The Italian Revenue Agency (“ITA”), with Circular Letter no. 32/E, 24 December, has properly defined the notion of "regulated markets" in the field of income tax.
The criteria for identifying regulated markets and the securities traded (or "listed") therein have undergone significant changes following the transposition into Italian law of Directives 2004/39/EC ("MiFID Directive") and 2014/65/EU ("MiFID2 Directive").
The most recent clarifications provided by ITA date back to Circulars Letters No. 165/E, 1998 and No. 207/E, 1999, without these having been followed by an update of the tax definition of "regulated markets".
Such definition is of primary importance not only for the purposes of the correct application of the rules laid down by the Italian Income Tax Code (e.g., for the purposes of the application of the taxation to non-residents and the qualification of income), but also of special regimes (inter alia, for the application of the substitute tax on interest, premiums and similar proceeds on bonds and similar securities).
In Circular Letter 32/E, 2020, the ITA, adopting also for income tax purposes, the notions outlined for regulatory purposes by the Italian financial authorities (CONSOB and Bank of Italy) (see §1.3), clarified that "regulated markets" – to be understood as systems subject to regulation deemed compliant with EU rules by the Supervisory Authority – include not only:
- the regulated markets referred to in the Consolidated Law on Finance (“TUF”), i.e., markets authorised or recognised by CONSOB and by the EU legislation registered in a specific list kept by the European Securities and Markets Authority (so-called "ESMA"), including markets recognised by CONSOB on the basis of ad hoc agreements entered into with Switzerland and the USA; and
- markets of countries belonging to the OECD (including EU and EEA countries), established, organised and regulated by provisions adopted or approved by the competent authorities in accordance with the laws in force in the country where such markets are located;
- any other market "regulated" by an organisation and operating rules which ensure orderly trading, in terms of efficient execution of orders, and thus trading volume, "recognised" by the competent Authorities and "open to the public", i.e., a multilateral market which, in its pricing, facilitates the matching of demand and supply of different participants; and
- multilateral trading facilities (MTF) insofar as they are characterised by a set of predetermined trading rules, whose compliance is verified by a public Authority. What is particularly relevant for income tax purposes is the existence of price formation rules.
Therefore, regulated markets in non-OECD countries, which were previously excluded, are now included in the category of “regulated markets”.
For tax purposes, the “regulated markets” are those identified by the lists prepared during self-regulation by the associations representing asset management companies and disclosed to the Bank of Italy.
The tax notion of "regulated markets" does not include organised trading facilities ("OTFs"), which, although falling within the definition given by the TUF, are characterised by the discretionary nature of the manager's choices.
Finally, it should be noted that no penalties nor interest are charged to taxpayers who have adopted for tax purposes the definition of "regulated markets" contained in previous practice documents.