Extraordinary transactions and registration tax: lease of business from the vehicle to the buyer between legitimacy and abuse.

The recent answer to ruling No. 260 of 2023 provides an opportunity to return to the subject of possible critical issues related to the correct application of registration tax in the case of extraordinary transactions involving the change of ownership of business units.

Specifically, the case at issue concerned a complex transaction, in which (i) Alfa contributed the business unit to a special newly formed corporate vehicle, (ii) the shares of the newco were transferred in full to Beta, (iii) which subsequently entered into a business lease agreement with the aforementioned newly acquired vehicle.

For registration tax purposes, this transaction results in taxation in the amount of 600.00 euros, as all three stipulated deeds are subject to fixed-rate tax (200.00 euros), as opposed to an ordinary business transfer, which is subject to a proportional rate of 3 percent of the price paid.

In this context, given the objective difference in the tax burden, the need to protect himself about possible, future objections of the Tax Office arises spontaneously in the taxpayer (that, consequently, proposed the abovementioned ruling).

In fact, although the amended art. 20 TUR - whose constitutional legitimacy is now ascertained following the Constitutional Court's rulings No. 158 of 2020 and No. 39 of 2021 - no longer allows the Internal Revenue Service to requalify the acts put in place by the taxpayer (1). Regardless, there remains, by virtue of the reference made by art. 53 T.U.R. to art. 10-bis of Law 212 of 2000, the possibility for the Tax Administration to challenge abuse of rights if it believes that the taxpayer has carried out a series of transactions without economic substance, for the sole (or main) purpose of obtaining undue tax advantages.          

After all, with the Ruling no. 138 of 2019, the Tax Administration has already had the opportunity to express its opinion on the elusive nature of the complex "contribution-transfer-merger" transaction.

In this hypothesis, there is a further step than the mere contribution of the business unit and subsequent sale of the vehicle (which is now unquestionably legitimate - see Ruling no. 13/2019).  The merger makes clear the real will of the parties to acquire the company and the absence of valid economic reasons, underlying the transactions carried out (as an alternative to the mere perfection, ab origine, of an asset deal). In fact, according to the Office, the combination of three acts subject to fixed-rate registration tax (contribution, sale and merger) results in the attainment of an undue tax advantage, where it allows circumventing the proportional taxation of the direct sale of the company.

The Office's conclusions are different with reference to the case under comment here.

Indeed, the concatenation of acts described by the taxpayer – although it could, at first glance, be considered akin to the case described above (here, too, a kind of "triangular transaction" could be recognized, aimed at bringing the company into the disposal of the transferor company) – it would not assume an elusive nature since it could not be equated with the mere sale of a company.

According to the Office, the lease of the business to the buyer, by the newco, has a quite different effect from a mere sale of the business (or the merger by incorporation of the newco).

After all, while the incorporation of the vehicle entails the assumption of all rights and obligations of the latter and the consequent total control of the business, the lease contract gives rise to a synallagmatic relationship in which the parties involved remain distinct and independent. In addition, from the lease agreement, as opposed to the merger, it follows:  

In conclusion, with the aforementioned response, the Tax Administration, valuing the lease in its substance, recognizes the existence of valid economic reasons underlying the transaction (as well as the substantial difference of the effects produced), excluding the presence of undue tax advantages and, therefore, a case of abuse of rights. 

It is clear that the Tax Authority's recent stance can be of interest to taxpayers, which, being about to put in place extraordinary transactions, find themselves sifting through, with the help of their professionals, the pros and cons of the various alternatives, including from the point of view of tax efficiency.

Dott.ssa Greta Vagani

Avv. Paolo Visconti

(1) Under the previous Art. 20 TUR, the tax authorities, endorsed by majority case law, proceeded to recharacterize business transfers and subsequent transfer of the transferee (subject to fixed-rate tax) into mere business transfers (proportional tax) on the mere basis of the alleged economic identity of the two transactions.

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