LED Taxand – Tax Insider No. 9/2018 – Clarifications by the Italian tax authorities on the transfer of a VAT credit in the context of a contribution of mainly leased property
Clarifications by the Italian tax authorities on the transfer of a VAT credit in the context of a contribution of mainly leased property
On 20 November 2018 the Italian tax authorities issued Ruling Answer No. 71, providing clarifications on the transfer of a VAT credit within a contribution of mainly leased property, under Art. 8, par. 1-bis of Law Decree No. 351/2001.
The case addressed by the ruling
The case concerns an Italian company owning a pool of leased real estate assets and controlled by a foreign investment fund. The fund is managed by an asset management company (AMC) operating as a “European Alternative Investment Fund Manager”, under Directive 2011/61/EU.
The AMC plans to reorganize the investment structure of the fund by establishing an Italian alternative REIF. In particular, the company intends to contribute its (leased) real-estate assets to the newly established REIF, including a VAT credit not asked for refund.
Based on the above, the company filed a ruling request concerning the transferability of the VAT in the context of the contribution.
The position shared by the ITA
Pursuant to Art. 8, par. 1-bis of Law Decree No. 351/ 2001, contribution of a plurality of real estate assets into an Italian REIF is equalled to a contribution of a going concern and falls, therefore, outside the scope of VAT, to the extent that such real estate assets are mainly rented out when the contribution takes place. According to the same law, registration, mortgage and cadastral taxes are due at the fixed amount of €200 each.
According to the ITA, given the assimilation of the contribution of a plurality of real estate assets to a contribution or transfer of going concern, provided by Art. 8, par. 1-bis, Law Decree No. 351/2001, the entire “VAT credit” accrued in the hands of the transferor (net of the amounts compensated until the date of the contribution), may be transferred with the same methods adopted in case of extraordinary transactions.
Therefore, the transfer of the entire VAT credit, accrued until the date in which the contribution produces its effects, is effective towards the ITA, regardless of compliance with the formal procedure for the transfer provided by the Royal Decree18 November 1923, No. 2440. In order to give evidence to the contribution the transferor must confine itself to completing the 2019 VAT return (FY 2019) by complying with the instructions for the “Taxpayers with extraordinary transactions (mergers, demergers etc. or other substantial subjective transformations”.
The case under examination is also relevant because it deals with a foreign AMC aiming at benefitting from the “European passport” that allows an investment management company authorised by the authority of its home country to conduct its activities within in the European Union or the European Economic Area.
In particular, as for the VAT obligations related to the real estate investment fund, the AMC discloses its intention to
- identify itself directly in Italy pursuant to Art. 35-ter of the VAT Decree, or
- nominate a fiscal representative under Art. 17, par. 3 of the VAT Decree.
That being said, the answer issued by the ITA on the transferability of the VAT credit in the context of a contribution of a plurality of mainly rented real estate assets also seems to tacitly confirm the correctness of the VAT compliance procedures the AMC has to put in place in Italy to fulfil the tax obligations concerning the activity of the REIF.
The information provided in this newsletter cannot be regarded as legal advice. LED Taxand cannot accept any liability for the consequences of making use of this publication without their cooperation.