Month: March 2024

Informal Donations between Parents and Children without Taxation

Written by Valentina Fabiano on 29/03/2024. Posted in Insights. No Comments on Informal Donations between Parents and Children without Taxation

Recently, the Italian Supreme Court clarified an issue concerning the taxation of donations between parents and children, particularly those made informally or through indirect payments, such as purchasing a house. The ruling no. 7442 on March 20, 2024, definitively established that such donations are not subject to donation tax unless they are formally registered.

The decision criticized Circular 30/2015 of the Italian Revenue Agency, describing it as ‘unshareable’, ‘imprecise’, and ‘incomplete’, because it imposed taxation on all gifts between living persons not accompanied by a registered written deed. However, the Court emphasized that only donations resulting from registered acts or those voluntarily declared by the taxpayer are taxable.

For indirect donations, such as those made through purchase deeds where the parent pays the price on behalf of the child, the Court reiterated that there is no obligation to register the deed as a donation unless specific conditions exist. In particular, the tax applies only if the donation is valued over one million euros and if it is revealed by the taxpayer during a fiscal inspection.

The decision establishes a clear distinction: not all indirect donations emerging from registerable deeds are automatically subject to taxation. The law allows taxpayers the option to voluntarily register such acts as donations, and the tax administration can impose taxes only if the value exceeds one million euros and the donation is declared in audit proceedings.

The Supreme Court’s ruling brings significant clarification for many taxpayers making transfers of assets informally or indirectly. This represents a tax relief, allowing parents to support their children without the fear of heavy tax burdens, unless specific criteria requiring the registration of the donation are met. This interpretation offers greater flexibility and fewer bureaucratic complications for substantial donations or in formal contexts.

Taxation of Artwork Sales: New Guidelines from the Supreme Court of Cassation

Written by Valentina Fabiano on 25/03/2024. Posted in Insights. No Comments on Taxation of Artwork Sales: New Guidelines from the Supreme Court of Cassation

In the context of tax regulations, the systematic sale of artworks may constitute a business activity and generate taxable income, as established by ordinance no. 1603 of January 16, 2024, from the Supreme Court of Cassation. This decision follows the jurisprudential trend that continuous activity is not necessary to determine the entrepreneurial nature of sales; factors such as the number of transactions, significant amounts, the variety of goods sold, and the number of buyers are relevant.

The case in question involved an art dealer who had received two tax assessment notices from the Revenue Agency. The Agency argued that the individual qualified as a commercial entrepreneur, thus making the proceeds from the sales subject to direct taxes and VAT. In contrast, the taxpayer defended himself by claiming to be merely a private collector without an independent organization, and that his sales represented simply the disposal of part of his personal estate.

The Supreme Court of Cassation rejected the taxpayer’s arguments, reaffirming a distinction already made in the judgment no. 6874/2023 between the civil and fiscal definitions of “commercial entrepreneur.” For tax purposes, the essential organization required by civil law is not necessary; “habitual professionalism” of the economic activity suffices.

Articles 55 of the TUIR (Consolidated Income Tax Act) and 4 of the VAT decree clarify that habitual professionalism, even if not exclusive, of the activities listed in article 2195 of the civil code, meets the requirement for entrepreneurial qualification for tax purposes, without the need for an independent organization of means.

Furthermore, the Supreme Court of Cassation outlined a tripartition between art dealer, occasional speculator, and pure collector. The dealer, who acts professionally and habitually even without an organized business structure, is subject to direct taxes, VAT, and in some cases, IRAP. The occasional speculator, who buys and sells artworks sporadically for profit, generates different incomes, not falling within the scope of habitual entrepreneurial activities. Lastly, the pure collector, who purchases artworks for personal interest without the intention of resale, is not subject to taxation on such transfers, lacking the habitual and speculative intent requirements.

The judgment emphasizes the importance of analyzing the specific context to determine the nature of the activity, highlighting that even the mode of reinvesting profits (in goods rather than cash) does not alter the substance of the capital gain. This jurisprudential clarification provides a more defined framework for distinguishing activities in the art market, awaiting further legislative directives for complete regulation of the matter.

Modes of Acceptance of Inheritance: Simple, with Benefit of Inventory, and Options for Renunciation

Written by Valentina Fabiano on 20/03/2024. Posted in Insights. No Comments on Modes of Acceptance of Inheritance: Simple, with Benefit of Inventory, and Options for Renunciation

Inheritance is not only a transmission of assets but also of debts, thus requiring careful consideration before acceptance. This decision rests solely with the designated individual, who, once the inheritance is accepted, permanently assumes the status of heir, as expressed by the principle “once an heir, always an heir”. Acceptance can be “simple” or “with the benefit of inventory”. The former implies a merger of the estates of the deceased and the heir, with the heir’s estate serving as a guarantee for the creditors of the deceased. The latter option keeps the estates separate, with the inherited estate serving as a guarantee.

The right to accept an inheritance expires after ten years, but this period is not final, allowing the designated individual to become an heir even after this period, unless prescription objections are raised. Acceptance with the benefit of inventory requires a formal declaration in front of a notary or the clerk of the court, accompanied by an inventory of assets. Conversely, simple acceptance can be declared explicitly or deduced tacitly from certain behaviors, such as the sale or donation of inherited assets.

Tacit acceptance can also be inferred from actions that indicate active management of assets, inexplicable otherwise except by the will to accept the inheritance, for example, the destruction of the deceased’s property. However, essential conservative actions are not considered tacit acceptances. An inheritance can be formally rejected through a notarial deed, and such renunciation is final and retroactive, freeing the renunciant from any inherited debts.

Legal entities and individuals not fully capable must accept the inheritance with the benefit of inventory and are bound to this mode for a year after reaching full capacity or the end of a legal incapacity, unless they fulfill the required procedures. Failure to draft the inventory within the prescribed terms results in the loss of the right to accept for private entities.

Moreover, once the inheritance is accepted, it is no longer possible for the designate to renounce; the acceptance is irrevocable. Renunciation, on the other hand, is considered as if the renunciant had never been designated, with effects dating back to the opening of the succession. The renunciant’s creditors can contest the renunciation if they suffer harm from such action and may be authorized by the judge to claim the inherited assets in the name of the renunciant.

In summary, the complexity of accepting and renouncing an inheritance reflects the importance of carefully considering the legal and financial implications of such decisions.