REOPENING OF THE TERMS FOR THE REVALUATION OF COMPANY SHARES AND LAND

The regulation is intended for:

• natural persons, whether resident or non-resident, relating to shares in Italian companies and to land located on the territory of the State;
• simple companies and non-commercial entities;
• non-resident subjects without a permanent establishment in Italy.

The re-assessment is effected regarding the purposes of capital gains derived from the sale in consideration of, and pursuant to art. 67, letters a) to c-bis) of TUIR,

And carried out by the above, regarding:

• securities, shares and rights not traded on regulated markets,
• building sites and agricultural land,

held on the first of January 2018, and used outside the company’s regime.

To have the advantage of the revaluation, it is necessary that the higher value results from a certified sworn appraisal (share revaluation), is prepared and sworn by an expert before June 30, 2018.

The revaluation expert’s report can be drawn up by chartered accountants (dottore commercialista) or auditors (revisore), or by accountants or commercial experts (in the case of revaluation of company shares), as well as by engineers, architects, surveyors, agronomists, agro-technicians, land surveyors or industrial building surveyors (specifically relating to revaluation of land).

In the event that the cost of the estimating expert’s opinion leads to an increase of the value of the share or the land, it is subject of revaluation. Although, if the expert’s report is drawn up on behalf of the company, whose shares are subject to revaluation, the cost of the expert’s report is deductible from the latter for income tax purposes.

Payment of the substitute revaluation tax, equal to 8 per cent of the highest revaluated value resulting from the expert’s report, is due by June 2018 (in the past this percentage was less: 2% / 4%). Alternatively, it is possible to provide a rescheduling of aforementioned taxes into three equal annual instalments, where the first payment must be submitted before the 30th of June 2018.

Interests on the deferred payments due are calculated at 3% annually, to be paid at the time of each instalment.
In the tax return related to 2018 (2019 income Tax Form, filed with reference to the 2018 tax period), it will be necessary to indicate the re-assessed value including the substitute tax, together with an of whether the option for payment by instalment has been granted.

The possibility of recalculating the purchase cost of investments and land held was introduced by the legislator in 2003 and the terms of which have been repeatedly reopened over the last few years.

Therefore, it is not uncommon that in the past a land or a shareholding has been subject to revaluation, and has since then acquired an increased value, nor in the event that the same asset which is already subject to revaluation is sold at a lower price.

In the first instance, it is possible to proceed to a second revaluation, by paying the total substitute tax due, net of what had been paid in the past with reference to the same asset (by deducting the tax already paid in the past related to the revaluation which may have been settled at a lower rate).

On the other hand, in the second instance, it is necessary to distinguish whether it is a share or a land. In the event where a revaluated share is transferred at a price lower than the revaluated amount, the lesser value is not considered as a deductible capital loss for income tax purposes. Instead in the case of land owned, the transferor is obliged to indicate whether he intends to use as a reference the value regarding direct and indirect taxes in the deed of transfer, the revaluated value derived from the previous expert’s report, or the historical cost.

The Revenue Agency, with Circular no. 1/2013, has provided referred explanations, illustrating the different consequences that may derive:

• if the assignor declares that he wants to use the re-assessed value determined in the expert’s report, there are no taxable gains for the purposes of direct taxes. However the registration, mortgage and land-registry taxes must be paid on the higher value resulting from the appraisal;
• if the transfer price is lower than the greater re-assessed value and the seller does not declare the wish to avail itself regarding the revaluation carried out, the ordinary rules for determining the capital gain are applied, without taking into account the restated value, both for direct and indirect taxes (losing any benefits that may derive from the revaluation carried out).

Alternatively, if the conditions are met, the landowner has the right to proceed with a new revaluation at the lower value, before the deadline of the 30^th June 2018, without having to pay any tax, but also without the possibility of recovering the higher taxes paid. In doing so, the indirect taxes due at the time of transfer, which would have been calculated on the transfer value, could also affect the reference value for the calculation of the capital gain.

The rule, even if it cannot be considered systematic since it is extended on an annual basis by the budget law, is welcomed each time, as it allows optimization of the tax burden resulting from a series of extraordinary transactions, such as direct transfers and, with particular reference to the revaluation of the company shares, encourages business restructuring and generational transfers.

However, it is important to underline that the performed revaluation does not produce effects related to tax purposes in the event of withdrawal (even indirect). Particularly, it should be noted that in the past the Revenue Agency considered that the capital gain derived from the transfer of the shares to the company itself, should the company proceed with their subsequent cancellation, does not fall under the different income referred to in article 67 Tuir (Income Tax Act) and consequently, the higher revaluated value is not relevant. On the other hand, in the instance where the shares are transferred proportionally to the other shareholders or to a third party identified by the shareholders themselves, provided that the transfer takes place for consideration.