative, it will be compensated by the positive results of the following four taxation years as regards to the same management. Instead, if the result is positive, the administrator, after calculating the substitute tax, performs directly the payment.
* a further advantage of the managed saving system, besides its simpleness and the anonymity featuring the Administered saving system, is the possibility to compensate all the components (realized o accrued) of the income related to the managing relationship. So losses may always compensate the realized gains in the same years, even if those gains have been realized before.
* The managed saving system allows, furthermore, the fiscal recuperation of the managing costs. When calculating the net outcome, indeed , the Bank will deduct managing fees from the taxable basis.
* The managed saving foresees the taxation in advance of the accrued and not realized capital gains during year. In this system the tax is applied to all components of income, whether potential or effective, and not to the single operations. Nevertheless it's a disadvantage compensated by the fact that, in parallel, potential capital losses are deducible, which have been accrued during year, but yet not realized.
Whichever fiscal system is chosen, unit trusts do not concur to form the taxable income of natural persons who do not practice trade. These unit trusts are in fact submitted to a substitute tax on the managing result according to the accruing criteria: the capital gains within the value of the beginning of the year and the daily recorded one are already taxation net and so the quota value issued daily is already what the client would gain from sale.
In the case of life-insurance, as it happened before, the taxable basis is formed by the difference between the received capital and the paid premiums: but, if the capital is received after more than ten years, the difference is reduced of 2% for every year after the tenth.Taxation is operated by the same insurance company that paying out the capital applies a deduction as a tax of 12,5% over the taxable difference.
If the taxpayer does not
want to apply one of the new systems introduced by the reform, can opt
to enclose the capital gains in his income tax return. Till September 30th
1998, indeed, who had a trust deposit of securities or assets administration
relationship with the Bank could practice the option of applying the income
tax return method rather than the Administered saving or the managed saving
systems. The capital incomes taxation will be carried out, this case, according
to the traditional method, that foresees deductions or substitute taxes.
Furthermore the taxpayer must point out in the income tax return all profits
or losses realized during the year. If the amount will be positive, he
must then pay the 12.5% tax rate. If it were negative he can deduct the
amount in the following years income tax return, but not beyond the fourth.
If the sale of the financial instrument is performed one or more years
after the purchasing, the amount of the tax will be calculated by the means
of the equalizator mechanism, as it has already seen for the Administered
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