{"id":27767,"date":"2024-12-10T15:54:21","date_gmt":"2024-12-10T14:54:21","guid":{"rendered":"https:\/\/it.andersen.com\/?p=27767"},"modified":"2024-12-10T15:54:57","modified_gmt":"2024-12-10T14:54:57","slug":"reform-about-rationalization-of-indirect-tax-other-than-vat","status":"publish","type":"post","link":"https:\/\/it.andersen.com\/en\/reform-about-rationalization-of-indirect-tax-other-than-vat\/","title":{"rendered":"Reform about rationalization of indirect tax other than VAT"},"content":{"rendered":"

The Italian Government has recently introduced a reform about rationalization of indirect tax <\/strong>namely, gift and inheritance tax<\/strong> (imposta sulle successioni e donazioni<\/em>), transfer tax<\/strong> (imposta di registro<\/em>), duty stamp<\/strong> (imposta di bollo<\/em>) and other indirect taxes other than VAT.<\/p>\n

This is Legislative Decree 139\/2024, which came into force on October 3, 2024, although, as we shall see, in some respects it is effective as of January 1, 2025.<\/p>\n

For those involved in estate and succession tax planning especially in next generation transfers<\/strong>, the reform included important innovations in the area of inheritance and gift tax and the taxation of contributions or allocations to trusts.<\/p>\n

The reform was dictated by the need, on the one hand, to definitively clarify, the taxation rules on the transfer of assets into trusts and their subsequent attribution to beneficiaries, and on the other hand, to clarify (and improve) certain rules that allow the transfer of control of companies and participations to future generations in total tax neutrality.<\/p>\n

 <\/p>\n

Transfers made through trusts for inheritance and gift tax purposes<\/strong><\/h2>\n

In Italy, as is probably the case in other Countries, the Government enacts tax laws<\/strong> and the ITA<\/strong> (Italian Tax Agency) in turn legislates by publishing circulars, answers to rulings and resolutions. Well, before the enactment of the reform, the most recent guidance on the taxation of trusts for both direct and indirect taxation purposes was provided in Circular No. 34\/E of October 20, 2022 (Circular 34\/E), issued by ITA. Among other provisions, the Circular established that the execution of a trust deed and the subsequent transfer of assets by the settlor to the trust were not subject<\/strong> to inheritance or gift tax. The taxable event occurred only upon the final distribution of trust assets to the beneficiary.<\/p>\n

The Decree amends Legislative Decree No. 346 of 1990 (the Consolidated Law on Inheritance and Gift Tax, or TUS), specifically amending Article 1 to state explicitly that transfers through trusts<\/strong> are subject to inheritance<\/strong> and gift tax<\/strong>. The wording of the new Article 4-bis introduces the principle that trusts are relevant for inheritance and gift tax, which is applied at the time of transfer to the beneficiaries if there is gratuitous enrichment of the beneficiaries. This entails the application of the various tax rates and exemptions that depend on the degree of relationship between the settlor<\/strong> and the beneficiary<\/strong>.<\/p>\n

But Article 4-bis provides for a further important innovation, namely that the settlor may choose to pay the tax at the time of each transfer of assets to the trust. This choice entails the application of tax rates and exemptions <\/strong>determined according to the total value of the assets and the degree of relationship at the time of the gift. Importantly, if the tax is paid in advance, any subsequent transfers to beneficiaries of the same class are not subject to further tax. The option to pay the tax at the time of the transfer of assets to the trust allows the taxable event to be \u201ccrystallized\u201d, providing certainty as to the amount of tax to be applied and thus preventing future increases in tax rates from affecting future distributions to beneficiaries.<\/p>\n

Last but not least, the Decree’s novelty concerns the territoriality of the tax by providing that for trusts, the tax is levied on all assets and rights transferred to the beneficiaries if the settlor is resident in Italy at the time of the separation event (i.e. when the assets are transferred to the trust). If the settlor is not resident <\/strong>in Italy, the tax is due only on the assets and rights located in Italy that are transferred to the beneficiaries.<\/p>\n

