Before examining the current case law on the taxation of transfers under the family business succession agreement, it is appropriate to briefly consider the legal nature of this instrument, which is also of fundamental importance for tax purposes.<\/p>\n\n
As repeatedly emphasized by legal scholars following the 2006 reform, the family business succession agreement is characterized as an institution of an essentially gratuitous nature, through which the transferor seeks to enrich the parties involved (the assignee and the non-assigned forced heirs) purely out of liberality.<\/p>\n\n
However, this is not a mere act of liberality, but rather a gratuitous transfer serving a succession-related function.<\/p>\n\n
The transfer of a business or equity interests could, in principle, also be carried out by way of a simple donation. What the family business succession agreement provides instead is a stable and lasting transfer, not susceptible to being undermined by the future succession of the transferor.<\/p>\n\n
The attribution of the transfers made under the agreement\u2014often described as \u201canticipations of the forced share\u201d\u2014is therefore aimed at ensuring stability in the generational transfer.<\/p>\n\n
Consequently, the transfers effected pursuant to a family business succession agreement give rise to a substantially unitary transaction, which the prevailing doctrine characterizes within the framework of a donation subject to a charge.<\/p>\n\n
With Order no. 32823 of 19 December 2018\u2014the first decision addressing the taxation of transfers in favor of non-assigned forced heirs\u2014the Italian Supreme Court acknowledged that the family business succession agreement performs an anticipatory function with respect to the \u201ceffects of succession,\u201d while at the same time preventing future disputes concerning division and reduction among co-heirs, thereby revealing an \u201cessentially gratuitous and donative nature.\u201d<\/p>\n\n
According to the Court, such functional and causal characteristics must be assessed for tax purposes in light of Article 58, paragraph 1, of the Inheritance and Gift Tax Code (TUSD), and therefore by applying the rule governing donations subject to a charge. As stated in the decision, the relevant charge is not imposed by the transferor but arises ex lege and \u201cfinds its basis in the original gratuitous nature of the transfer.\u201d<\/p>\n\n
According to the prevailing scholarly interpretation, the application of the rule set forth in Article 58, paragraph 1, TUSD to the transfers effected through the family business succession agreement leads to the characterization of the transfer represented by the charge as an autonomous donation from the transferor to the non-assigned forced heir. Consistently with the civil law reconstruction, through the charge the transferor would carry out two gratuitous transfers: one direct (in favor of the assignee) and one indirect (in favor of the non-assigned beneficiary). From this perspective, the latter transfer should be subject to taxation by reference to the personal relationship of direct lineal descent between the transferor and the forced heir.<\/p>\n\n
In the above-mentioned decision, however, the Italian Supreme Court reached a different conclusion, characterizing the transfer to the beneficiary of the charge as a donation originating from the burdened party. This would entail the application of the tax rate and the corresponding exemption based on the relationship between the assigned beneficiary and the non-assigned beneficiary.<\/p>\n\n
At the same time, with regard to the applicability of the exemption provided for under Article 3, paragraph 4-ter, TUSD, the Italian Supreme Court endorsed the position taken by the tax authorities, according to which \u201cthe relief set out in Article 3, paragraph 4-ter, TUSD applies exclusively to the transfer carried out through the family business succession agreement and does not extend to any transfer of cash or assets made by the assignee of the business or shareholdings in favor of the other parties to the agreement,\u201d and this \u201cregardless of the civil law characterization of the instrument as having a unitary contractual cause.\u201d<\/p>\n\n
The Italian Supreme Court, however, has recently revisited the same issues, adopting a position that is partially opposite to that outlined above.<\/p>\n\n
First, as regards the applicability of Article 3, paragraph 4-ter, TUSD also to transfers in favor of non-assigned beneficiaries, the Court confirmed its previous stance.<\/p>\n\n
In particular, the inapplicability of the relief must be inferred from the literal wording of the provision itself, which refers solely to the transfer of businesses and shareholdings. Consequently, compensatory payments in favor of non-assigned forced heirs must \u201cbe regarded as excluded from the exemption, since the provision, like any tax relief measure, is subject to strict interpretation, being derogatory of the ordinary tax regime.\u201d<\/p>\n\n
Conversely, the Court adopted a diametrically opposite position compared to its 2018 ruling with regard to the tax rate applicable to payments made in favor of non-assigned beneficiaries, holding that such payments must be regarded as donations \u201cfrom the transferor to the non-assigned forced heir, with the consequent application of the tax rate and exemption corresponding to the relevant relationship of kinship or marriage.\u201d<\/p>\n\n
Indeed, although the payment in favor of the forced heirs is not perfectly identical to the modus found in donations subject to a charge, from a tax perspective \u201cthe situation is comparable, because the gratuitous transfer is accompanied by an obligation on the beneficiary to perform an act that does not constitute consideration for the transfer received, but rather reduces it, satisfying other interests of the transferor and of third-party beneficiaries.\u201d<\/p>\n\n
Consequently, the donation falls within the scope of Article 58, paragraph 1, TUSD and, therefore, \u201ca donation subject to a charge in favor of a specific beneficiary is [\u2026] regarded, for tax purposes, as a double donation: one made in favor of the donee and the other in favor of the beneficiary of the charge.\u201d<\/p>\n\n
The above-mentioned decisions of the Italian Supreme Court, which to date remain the only rulings specifically addressing the taxation of transfers in favor of non-assigned forced heirs, have recently found confirmation in lower court case law.<\/p>\n\n
