The recent clarification provided by the tax authorities on August 20th, regarding the tax treatment of asset contributions that do not constitute a business or a branch of a business, warrants a detailed examination. This commentary aims to dissect the dual tax treatment under IRES and IRAP, as outlined in the response, and to explore the broader implications for companies involved in such transactions. The case in question involves a company, referred to as Alfa, which contributes assets to its subsidiary, Beta. These assets do not form a business or a branch of a business. An independent valuation, conducted in compliance with Article 2465 of the Civil Code, confirmed that the value of the contributed assets is at least equal to the increase in share capital. However, the normal value of the assets, as determined under Article 9 of the TUIR, exceeds the value attested by the valuation report. The primary issue revolves around determining the correct value to compare with the unamortized cost of the assets, in order to calculate the relevant capital gain or loss for IRES and IRAP purposes. According to the tax authorities, the taxable income for IRES purposes is the difference between the consideration received (net of directly attributable ancillary costs) and the unamortized cost of the contributed asset. Article 9, paragraph 2, of the TUIR specifies that in the case of contributions to a company, the consideration received is deemed to be the normal value of the contributed assets and credits. The authorities further clarify that the amount corresponding to the increase in share capital and any premium does not necessarily coincide with the normal value of the contributed asset. In this case, since the normal market value of the contributed assets exceeds the value of the share capital increase and premium, the taxable capital gain for IRES purposes must be calculated based on the normal value. The neutrality provision, applicable only to contributions of businesses or business units, does not apply here. It is also worth noting that the capital gain from the contribution can be spread over time, as per Article 87, paragraph 4, of the TUIR, provided the legal requirements are met. However, the response does not delve into two additional aspects. Firstly, for the contributing company, the fiscal value of the shares received is equal to the normal value of the shares that determined the calculation of the fiscal capital gain. This results in a divergence between the fiscal and accounting values of the shares. Consequently, the contributor must make an upward adjustment in the tax return to tax the capital gain calculated on the normal value and complete the RV section I to highlight the different civil and fiscal values. Secondly, a more delicate issue arises regarding the fiscal value of the assets at the receiving company. The question is whether this value can also be determined based on the normal value of the asset that was relevant in determining the taxed capital gain for the contributor. For example, in the case of a contribution of a depreciable asset, it currently seems impossible to deduct the higher depreciation that would result, as there is no prior allocation to the income statement, unless a very extensive interpretation of Article 109, paragraph 4, letter b) of the TUIR is adopted. This article allows the deduction of negative components that, although not allocated to the income statement, are deductible by law. A precedent can be found in resolution no. 69 of August 5, 2016, which is based on a specific legal provision (Article 12 of Legislative Decree 147/2015), which is not easily applicable in this case, unless a systematic interpretation of the TUIR is adopted, starting from Article 9. The upcoming implementation of the tax delegation could be an opportunity to resolve this issue by law. Conversely, there seem to be fewer obstacles to considering that the higher value of the asset can also be assumed as the fiscal value for the receiving company in the event of a subsequent sale of the asset received by contribution. In this case, the RV section I should also be completed. The response highlights a different treatment for IRAP purposes, resulting from the principle of direct recognition from the balance sheet of expressly identified and relevant items for tax purposes, as well as the detachment of IRAP from IRES rules, following the repeal of Article 11-bis of Legislative Decree 446/1997. Therefore, for IRAP purposes, the capital gain must be determined based on the balance sheet results, which consider the value used for accounting purposes for the contribution, even if it is lower than the normal value of the assets. It is also noted that the capital gain is not spreadable.

Insights

The dual tax treatment of asset contributions highlights the complexity of aligning fiscal and accounting values. The distinction between IRES and IRAP treatments underscores the need for companies to carefully navigate the tax implications of asset contributions, particularly when the normal value of assets exceeds the accounting value. The potential for legislative clarification offers hope for resolving some of the ambiguities currently faced by companies.

Issues

• Discrepancy between fiscal and accounting values for the contributing company.

• Uncertainty regarding the fiscal value of assets for the receiving company.

• Complexity in determining taxable capital gains under IRES and IRAP.

• Need for legislative clarification to address unresolved issues.