 <\/p>\n

Transfer of companies and participations to future generations<\/strong><\/h2>\n

Decree 139\/2024, also introduces important and significant changes to Article 3, paragraph 4-ter of the TUS, a provision introduced by the 2007 Finance Act following the implementation of a Recommendation of the European Commission (94\/1069\/EC of 7 December 1994,) which provided for, and still provides for, total exemption from tax in cases of transfers to descendants <\/strong>and spouses of companies or branches thereof, company shares and shares.<\/p>\n

The text of Article 3, 4-ter in force until October 2, 2024 read as follows: \u201cTransfers, including those made by means of family agreements (…) in favor of descendants and spouses, of companies or branches thereof, company shares and shares, are not subject to tax. In the case of company quotas and shares of entities (…) the benefit is limited to the shareholdings through which control is acquired or integrated (…)\u201d.<\/p>\n

The letter of the rule, which on the surface appeared to be clear, in reality entailed numerous problems of interpretation, also due to the practice guidelines of the Italian Tax Agency and the orientation of the Supreme Court (Corte di Cassazione<\/em>).<\/p>\n

Well, the legislative novelties introduced by the Decree essentially concern three aspects, which are disclosed in the following paragraphs.<\/p>\n

 <\/p>\n

Transfers of minority shares in companies in which the beneficiary of the gift or inheritance already held control <\/strong><\/h2>\n

The new rule provides that the benefit of the exclusion from taxation applies when, as a result of the transfer, de jure control is acquired or there is already existing control.<\/p>\n

And still on the subject of control, the doubt has already been raised in doctrine as to how the criterion for determining control is to be understood; one thinks, for example, of the so-called special rights<\/strong> of the shareholder. It should be noted that since the rule extends the applicability of the exemption to foreign companies in general, subject to what will be said shortly, interpretative doubts may arise as to the meaning of control, which may differ in jurisdictions other than Italy.<\/p>\n

 <\/p>\n

Transfer of participations in companies \u201cwithout a company\u201d (passive income companies)<\/strong><\/h2>\n

The text of the previous rule is amended by specifying that relief applies to three different hypotheses:<\/p>\n

    \n
  • Company or branches thereof for which there must be the continuation of the business activity<\/li>\n
  • Shares of companies on condition that the holding of control <\/strong>is exercised for at least 5 years from the date of the gift or inheritance. There is no longer a reference to the requirement of the continuation of the business activity. For corporations, the holding of the shares <\/strong>is required, not the carrying on of the business activity, a requirement that applies only to companies<\/li>\n
  • Other companies shares, i.e. the holding of the ownership right. Here we find simple partnerships (societa\u0300 semplici<\/em>). No business activity<\/strong> is required<\/li>\n<\/ul>\n

    It follows that pure holding companies, real estate companies and simple partnerships must be included. Even in this case, there may be interpretative problems linked to the different types of companies in force abroad.<\/p>\n

     <\/p>\n

    Applicability of benefit to foreign companies<\/strong><\/h2>\n

    The new wording of Article 3 4-ter provides that \u201cThe benefit also applies to transfers of shares and quotas of companies resident in countries belonging to the European Union or the European Economic Area or in countries that guarantee an adequate exchange of information, under the same conditions provided for transfers of shares of resident entities\u201d. <\/em>It should be noted that the amendments to Article 3 4-ter take effect as of January 1, 2025<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

    The Italian Government has recently introduced a reform about rationalization of indirect tax namely, gift and inheritance tax (imposta sulle successioni e donazioni), transfer tax (imposta di registro), duty stamp (imposta di bollo) and other indirect taxes other than VAT. This is Legislative Decree 139\/2024, which came into force on October 3, 2024, although, as […]<\/p>\n","protected":false},"author":125,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[50],"tags":[],"_links":{"self":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts\/27767"}],"collection":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/users\/125"}],"replies":[{"embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/comments?post=27767"}],"version-history":[{"count":1,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts\/27767\/revisions"}],"predecessor-version":[{"id":27768,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts\/27767\/revisions\/27768"}],"wp:attachment":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/media?parent=27767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/categories?post=27767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/tags?post=27767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}