CORPORATE | The Italian Supreme Court on tax benefits provided for demergers

On 29 October 2024, the Italian Supreme Court issued its judgment No. 27905 concerning the requalification of the demerger of a company whereby a real estate property had been assigned to its two shareholders. The Italian Tax Authority (Agenzia delle Entrate) claimed that such a demerger had no purpose of reorganisation, but was only aimed at transferring the real estate to the shareholders who would benefit from the tax neutrality regime provided for demergers under Article 173 of the Testo Unico delle Imposte sui redditi (TUIR).  The Tax Authority’s claim was accepted by the Court, which founded its reasoning on the legal institute known as abuse of right (“abuso del diritto”), which may occur in case of artificial constructions that – although not contrary to any specific provision of law – lack commercial and economic grounds and are performed to avoid taxation.

Newsletter n. 130 – January 2025