Contributions in kind: variable tax base for VAT, IRES and IRAP purposes

by Fabrizio Pacchiarotti, Leonardo Avalos

In its response to tax ruling n. 171/2024, the Italian Revenue Agency provided some clarifications on the taxation of contributions of assets, specifying the methods for determining three different taxable amounts.  In particular, from a VAT point of view, the notional consideration for the contribution is relevant, i.e. the value attributed by the parties to the increase in share capital, including the share premium and any cash adjustment; for IRES purposes, on the other hand, the normal value of the assets contributed must be taken into account to determine the capital gain/loss; finally, for IRAP purposes, the value in the financial statements is taken into account.

The question

In the case dealt with in the reply under consideration, the applicant is a company (Alfa S.p.A.) which, following the incorporation of another company (Beta S.r.l.), made a contribution of assets to the latter for the purpose of carrying on its business.

In order to establish the value of the assets contributed, the applicant states that, on the basis of an independent valuation, that value is at least equal to the value of the increase in share capital, including the share premium.

In the light of the above, the applicant requests clarification from the Revenue Agency regarding:

  • the determination of the taxable amount for VAT in respect of the assets transferred pursuant to Article 13 (1) of Presidential Decree n. 633/1972 (“VAT Decree”);
  • the calculation criteria for determining the capital loss/gain relevant for IRES and IRAP purposes. In this respect, the petitioner considers that the taxable base can be determined as the amount corresponding to the increase in Beta's share capital and the share premium, since, as confirmed by the expert's report, this value is congruent with the maximum value of the assets transferred.

The Italian Revenue Agency’s answer

VAT

With regard to VAT, the Agency observes that, under the amendments introduced by Legislative Decree n. 313/1997, contributions of assets that cannot be constituted as companies or branches of companies made by persons liable to VAT to other companies fall within the taxable scope of the tax, since they are assimilated to supplies.

As a general rule, the taxable amount of VAT on the supply of goods for consideration is the consideration actually owed to the supplier by the recipient or a third party, in accordance with Article 73 of Directive 2006/112/EC, transposed by Article 13 (1) of the VAT Decree.

According to the authorities, except in the cases referred to in paragraph 3 of the same article (where the open market value of the assets is taken into account), “the taxable amount to which VAT is to be applied shall be equal to the increase in the capital, including the share premium, of the transferee company, increased by the sums paid by the latter to the transferor by way of adjustment of any differences noted between the stock of assets on the date of the valuation report and the stock of the same assets on the effective date of the transaction”.

IRES

As regards direct taxation, the authorities first point out that, for the purposes of determining the capital gain/loss arising from the contribution of assets pursuant to Articles 9(5), 86 and 101 of the TUIR, the taxable income arising from such a transaction is the difference between the consideration received and the undepreciated cost of the asset transferred.

Consequently, according to the Agency, “the solution proposed by the applicant cannot be considered acceptable as it does not comply with the provisions of Article 9 (2 and 3) of the TUIR. Indeed, the amount corresponding to the increase of the share capital and the share premium in a contribution transaction does not necessarily correspond to the normal value of the asset transferred”.

IRAP

Regarding the methods for determining the IRAP tax base, the Agency recalls that the 2008 Finance Act (IRAP reform) established a new system for determining the tax base, based on the principle of “taking directly from the financial statements” the items expressly identified and considered relevant for tax purposes, with a consequent departure from the rules for determining IRES.

In conclusion, in the case of contributions in kind, the taxable amount must be determined as follows:

  • for VAT purposes, in the increase in the capital of the transferee, including the share premium and any cash adjustment;
  • for IRES purposes, in the normal value of the assets transferred, irrespective of the capital increase;
  • for IRAP purposes, by taking direct account of the values of the assets shown in the balance sheet.