Introduction to the Reform

The legislative reform of inheritance and donation tax is progressing towards approval, following a non-binding opinion from Parliament issued on July 24. This reform aims to redefine Article 56-bis of the Tus (Legislative Decree 346/90), specifically addressing the so-called liberalities different from donations. These include indirect gifts and informal donations, which have distinct implications both legally and fiscally.

Understanding Indirect and Informal Gifts

From a fiscal perspective, liberalities different from donations can be categorized into two types: indirect gifts and informal donations. Indirect gifts are legal acts or transactions (referred to as "negozio-mezzo") executed by an individual to achieve the same effects as a formal donation ("negozio-fine"). On the other hand, informal donations involve material activities or legal transactions that result in a direct transfer from the donor to the recipient, leading to a decrease in the donor's assets and a corresponding increase in the recipient's wealth. These are not formalized in a donation act as per Article 782 of the Civil Code, which requires a solemn form.

Key Changes in the New Decree

The new provision of Article 56-bis of the Tus removes the quantitative condition previously required by the existing regulation. This condition stipulated that liberalities different from donations must have resulted in a patrimonial increase exceeding 350 million lire, either alone or combined with previous gifts to the same beneficiary.

Additionally, the draft legislative decree explicitly states that, besides expenses not subject to collation and modest value donations as per Articles 742 and 783 of the Civil Code, usage donations under Article 770, paragraph 2, are also exempt from taxation.
These are gifts typically made on the occasion of services rendered or in accordance with customary practices.

Taxation and Registration of Gifts

The decree confirms that liberalities different from donations can only be assessed when their existence is evident from declarations made by the interested party during tax assessment procedures. In such cases, the tax rate on these gifts is increased from 7% to 8%, applied to the portion exceeding the legal exemption (e.g., one million euros for spouses or descendants).

Furthermore, the current third paragraph of Article 56-bis of the Tus is upheld, allowing for the voluntary registration of liberalities different from donations.
In such instances, in addition to the legal exemptions, the ordinary tax rates apply, varying based on the relationship of kinship, affinity, or marriage.

The Issue of Informal Donations

A critical aspect of informal donations is the discrepancy between civil and fiscal regulations. As clarified by authoritative doctrine, these donations are subject to tax despite being civilly null due to the violation of the solemn form required by Article 782 of the Civil Code. This nullity means that the donor, while alive, or their heirs, after their death, can seek restitution from the beneficiary for what was an improper transfer.

The fiscal relevance of informal donations has led to their widespread use in estate planning, often overlooking their civil nullity.
This can expose the beneficiary to restitution obligations, which were likely not anticipated by those who believed such transfers could be executed smoothly as part of a comprehensive estate transfer plan.
Therefore, the use of informal donations in estate planning necessitates careful consideration.

Conclusion

The reform of inheritance and donation tax, particularly the redefinition of Article 56-bis of the Tus, brings significant changes to the treatment of indirect and informal gifts. By eliminating the quantitative condition and introducing specific exemptions, the new decree aims to clarify and streamline the tax implications of these gifts. However, the civil nullity of informal donations remains a critical issue, underscoring the need for meticulous planning and awareness of potential legal and fiscal consequences.

Critical Aspects and Potential Issues:

1. Civil vs. Fiscal Discrepancies: The civil nullity of informal donations versus their fiscal recognition can lead to legal disputes and restitution claims.

2. Complexity in Estate Planning: The use of informal donations in estate planning requires careful consideration to avoid unintended legal and fiscal consequences.

3. Tax Rate Increase: The increase in the tax rate from 7% to 8% for certain gifts may impact estate planning strategies.

Common Pitfalls and Errors:

1. Overlooking Civil Nullity: Ignoring the civil nullity of informal donations can result in unexpected legal challenges.

2. Misunderstanding Exemptions: Misinterpreting the specific exemptions introduced by the new decree can lead to incorrect tax filings.

3. Inadequate Documentation: Failing to properly document gifts can complicate tax assessments and legal proceedings.

Suggestions and Useful Tips:

1. Consult Legal Experts: Engage with legal and tax professionals to navigate the complexities of the new regulations.

2. Thorough Documentation: Ensure all gifts, especially informal ones, are well-documented to avoid future disputes.

3. Stay Informed: Keep abreast of legislative changes and their implications for estate planning and tax obligations.