Italy has tied tax breaks on investment returns of first and second pillar pension funds in the real economy through venture capital funds to a certain share of allocation to the asset class.

Tax exemptions on returns apply if investment allocations in 2025 in venture capital funds of first pillar pension schemes (casse di previdenza), and industry-wide pension funds (fondi negoziali) are at least equal to 5% of the basket of qualified investments resulting from the statement of the previous financial year, and equal to 10% starting from financial year 2026, according to the new competition law (Legge per la Concorrenza), entered into force on 19 December 2024.

First and second pillar schemes can invest up to 10% of their assets under management in equities, via Undertakings for the Collective Investment in Transferable Securities (UCITS), credit funds, venture capital funds in Italy and in the European Union, or in the European Economic Area, according to the law.

The law applies both to qualified investments and long-term savings plans (Piani individuali di risparmio a lungo termine, PIR).

Pension schemes are exempted from tax on returns if they hold qualified investments for at least five years. A levy applies both on income from divestments and returns on held assets if they get rid of said assets before the five-year period.

Adepp, the Italian association of pension funds for professionals, has welcomed the changes to the competition law representing the right balance between protecting the economic and the financial strength of first pillar schemes, and at the same time encouraging investments in start-ups, it said in a statement.

The new competition law includes some of the proposals put forward by the Adepp, which considered the law drafted before the final approval more binding, with an asset allocation earmarked for qualified investments of 8% and a further 2% to be allocated exclusively to venture capital.

Moreover, now a specific safeguard clause allows for the retroactive recognition of tax benefits for investments already made in innovative start-ups before the law came into force, the association added.

“The original wording of the provision would have exposed us to excessive risks, considering that the venture capital market in Italy is still in the development phase,” Adepp noted.

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Luigi is IPE's Berlin-based DACH correspondent. His coverage includes regulation and the latest pensions and investments trends, and, being a native Italian, he also covers Italy’s pensions market. He has reported from Italy and Germany on international politics and business for European and US publications including USA Today, Bloomberg BNA and for the investigative magazine L’Espresso. He was previously Germany correspondent for Mergermarket covering M&A.View full Profile

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