By Davide Anghileri, University of Lausanne
The Italian Revenue Agency has concluded that a sale stock in an Italian company in connection with a business restructuring is exempt from the financial transactions tax because the sale was exclusively aimed at changing the legal form of the entity that will hold the stake in the Italian company not profit from the sale.
As described in Resolution n. 28/E, published 9 March, the case at stake involves a business restructuring through which 25 % of shares in an Italian company are sold by a Dutch company (the seller) to a British company (the buyer). Both the buyer and the seller are equally owned by a Dutch foundation and a British investment fund.
The issue relates to the tax regime applicable to the sale, as the sale is a business restructuring aimed at modifying – without altering the governance rules – the legal form and the jurisdiction of the entity (replacing the seller with the buyer) through which the shareholders hold the stake in the Italian company.
The Italian Revenue Agency pointed out that the tax on financial transactions does not apply to transfers of shares traded on regulated markets or multilateral trading systems issued by companies whose average capitalization, in the month of November of the year preceding that in which the transfer of ownership takes place, is less than 500 million Euros.
Moreover, the tax does not apply to a business restructuring where the sale of shares does not change the control on the transferee company and does not change the economic structure of the group, even in the case of a transfer of shares. In this case, the aim of the law is not to hamper a business restructuring with the imposition of a tax, the Revenue Agency said.
The revenue agency, then, clarified that the notion of control should include not only the direct control but also the indirect control, as the law does not specify which type of control could apply.
The revenue agency said that the control should be exercised by a unique subject with the capacity to influence the choices of the controlled subject.
Therefore, for the exemption to not apply, transferee company has to lose direct or indirect control of the transferor company and to leave the group, the agency said.
Hence, the revenue agency concluded that in the case at stake the exemption can apply as the sale of shares entailed a transfer of the shares to a newly established company, which is owned by the same shareholders and in the same proportions of the selling company. Furthermore, in the new company, the governance rules of the selling company are reproduced, in terms of administrative rights, financial rights and shareholders’ agreements.
In fact, the business restructuring was aimed to modify the structure of the special purpose vehicle to be more in line with the corporate needs, leaving unchanged the corporate structure. The shareholders (the Dutch foundation and the English investment fund) will remain with the same percentage of shareholdings in the share capital (fifty percent each).
Moreover, the revenue agency added that the transaction at stake can be considered an intragroup transaction without an intention to earn profits on the sale because both the seller and the buyer are owned by the same shareholders even after the sale of the shares in question.
Thus, the tax on financial transactions does not apply.
Davide Anghileri
Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.
Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues.
Davide can be reached at [email protected].
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