Costitutional Court rules on the interpretation of deeds subject to Italian registration tax

Prepared by Valentino Guarini, Carlo Romano and Maurizio Foti

The Constitutional Court, with the judgment no. 158/2020 filed on July 21st 2020, clarified that, for the purposes of register tax, the Revenue Agency must apply the tax according to the nature of the specific act subject to the register tax and must not consider extraneous elements and circumstances to the same specific act subject to registration.

One of the practical effects of this judgment will be the preclusion for the tax authorities to characterize the so called “two-step transactions” (contribution of part of a going concern into a newco and subsequent disposal of the shares), which are already subject to lumpsum registration tax, as a transfer of part of a going concern, which is instead subject to proportional registration tax.

Judgment no. 158/2020 puts an end to the controversial interpretation of art. 20 of the Presidential Decree no. 131/1986 (T.U.R.) which mainly affects corporate M&A.

In fact, such matter should have been considered already clarified in light of the progressively enacted legislation: (i) Art. 1, paragraph 87, let. a), of Law no. 205/2017 amended Art. 20, paragraph 1, of the TUR stipulating that the registration tax should be applied with regard to the sole deed to be registered and therefore “on the basis of the elements inferred from the deed itself, regardless of the extratextual ones and the deeds related to it”; (ii) Art. 1, paragraph 1084, of Law no. 145/2018, then set out the retrospective scope of the such amendment to Art. 20 T.U.R.

However, the above described legal amendments did not suffice in solving the issues and the Constitutional Court judgment turned necessary as it dismissed the request for a preliminary ruling on constitutional consistency raised by the Italian Supreme Court by means of order no. 122/2019, thus confirming the hindrance for the Revenue Agency to legally characterize a given M&A transaction on the basis of Art. 20 of the TUR.

According to the Supreme Court, the new wording of Art. 20 of the TUR could allegedly amount to a breach of: i) the principle of ability to pay under Art. 53 of the Constitution as a background to the principle of substance over form (e.g.: transfer of business vs. transfer of shares) and ii) the principle of equality enshrined by Art. 3 of the Constitution, resulting in a disparity of taxation between those who realize their interests by means of a single step.

Those issues were raised by the Supreme Court as part of proceedings where the consistency of a demand for registration tax payment issued by the Revenue Agency were disputed as those were taxing a sale of a company (subject to a proportional register tax) in light of a contribution of a part of a going concerned followed by the subsequent share transfer (both transactions subject to fixed register tax) in pursuance of Art. 20 of TUR.

In deeming the request for a preliminary ruling on constitutional consistency raised by the Supreme Court ill-founded, the Constitutional Court highlights how the legislator may confirm the isolated taxation of the sole deed presented for registration, without taking into account the extratextual elements and related deeds, and that appears consistent with the inspiring principles of the registration tax law and, in particular, with the nature of “deed tax” historically linked to the registration tax after the substantive evolution from public service fee to tax.

The Constitutional Court also stated that, considering both the extratextual elements and the related deeds not relevant does not imply undue tax advantages (by untaxing the actual taxable wealth), given that such consequence “could be relevant under the abuse of rights” referred to in Article 10-bis of Law 212/2000 (i.e. general anti-avoidance rule).

In addition, the Constitutional Court points out that Art. 20 of TUR has no anti-elusive purpose and that allowing the Tax Authorities such utilization of the rule would deprive the taxpayers of their rights (such as that of being heard in advance) and would release the Authorities themselves from the burden of proving the existence of an abuse of rights as provided in Art. 10 of the Law 212/2000,  de facto blocking any lawful tax planning of the taxpayer, which is – instead – peacefully admitted in both the national and European tax law.

Even if the possibility to challenge multiple-step transactions under the Italian GAAR is unprejudiced, based on the cross reference of Article 53-bis of Italian Registration Tax Code to article 10-bis of the Italian Law no. 212/2000, the judgement no. 158/2020 confirms with respect to, for the registration tax purposes, a contribution of a going concern followed by a share deal, that should not be recharacterized as a an asset deal  and does not entail per se undue tax savings (except where the said transactions are followed by further steps such as a direct or reverse merger, which should lead to parties’ intention to acquire a going concern, i.e. executing an asset deal).


This judgment will have a major impact on all tax assessment and pending disputes concerning legal recharacterizations pursuant to Art. 20 TUR related to M&A transactions. In fact, those cases must all be resolved in a favorable way for the taxpayer, and that also is applicable to all cases, still pending, in which the old version of Article 20 TUR is at the bar.

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For a deeper discussion, please contact:

Valentino Guarini

PwC TLS Avvocati e Commercialisti


Carlo Romano

PwC TLS Avvocati e Commercialisti


Maurizio Foti

PwC TLS Avvocati e Commercialisti