Budget Law 2017 - What risks and what benefits in the transitional tax regulation on real estate sales in the context of executive or bankruptcy procedures

- With the 2017 budget law approved in December 2016 by Parliament, the duration of the transitional tax regulation regarding real estate transfers in the context of judicial sales was extended until 30 June 2017.

- This regulation, first introduced with legislative decree n.18/2016, subsequently converted into law n.49/2016, constitutes a facilitation for transfers of properties carried out in the context of judicial or bankruptcy proceedings, specifically providing for a lightening of the burden tax on this operation.

However, the legislative measure presents significant margins of criticality and must be carefully examined.

- The law provides that such transfers "are subject to registration, mortgage and cadastral taxes in the fixed amount of 200 euros each" in replacement of the ordinary amount, offering a significant saving for the buyer, but only if particular conditions are met.

- It is precisely these conditions that deserve careful examination.

- The subjects who can benefit from these benefits are both businesses (individual and corporate) and private individuals; Let's look at the methods.

- If it is a business, a declared commitment is required to resell the property within five years (according to the latest amendment made with the 2017 budget law, originally two years were foreseen) from purchase.

- As regards private individuals, however, the benefit concerns the purchase of the "first home" and therefore the object of the transfer must be a property to be used as a home (but not a luxury property, i.e. not belonging to the cadastral categories A1, A8, A9) and the buyer must not be the holder of real rights on other properties.

- Furthermore, it is required that the buyer of the "first home" does not resell the property before five years.

So:

A) companies certainly expose themselves to a big risk by assuming the obligation to resell the property in the following 5 years, because in case of failure to comply with the obligation to resell within 5 years for the company (or ban on resale if it is of a private individual) there is an administrative penalty of 30% in addition to late payment interest (and obviously the payment of the registration, mortgage and cadastral tax in the ordinary amount).

B) The individual who purchased their first home loses the benefit if they need to sell the home in the first 5 years.

- Where the company (or private individual), following the purchase, cannot comply with the conditions set or simply does not intend to do so, it may submit a waiver request to the Revenue Agency offices before the deadline expires, in so as to avoid the administrative penalty (but will not be able to avoid the application of interest on the payment of the tax difference, which will begin to run from the day of the act).

- The deadline for the recovery of ordinary taxes starts for the Financial Administration from the expiry of 5 years following the purchase of the property by the company or private individual.

- For the considerations made, to which must be added the circumstance that the regulation is transitional and therefore valid until 30 June 2017, the benefits and pitfalls that the legislative provisions entail appear to be very few.

Milano, March 1st 2017.

Avv. Giovanni Babino