Abuse of rights: the new MEF guidelines between freedom of choice, circular operations and tax deferral

With the Act of Direction n. 5/2024, the MEF has outlined i principi guida sull’abuso del diritto ai fini fiscali, in applicazione dell’art. 10-bis dello Statuto del Contribuente. Il documento offre indicazioni operative volte a limitare usi distorti della norma antiabuso e a garantire la certezza del diritto.
The key points are:

• Legitimate tax planning: The tax payer can choose between several legal alternatives, even if some entail a lower tax burden. The abuse exists only if the transaction has no economic substance and is aimed solely at an undue tax advantage;
• Evidence on the part of the administration: The IRS must demonstrate the main elusive intent, not being able to resort to generalized presumptions;
• Value of the request: this instrument of consultation is promoted as a preventive means to avoid disputes at a later stage.

Atypical withdrawal and circular transactions

A central passage of the act of direction concerns atypical withdrawal, such as the transfer of revalued shares to other members: it is reiterated that these are valid transactions and not abusive if supported by valid economic reasons. However, the use of circular schemes, where the member formally exits but remains de facto holder of the participation, or repurchases the shares immediately thereafter is prohibited.
Purely circular transactions — such as a sale with immediate retrocession or a sale to subsidiaries of the same transferor — are suspected of abuse, since they do not result in any real change in the economic or management structure.

Tax deferral "sine die": attention to undue nature

As well evidenced by the doctrine, the MEF act introduces the concept that even a merely temporary tax advantage — such as a Tax deferral — can be considered abusive if sine die significantly deferred.
However, the same document reaffirms a fundamental principle:
“the undue nature of the tax advantage must always be verified on a case-by-case basis“.
Not every deferral of taxation is an abuse. For example,, tax neutrality contributions, property splits or controlled realisation transactions may generate legitimate tax deferrals, if they are compliants with the rule's purposes and do not involve any avoidance.

Final operations

• Atypical withdrawal transactions are also eligible between members, as long as they do not mask purely circular transactions.
  The tax deferral is not in itself abusive: it is always necessary to check the purpose and consistency with the law.
• The abuse of the right is only in the presence of an undue tax advantage, achieved through acts without economic substance.

The Bampo Studio is available for analysis of extraordinary operations, divestments and corporate reorganizations, also through requests for greater security.