Prepared by Davide Accorsi, Stefano Luigi Airaghi and Federico Peterlini
With the replies to ruling no. 91 of January 19, 2023 and No. 157 of January 24 2023, the Italian tax authorities provided clarifications on the treatment applicable for VAT purposes (and, in reply to ruling no. 91, also for registration tax purposes) to the transfer of assets existing in the territory of the State forming part, respectively, of a partial demerger and a merger by incorporation occurred abroad between companies resident in European Union without a permanent establishment in Italy.
In particular, in the reply to ruling no. 91, the applicant is a company incorporated under German law, without a permanent establishment but registered for VAT purposes in Italy, which carries out a partial demerger of a business unit located in Germany towards another German company, without a permanent establishment but registered for VAT purposes in Italy, which includes inventories of goods located in the territory of the State. The applicant also specifies that the German civil law, as well as the Italian civil law, provides that the beneficiary takes over all the rights and obligations related to the demerged business unit, determining a continuation of the subjective positions of the company receiver of the transferred assets without interruption in the management of the business transferred from the demerged company to the beneficiary, and that also in German VAT law, as in Italian law, has been implemented the faculty attributed to Member States by Article 19 of Directive 2006/112/EC not to subject to VAT the “transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof” for the absence of the objective requirement.
In these circumstances, the Italian tax authorities held that the transfer of the assets existing in Italy as a result of the foreign partial demerger should be considered not subject to VAT pursuant to article 2, paragraph 3, letter f), Presidential Decree no. 633/1972, considering that this provision includes “The transfer of goods as a result of company mergers, divisions or transformations and similar operations carried out by other entities”.
In this regard, the Italian tax authorities point out that in Resolution no. 152/E of 2008 (also mentioned in the subsequent reply to ruling no. 555 of 2022), the application of the provision under discussion has already been recognised in respect of transfers of assets carried out during a merger between two non-commercial entities involving assets not related to a business activity. For this reason, especially, the rule at hand would be applied in the case of the transfer/assignment of assets located in Italy and functionally connected to the transfer of a branch of business, even if existing abroad, by means of a demerger.
With reference to the documentation to be kept in order to prove the transaction and thereby to make it enforceable against third parties and the registration tax, the Italian tax authorities clarified the following.
The use in the territory of the Italian State of public acts notarised and private deeds authenticated in a foreign State is subject to the prior deposit of such documents at the local notary’s archive or to a notary exercising his profession in Italy.
To this purpose, the notary, who receives the document (i.e., the demerger’s act drafted abroad) in deposit, should draft a specific minute subject to registration and to the application of registration tax at a fixed rate, pursuant to Tariff first part, article 4, attached to Presidential Decree no. 131 of 1986.
In the reply to ruling no. 157, on the other hand, the applicant is a company incorporated under Netherlands law, without a permanent establishment and VAT identification in Italy, which is merged into a Belgian company, without a permanent establishment but registered for VAT purposes in Italy, following a cross-border merger by incorporation involving assets (pallets and containers owned by the applicant) located in the territory of the State.
The applicant also specifies that (i) the business carried on by the incorporating company (carried out both in Belgium and abroad by itself and by or with the assistance of third parties) will not be modify in any way through the merger, (ii) the proposed extraordinary transaction will take place, in addition to the rules provided by Dutch and Belgian laws, according to the provisions of the Directive 2005/56/EC on cross-border mergers and that (iii) Belgian and Dutch civil law, as well as Italian civil law, provide that, following the merger, all the assets, liabilities and legal relationships owned by the applicant will be transferred to the incorporating company by virtue of the universal succession laid down by European Union legislation, in addition to the fact that the Belgian and Dutch VAT legislation, as well as the Italian VAT legislation, implement the option given to the Member States by Article 19 of Directive 2006/112/EC not to subject to VAT for absence of the objective requirement for transfers for consideration or free of charge or in the form of the transfer to a company of a totality of assets, whether in whole or in part.
With reference to the VAT treatment applicable to the transfer of assets in Italy as a result of the foreign cross-border merger, the Italian tax authorities specified that, although referred to a partial demerger, the same principles set forth in reply to ruling no. 91/ 2023 are also applicable to the merger at hand, considering that both types of transactions are characterised by legal continuity and, therefore, are both included in article 2, paragraph 3, letter f), Presidential Decree no. 633/1972, together with the transformation.
It is worth considering how the clarifications provided by the Italian tax authorities in the two ruling replies under discussion might appear to be in contrast with what was previously expressed in the replies to ruling no. 536 of August 6, 2021 and no. 637 of September 30, 2021 where, in the context of transfers of business carried out outside the European Union, but with the presence of trademarks registered in Italy (in the first case) and existing stock in Italy (in the second case), the non-liability to VAT according to article 2, paragraph 3), letter b), Presidential Decree no. 633/1972 was not recognised to the transfers of trademarks/goods existing in Italy, which were instead considered respectively as autonomous supplies of services and supplies of goods.
However, even considering that the two more recent replies provided by the Italian tax authorities under discussion do not contain explicit references to a possible overcoming of the clarifications provided in the other two previous replies above mentioned, it appears that the previous comments are still applicable by virtue of their possible different scope.
Such a different scope might be justified by the fact that in previous answers at least one of the parties to the extraordinary transaction was resident in a non-European member State.
Alternatively, the different VAT treatment might depend on the nature of the extraordinary transaction. In this regard, it should be noted that article 2, paragraph 3), letter f), Presidential Decree 633/1972 specifically excludes from VAT “transfers of assets” related to mergers, demergers and transformations. On the contrary, Article 2, paragraph 3), letter b), merely provides that the following are not subject to VAT “Transfers and contributions to companies or other entities, including consortia, associations and other organisations, of businesses or business units”.
Considering that the possible different interpretations could lead to significant differences in VAT treatment, are advisable on this matter further clarifications by the Italian tax authorities.
 The Italian tax authorities clarify that “However, it should be noted that in the context of the company law reformation ”from a terminological point of view, it was deemed appropriate in the case of a demerger to describe its effects on assets in terms of ”assignment” and not ”transfer”. This also aims to clarify, as recognised by settled case law, that in the scenario of a demerger itself the rules specific to the transfer of individual assets (e.g. relevant to the immovable property’s construction status) are not applicable” (see Illustrative Report to Legislative Decree No. 6 of 17 January 2003)”.
 This provision concerning the taxation of company’s acts states in paragraph 1, letter b), that the following shall be subject to registration tax at the fixed rate of EUR 200 the “merger between companies, demerger of companies (…)”.
 Therefore, it is not clear if different conclusions can be reached on the basis of the fact that the extraordinary transaction takes place in an EU state where Article 19 of Directive 2006/112/EC has been implemented, rather than in a different EU state or a non-EU state, or if it is sufficient that, from a civil law point of view, the extraordinary transaction carried out abroad has the same effects as those attributable to the analogous transaction if it were carried out in Italy.
 A different VAT treatment of transfers of business or business units, with respect to mergers, demergers and transformations, however, might not be compatible with the wording of the mentioned article 19 of Directive 2006/112/EC, which aims to give to the EU Member States the option of providing for the irrelevance, for VAT purposes, of the extraordinary transactions (mergers, demergers, but also transfers and contributions of businesses) through which the transferring company transfers to the transferee all the assets and liabilities of which it is the owner, thus realising a continuity of the business activity at the beneficiary/recipient of the business.
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PwC TLS Avvocati e Commercialisti
PwC TLS Avvocati e Commercialisti