It therefore appears appropriate to examine some of these decisions in order to assess the prevailing position currently adopted by the tax courts.<\/p>\n\n
The first decision deserving analysis is certainly the judgment of the Abruzzo Regional Tax Court (CTR Abruzzo), no. 552\/2021, to which the Italian Supreme Court itself had remanded the case with its Order no. 29506\/2020 for a determination on the merits of the tax due.<\/p>\n\n
The case concerned a family business succession agreement under which a father assigned the controlling interest in a foreign company to his son, imposing on him the obligation to compensate his sister\u2014who was a non-beneficiary forced heir\u2014by means of a cash payment. The taxpayers had taken the view that both transfers were exempt from taxation pursuant to Article 3, paragraph 4-ter, TUSD; conversely, the Tax Authority denied the applicability of the relief with respect to the compensation paid to the non-assigned forced heir, considering it subject to ordinary taxation at the 6% rate applicable to donations between siblings.<\/p>\n\n
Although constrained by the principle of law set out in the Supreme Court\u2019s ruling, the judgment is noteworthy for its effective systematization of the Court\u2019s reasoning, ultimately concluding that proportional taxation was applicable due to the exceeding of the EUR 1,000,000 exemption threshold in force for direct-line descendants.<\/p>\n\n
In a subsequent decision issued by the Varese Provincial Tax Court (CTP Varese), the judges were called upon to rule on the legitimacy of a denial of a refund request, whereby reimbursement was denied for donation tax paid at the 6% rate in relation to the compensatory payments made by the assigned beneficiary to her sisters under a family business succession agreement concerning the shares of an S.r.l. held by their mother.<\/p>\n\n
Adopting the reasoning of the Italian Supreme Court\u2019s Order no. 29506\/2020, the Tax Court classified the transfers in favor of non-assigned forced heirs as a charge arising ex lege, with the consequent application of Article 58 TUSD.<\/p>\n\n
Accordingly, such transfers were treated as indirect gratuitous transfers from the transferor to the non-assigned forced heirs, with the application of the tax rates and exemptions corresponding to the relationship existing between those parties.<\/p>\n\n
On this basis, the first-instance judges held that the refund was fully due.<\/p>\n\n
The same line of reasoning was subsequently reiterated by the Reggio Emilia Provincial Tax Court (CTP Reggio Emilia), judgment no. 222\/2021, which was called upon to rule on the taxation of a family business succession agreement under which spouses Titius and Caius transferred their shares in Alfa Societ\u00e0 Agricola to their son Sempronius, who assumed the obligation to compensate his sisters for their reserved shares.<\/p>\n\n
Also in this case, the Court held that the arguments outlined above justified treating the compensatory payments between the assignee and the forced heirs as an indirect donation from the transferor to the non-assigned beneficiaries.<\/p>\n\n
Consequently, the Tax Court annulled the challenged assessment, as the value of the gratuitous transfer fell entirely within the applicable exemption threshold.<\/p>\n\n
The lower court case law discussed above clearly demonstrates a general acceptance of the position taken by the Italian Supreme Court in its 2020 ruling, which is undoubtedly more consistent with the characterization of the transfers already adopted in 2018.<\/p>\n\n
The obligation imposed on the assignee beneficiary to compensate the non-assigned forced heirs, even where fulfilled through cash or assets drawn from the assignee\u2019s own estate, must be characterized as an indirect gratuitous transfer by the transferor.<\/p>\n\n
Such a conclusion is grounded in the substantive unity of the contractual arrangement underlying the family business succession agreement, in which the transferor does not merely intend to transfer the business or the shareholdings to the assignee (as would occur in an ordinary donation), but also seeks to settle the corresponding forced shares in favor of the non-assigned heirs.<\/p>\n\n
Conversely, it would be wholly inconsistent with the taxable event of the gift tax to subject to taxation a transfer of assets rendered mandatory by Article 768-quater, paragraph 2, of the Italian Civil Code, as such a transfer lacks the essential requirement of gratuitous intent (liberalit\u00e0).<\/p>\n\n
However, the conclusions reached by the case law of the Italian Supreme Court\u2014and not challenged by the tax courts\u2014with respect to the inapplicability of the exemption provided for under Article 3, paragraph 4-ter, TUSD are open to criticism.<\/p>\n\n
More specifically, the exclusion of transfers in favor of non-assigned forced heirs from the scope of the exemption solely on the basis of the need to interpret tax relief provisions \u201crestrictively\u201d clashes with two important considerations.<\/p>\n\n
First, a restrictive interpretation of tax relief provisions must be balanced against a careful analysis of the underlying ratio of the rule, as such a principle cannot extend so far as to exclude from the tax benefit legal positions that are, in abstract terms, comparable to those expressly identified by the provision.<\/p>\n\n
Second, it is essential to question why the family business succession agreement should be regarded as unitary for the purposes of determining the applicable tax rate, but not for the purposes of applying the exemption under Article 3, paragraph 4-ter, TUSD.<\/p>\n\n
As has repeatedly been noted by the Tax Authorities themselves, the ratio underlying the relief lies in the legislature\u2019s intention to facilitate generational transfers in family-owned businesses.<\/p>\n\n
Through the compensatory payments made in favor of non-assigned forced heirs, the beneficiary of the family business succession agreement merely allocates a portion of the value of the business or the shareholdings to the other heirs, while at the same time ensuring stability and continuity in the generational transfe<\/p>\n\n
If this is the case, then such compensatory payments must likewise be regarded as rooted in the generational transfer itself, making it unreasonable to apply differentiated tax treatment to two transfers that, in substance, form part of a single transaction aimed at transferring the family business to the next generation.<\/p>\n","protected":false},"excerpt":{"rendered":"
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