jurisdiction

1. Is there a specific tax regime for carried interest in your jurisdiction?

Yes.

2. What is the applicable tax treatment?

Under the Italian carried interest regime, proceeds relating to shares or participatory financial instruments distributed to employees/managers are subject to a 26% substitute tax, rather than being characterized as employment income taxed at ordinary progressive rates.

3. Under which conditions are the regime applicable?

Proceeds qualify as carried interest where the following cumulative conditions are satisfied: (a) the aggregate investment by employees/managers exceeds 1% of the fund’s total investment; (b) distributions are subordinated such that income accrues only after investors have received their capital plus a minimum return; and (c) the relevant instruments are held for at least five years.  The Italian Tax Authority (ITA) has clarified that failure to meet the 1% threshold alone does not automatically recharacterize proceeds as employment income, provided there is genuine alignment of interests and risks between managers and other investors. By contrast, if either the subordination requirement in (b) or the five‑year holding period in (c) is not met, the carried interest regime does not apply and the income must be treated as employment income.  A case‑by‑case analysis is therefore required to verify alignment and deferral of profit distribution, either by self‑assessment or through an advance tax ruling filed with the ITA.

4. Who are the beneficiaries?

The regime applies to individuals who are managers/employees of the funds and does not extend to external consultants.

5. Which types of funds are concerned?

The regime applies to participations in collective investment undertakings (OICR), companies, or entities that are either resident or established in Italy or resident in jurisdictions ensuring adequate exchange of information (i.e., white‑listed countries).  For these purposes, OICR specifically includes mutual investment funds, SICAF (closed‑end investment companies), and SICAV (open‑end investment companies).  The regime also covers asset management companies (SGR), advisory companies, investing entities, and target companies involved in investment operations.

6. Is carried interest subject to social security in your jurisdiction?

No.

7. Any other key information? 

No.