Increasingly, owners of real estate assets are choosing to centralize the management of their properties by setting up a holding company, a solution that allows for more effective rationalization of assets from an organizational and management perspective.
Why set up a real estate holding company
One of the main advantages of transferring real estate to a holding company is the possibility of separating assets between the personal sphere of the transferor and the real estate assets transferred. The transfer of ownership of the assets to the company makes it possible to mitigate the risk of direct aggression on the properties, limiting any enforcement action to the value of the stake held in the holding company.
Real estate holding companies and estate planning
Further benefits arise in the areas of estate planning and generational transition. The unified management of real estate assets makes it possible to avoid the fragmentation typical of successions with multiple heirs, allowing the transfer of the entire real estate complex through the sale or donation of company shares. This results in clear advantages not only in terms of simplification, but also in terms of management continuity.
Transfer of real estate to a holding company: preliminary tax assessments
Given these opportunities, however, the transfer requires careful prior assessment of the tax implications, both in terms of direct taxation and, above all, indirect taxation, which is often the most significant factor in the overall assessment of the transaction’s profitability.
Direct taxation of real estate transfers
Transfer of real estate by individuals
With regard to individuals who do not have business income, the transfer of individual properties to companies is subject to the capital gains regime, similar to the provisions for transfers for consideration. In this case, any capital gains realized fall within the category of “miscellaneous income,” pursuant to Article 67 of the Italian Tax Code (Tuir), and are determined as the difference between the value attributed to the asset contributed and the related cost recognized for tax purposes. The income thus determined is subject to a substitute tax of 26%.
Real estate capital gains and Superbonus
However, it should be noted that the capital gain is taxable only in the case of the transfer of real estate held for a period not exceeding five years, with the exception of real estate acquired by inheritance and that used as the main residence of the transferor or his or her family members. Article 67 of the Tuir, in paragraph 1, letter b-bis, has also introduced specific rules for properties renovated with the so-called “Superbonus,” for which the capital gain is taxable if the transfer takes place within ten years of the end of the work.
Real estate transfer and business income
On the other hand, for individuals with business income who transfer individual properties, as opposed to business complexes for which the neutrality regime referred to in Article 176 of the TUIR may apply, the tax treatment is governed by Article 9 of the TUIR. In such cases, the capital gains or capital losses arising from the transfer contribute to the formation of total income depending on the nature of the transferring party, being taxable for IRPEF (personal income tax) purposes in the case of taxation through transparency or for individual entrepreneurs, or for IRES (corporate income tax) and IRAP (regional business tax) purposes in the tax period in which the transfer takes effect.
Indirect taxes on the transfer of real estate to holding companies
The indirect tax regime applicable to real estate transfers varies, first and foremost, depending on the type of property transferred and the nature of the entity carrying out the transaction.
Transfers made by individuals
In the case of transfers made by individuals who do not have business income, the transaction qualifies as outside the scope of VAT and is subject to proportional registration tax, generally applying a rate of 9% on the value of the transferred asset. In addition, mortgage and cadastral taxes are applied at a fixed rate of €50 each.
Contribution made by a VAT taxpayer
If, on the other hand, the contribution is made by a VAT taxpayer, the taxable event for value added tax occurs, without prejudice to the possible application of the exemption regimes provided for by current legislation.
Real estate transfer and VAT: residential buildings
With regard to residential buildings, the transaction is exempt from VAT if it does not fall within the cases provided for in Article 10, paragraph 1, no. 8-bis of Presidential Decree 633/1972, i.e., transactions carried out by construction or renovation companies within five years of the date of completion of the property. In such cases, in application of the principle of alternativeness between VAT and registration tax established by Article 40 of Presidential Decree 131/1986, the real estate transfer is subject to registration tax on a proportional basis, at a rate of 9% and a minimum of €1,000. Mortgage and cadastral taxes, on the other hand, are payable at a fixed rate of €50 each.
Transfer of instrumental properties: tax regime
Also with reference to instrumental buildings, Article 10, paragraph 1, no. 8-ter of Presidential Decree 633/1972 provides for VAT exemption for transactions other than those carried out by construction or renovation companies within five years of completion of the property. In such cases, the transfer is subject to a fixed registration tax of €200, while mortgage and cadastral taxes are applied proportionally, at rates of 3% and 1% respectively.
Real estate holding company or real estate trust? Final assessments
The establishment of a real estate holding company through the transfer of real estate assets is now an increasingly popular solution for the management and reorganization of real estate assets, due to the many advantages it can offer in terms of assets, organization, and inheritance.
From a direct taxation perspective, the transfer is often fiscally sustainable in practice. In cases where the transaction is carried out by individuals who do not have business income, the transfer frequently does not result in taxable income, as the purpose of the rule is to tax only transactions that imply a speculative purpose.
For individuals with business income, on the other hand, the legislation also allows for the taxation of capital gains to be spread over several installments, thereby limiting the financial impact.
On the other hand, the aspect that requires particularly careful consideration during planning is indirect taxation and, in particular, registration tax.
In cases where the latter is applied proportionally, the standard rate of 9%, calculated on the value of the asset transferred, can have a significant impact on the overall cost of the transaction, especially in the case of the establishment of a holding company through the transfer of a significant number of properties.
Real estate holding companies: tax risks and shell companies
In addition, particular attention must be paid to what will be done with the properties transferred to the holding company, as there is a risk of so-called “shell companies.” Another important aspect concerns the type of property transferred, given that there is a so-called “cedolare secca” (flat-rate tax) on rents received by individuals on leased residential properties.
In light of these considerations, it is essential to carry out a careful overall assessment, balancing the trade-off between the financial, management, and succession advantages deriving from the establishment of the real estate holding company and the tax burden associated with the transfer, so that the choice is consistent with the objectives pursued and, above all, sustainable in the medium to long term. In this regard, a very valid alternative tool for achieving the objectives discussed here—also characterized by a difference in the tax profiles of the transaction—is the real estate trust.
(Article written in collaboration with Dr. Asia Zaltron, collaborator at Studio Righini)
