Company holding stocks or shares total divestment: the implementation of the fixed stamp duty

The legal regulation – the differences between a company holding stocks or shares total divestment and a company transferring, the 2018 Budget Law and the applicable stamp duty.

A company holding stocks or shares total divestment and a company transferring are two different legal and economic transactions. This is a fundamental circumstance for the stamp duty implementation. First, let’s start analysing the differences among the two transactions.

• What is transferred

With the total divestment of a company holding stocks or shares, the property of the company owner’s legal entity is transferred, together with all its constitutive, shown, hidden, actual and potential elements, as well as the related active and passive legal positions – E.g. pursuant to Art. 86, paragraph 4 of the Italian Income Tax Code (TUIR), the obligation to tax the capital gains of the years before if the fractional taxation option has been used for many years of the same.

With the company transferring, the property of a specific legal entity is transferred without any transferring of active and passive subjective positions related to it. If a given subject sells its/his/her business, tax losses will remain to this subject and they will not be transferred to the business buyer. The active, passive and potential elements are not necessary transferred. This is because the transferring concerns only the active and passive elements about which the parties had specifically agreed the purchase.

• Fiscal values

When the property of a company holding another business is transferred, the fiscal values of the active and passive elements do not change. This is because the buyer’s cost does not concern the founding elements of the business, but the shares of the company which owns that shares.

On the contrary, with a company transferring, the buyer has the right to acquire, for tax purposes, the value of the transferred goods for the value corresponding to the paid price according to the cost criteria and pursuant to Art. 110 of the Italian Income Tax Code (TUIR), independently from the tax value which that goods had towards the transferor, and take benefit from it.

• The company credits transferring

With the stocks and shares transferring, the transferred company credits generable effect will inevitably continue to affect that company so, indirectly, the shareholding buyer, independently from the parties’ will.

• Debts transferring

With the stocks or shares transferring, the debts generable effects relating to the transferred company will necessary affect the company itself, so they will indirectly affect the buyer too, which means the complete exoneration of the subject who/which has transferred its/his/her shareholdings, including without the creditors’ approval.

With the company transferring, instead, pursuant to Art. 2560 of the Italian Civil Code and according to the principle for which the debtor’s changing is not allowed without the creditor’s approval, the vendor is not exonerated from the debts relating to the company activity sold before the transferring, except in the case of creditors’ approval existence.

• Company activity agreements legal succession

With the stocks and shares transferring, the sold company contracts will be still valid and they cannot be interrupted by the vendor’s and buyer’s joined will without the third contractor’s and the sold company approval, but they cannot be interrupted by the third contractor without the sold company approval too.

With the company selling, pursuant to Art. 2558 of the Italian Civil Code, the buyer follows into the company activity contracts, except in the case of other agreement existence. The third contactor can withdraw from the contract within three months from the transferring notice if just cause exists and except in the case of alienating’s responsibility.

For all this reasons, the above mentioned transactions have completely different legal and economic effects among each other. So, they cannot be considered equivalent and they cannot be subject of the same transferring taxes. This applies itself to the stamp duty too.

Often, according to the original Art. 20 of the Italian Stamp Duty Tax Code (TUR), the financial management dealt with the shareholdings total divestment requalification by, for the stamp duty purposes, transforming them into a mere company selling act. This has different effects: in case of shareholdings total divestment, stamp duty is fixed while, pursuant to Art. 11 – TUR Tariff part one, it becomes proportional in case of company selling. Initially, both the law and prevalent doctrine denied the accuracy of this method. Successively, they had changed their orientation and confirmed the validity of this interpretation several times. Basically, it was based on 3 conditions:

1. Art. 20 anti-elusive nature
2. Economic effects similarity
3. Transaction scheme used by the Legislator

To the present day, we can affirm that, on the bases of the 2018 Budget Law (i.e. Law 205/2017), the issue has been definitively solved: indeed, by modifying Art. 20 of the Tur, the 2018 Budget Law has established that, for an equal act taxation purpose and both in the case of company holding stocks or shares total divestment and company selling, it does not consider other interpreting elements and the disposition included in other legal transactions connected to the one to be registered, as well as the interests objectively and concretely followed by the parties in the cases in which that interests could bring to a juridically different contractual types assimilation.

The new regulation is aimed to avoid that a shareholding total divestment can be assimilated to a company selling.  In any case, this means that a shareholdings total divestment cannot be requalified, for stamp duty purposes, into a company selling. So, the stamp duty to be used for a shareholding total divestment is the fixed one.