LED Taxand summarizes hereinafter the main tax news regarding Italian real estate for the second quarter of the year 2021.
Case law – Italian Supreme Court of Cassation, judgment no. 10656/2021 – Recoverable VAT not only from the purchaser but also from the seller if the “First Home” purchased is a luxury home and VAT has been charged at 4%.
In the event that the sale of a property has been unduly subject to the reduced VAT rate of 4% pursuant to No. 21, Part II, of Table A, attached to Presidential Decree No. 633 of 1972 (the so called “First Home” tax benefit) instead of the ordinary rate, the revocation of the benefit by the Tax Authorities is also effective against the seller. In this regard, the Supreme Court has stated that this is possible in the cases in which the advantage regime has been unduly benefited on the basis of circumstances not attributable exclusively to a specific conduct of the purchaser, but to objective elements of the purchase agreement between the parties, of which they are necessarily both aware. Therefore, in such cases the Tax Authorities may issue the tax assessment for the higher taxes due, plus penalties, both against the seller, as taxable person (and without prejudice to the subsequent recourse in case of payment), and against the purchaser of the property itself.
Revenue Agency’s guidelines – Reply to tax ruling no. 370 of May 24, 2021 – Conversion of a joint stock company into a real estate SICAF.
The Revenue Agency’s reply analyses the tax aspects related to the conversion of a joint stock company operating in the real estate sector (owning real estate assets rented out) into a real estate SICAF (Fixed Capital Investment Company) externally managed. In particular, Italian tax authorities clarified that such conversion (although not covered by art. 2500-septies Italian civil code related to transformations) requires an amendment to the articles of associations, which implies an exempt status for direct tax purposes (IRES and IRAP). As regards IRES, applying by analogy art. 171 Italian tax code related to transformation, the company must compute the income related to the period between the beginning of the fiscal year and the date of the conversion into SICAF, also considering the capital gain realized at market value on the assets held by the company at the time of the conversion. Capital losses (if any) are not deductible under article 101 Italian tax code.
As regards IRAP, the company must file a tax return related to the above-mentioned period, computing its taxable base under the rules applicable to the activity carried out before conversion. However, Italian tax authorities do not clarify whether the conversion is a taxable event also for IRAP purposes.
With reference to VAT, the conversion is out of the VAT scope according to art. 2, para. 3, letter f) Italian VAT decree. As regards registration tax, the minutes of the extraordinary meeting which modifies the articles of associations of the company are subject to euro 200 registration tax. Also transfer taxes apply in the fixed amount of euro 200 each, since the conversion does not imply any transfer of real estate assets or real estate rights.
Revenue Agency’s guidelines – Reply to tax ruling no. 409 of June 16, 2021. Investments by foreign funds in Italian real estate alternative funds.
The Italian Tax Authorities has ruled in favour of the application of the exemption regime provided for by Article 7, paragraph 3, of Decree-Law No. 351/2001 for income deriving from the participation in an Italian reserved closed-end real estate alternative investment fund participated by a chain of funds and vehicle companies resident in white listed countries (i.e. Luxembourg, Cayman Islands, UK).
The aforementioned regime applies not only in the event of direct participation in the Italian real estate fund, but also where such investors totally hold the vehicle company making the investment (as already clarified by Resolution No. 54/E of 18 July 2013, which also specified that it is not necessary for the vehicle company so participated be resident in the same Country as the investor, if the residency requirements set forth by Article 7, paragraph 3, are met with respect to the investors therein indicated).
In addition, in order to be exempt from the withholding tax on the fund’s income, it is necessary to obtain documentation proving the white list residence of the entities involved and the supervisory status of the funds.
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