LED Taxand summarizes hereinafter the main tax news regarding Italian real estate for the first quarter of the year 2021.

Case law – European Court of Justice C-478/2019 e C-479/2019. Opinion of Advocate General Hogan. Potential EU Law infringement of the favourable Italian transfer tax regime provided for the purchase of commercial real estate assets to which Italian closed-ended real estate investment funds are parties

On 25 February 2021, the Opinion of the Advocate General of the European Court of Justice, Gerard Hogan, was issued on the joined cases C-478/2019 and C-479/2019 (“UBS Real Estate KmbH”) relating the appeal of the Italian Supreme Court on the compatibility with EU law of the Italian legislation limiting the reduction from 4% to 2% of the mortgage and cadastral taxes to the sole cases of purchase of commercial real estate assets referred to in art. 35, paragraph 10-ter, of Law-Decree no. 223/2006 carried out by/in favor of Italian closed-ended real estate investment funds (“REIFs”).
In the case at hand, the Italian Tax Authorities denied the refund of mortgage and cadastral taxes, paid at the ordinary rate, to an asset management company established in Germany, UBS RE, which had purchased Italian commercial real estate assets on behalf of two open-ended REIFs organized under German law.

UBS RE appealed against this refund denial in front of the Italian Tax Courts and, following unfavourable judgments, appealed the Italian Supreme Court, arguing that foreign real estate investment funds, whether closed-ended or open-ended, should also be eligible for the favourable regime, otherwise they would be in breach of the fundamental freedoms of the EU Law. The Supreme Court then referred the matter to the European Court of Justice in order to understand whether the above-mentioned Italian favourable legislation was in conflict with EU law, and in particular with the principles of freedom of establishment and free movement of capital (Judgment no. 15432/2019).

According to the Advocate General, a reduction in the rate of mortgage and cadastral taxes payable in the event of the purchase of a commercial asset may be limited to closed-ended investment funds if that limitation is justified by the need to mitigate a potential systemic risk in the relevant real estate market (given that the shares of open-ended investment funds may be subscribed at any time, and at any time it is possible to obtain total or partial redemption).
The Advocate General has also commented on the condition that the funds must be administered in Italy or otherwise governed by Italian law in order to benefit from the reduced transfer taxes. In that regard, he argued that such a requirement may give rise to direct discrimination based on the nationality of the fund and not justified by reasons expressly provided for by the Treaties or by reasons of general interest, thus infringing the free movement of capital, at least as regards foreign closed-ended investment funds.

As of today, therefore, a prudent approach could be to wait for the decision of the Court of Justice, but another option could be to consider that, on the basis of the opinion of the Advocate General, there are already the grounds for foreign closed-ended REIFs, that have sold/purchased commercial real estate assets located in Italy and paid transfer taxes at the ordinary rate of 4%, to be able to claim a refund to the Italian Tax Authorities of the half of such taxes in application of the reduction provided for by the Italian legislation (in this sense, the Regional Tax Court of Milan, Judgment no. 5952 of 2018, had already stated that the reduced transfer taxes could also be applied to foreign closed-ended REIFs). On the contrary, the possibility to extend this opportunity also to open-ended foreign REIFs should only be assessed in light of the future decision of the European Court of Justice on the matter.

Case law – Constitutional Court, decision 16 March 2021 no. 39. Constitutional legitimacy of Article 20 of the TUR and the retroactivity of the amendments made in 2017

With decision no. 39 of 16 March 2021, sharing the arguments of its previous ruling (Judgment no. 158 of 2020) on the constitutional legitimacy of Article 20 of the Presidential Decree no. 131 of 26 April 1986 (“TUR”) and the provision of Law no. 145/2018 (“2019 Budget Law”) which stated the retroactivity of the amendments made in 2017, the Constitutional Court declared both questions of constitutional legitimacy groundless and inadmissible.

Specifically, the Provincial Tax Court of Bologna had raised issues of constitutional legitimacy (i) with reference to Articles 3 and 53 of the Italian Constitution, of Article 20 of the TUR “in the part in which it provides that, in applying the registration tax according to the inherent nature and legal effects of the deed submitted for registration, even if the title or the apparent form does not correspond to it, only the elements that can be inferred from the deed itself must be taken into consideration, regardless the extra-textual elements and the deeds linked to it, except as provided for by subsequent articles”; (ii) alternatively, with reference to Articles 3, 81, 97, 101, 102, 108 and 24 of the Italian Constitution, of Article 1, paragraph 1084, of the 2019 Budget Law, which qualifies as “authentic interpretation” the 2018 Budget Law concerning the regulation of the interpretation of deeds for the application of registration tax.

In this regard, the Court first of all repeated that, for the purposes of the constitutional legitimacy, it is not decisive to establish the innovative or interpretative nature of Article 20 TUR, which qualifies as an authentic interpretation rule. The Court also stated that the provision, as amended, is a systemic rule – therefore, legitimately with retroactive effect – which aims to correct the evolutionary interpretation endorsed by the Italian Supreme Court and to bring Article 20 TUR back to its original scope, i.e. to apply registration tax to deeds on the basis of the legal effects they produce, regardless of related deeds and extra-textual elements.

Revenue Agency’s guidelines – Non-public reply to tax ruling 19 February 2021. AIFMs can qualify as construction enterprises for VAT purposes

Italian tax authorities clarified that an AIFM on behalf of its real estate fund can qualify as construction enterprise for VAT purposes, dispelling doubts deriving from previous interpretations of the Italian Revenue Agency. Consequently, the AIFM qualifying as construction enterprise can opt – for example – for the application of the VAT on lease agreements related to residential buildings, avoiding limitations in the deductibility of the VAT on costs.

Revenue Agency’s guidelines – Reply to tax ruling 2 March 2021 no. 132. Tax treatment of real estate securitization vehicles under art. 7.2, Law no. 130/1999

With reference to the tax treatment applicable to real estate securitization vehicles (RE SPV) under art. 7.2, Law no. 130/1999, Italian tax authorities clarified that:

  • no corporate and local income tax apply to income and gains of the RE SPV, unless residual profits remain at the end of the transaction, which are not to be paid out to noteholders or to other creditors;
  • Legislative Decree no. 239/1996 applies to interest related to the real estate securitisation notes. Therefore, whitelisted foreign (institutional and non-institutional) investors may benefit from the withholding tax exemption under the conditions provided by art. 6 of the mentioned decree;
  • ordinary VAT rules apply.


The information contained in this newsletter cannot be considered as a legal opinion. LED Taxand does not accept any liability in connection with the use of such publication without the collaboration of its professionals.

Download Newsletter