Copy of the Ruling is available here.
The Article 7.2 securitisations
Art. 7.2 was introduced by Law Decree No. 34/2019 in order to permit the purchase by the SPVs of real estate, registered movable assets and in rem rights or personal rights on such assets and the securitisation of the proceeds deriving from such assets.
The tax regime interpretative issues
Since the enactment of Art. 7.2 is quite recent, a number of interpretative issues arose in the structuring of securitisations governed by such new rules. Namely, uncertainties existed as to the tax treatment applicable to the RE SPV, to the asset backed notes issued by it and to the transfer and documentary taxes regime applicable to the transactions performed by the RE SPV.
The clarifications provided by the Ruling
The Ruling is the first official position issued by ITA on the tax regime applicable to RE SPV operating under Art. 7.2 and offers some important confirmations and clarifications.
The case examined in Ruling concerned a RE SPV incorporated for the purpose of acquiring certain photovoltaic plants, enhancing them and, finally, generating proceeds from their lease or their disposal. The background of the Ruling specifies that the financial means necessary to fund the acquisition of the photovoltaic plants are raised by the RE SPV through the issuance of one sole class of notes subscribed by two banks. It is also specified that the RE SPV facilities, assets, liabilities, costs and revenues connected with its activity will not be registered in the RE SPV balance sheet nor in its income statement, but will be reported in its explanatory notes (nota integrativa) only.
The clarifications provided by ITA on the tax regime applicable to RE SPVs can be summarized as follows:
a) Income taxes
For income taxes purposes ITA confirmed that the principles stated in Circular No. 8/2003 in relation to securitisation of receivables (and more recently confirmed by Rulings No. 18/E of 30 January 2019 and No. 56/E of 15 February of 2019) apply also in the framework of securitisation transactions governed by Art. 7.2. In other words, the taxation in the hands of the RE SPV of temporary spreads, if any, deriving from possible timing mismatches between positive and negative flows in relation to the real estate assets is excluded, insofar as any and all amounts deriving therefrom are specifically destined to the fulfilment of the obligations owed to the noteholders and to third party creditors in respect of the securitisation, i.e. as long as the assets remain subject to the segregation regime in the hands of the RE SPV. Corporate income tax (IRES) and regional tax on productive activity (IRAP) will therefore only become due on the excess proceeds available at the end of the securitisation, if any.
b) Tax regime of the notes
As to the tax regime of the notes, ITA confirmed that the tax regime set out under Legislative Decree No. 239 of 1 April 1996 (“Decree 239”) applies to the notes issued by the RE SPV. Therefore, payments of interest and other proceeds to the noteholders will be subject to the so-called 26% substitute tax (imposta sostitutiva) regime according to which certain noteholders non-Italian resident may benefit from a full tax exemption in Italy. Indeed, Decree 239 provides said substitutive tax does not apply to interest payments performed in favour of non-Italian resident (i) residing in a country which recognises the Italian tax authorities' right to an adequate exchange of information and (ii) meeting all the requirements (e.g. the beneficial ownership status) and procedures set forth in Decree 239 and in the relevant application rules, as from time to time amended.
Under a VAT perspective, ITA confirmed that the activities performed by the RE SPV for the acquisition, management and enhancement of real estate properties qualify as a complex real estate asset management activity which is per se subject to VAT. Accordingly the Ruling confirmed that such activity is subject to the ordinary VAT regime set out by art. 10(1) numbers 8 and 8-bis of Presidential Decree No. 633/1972. In particular, such activities are exempt from VAT, unless the RE SPV exercises the option to apply VAT. As a consequence, the RE SPV will be entitled to recover input VAT suffered on the purchase of goods and services related to its activity under the ordinary rules set forth by articles 19 et seq. of Presidential Decree No. 633/1972.
d) Transfer taxes
Finally, in relation to transfer taxes due on the acquisition of the photovoltaic plants by the RE SPV, ITA clarified that registration, mortgage and cadastral taxes are due in their fixed amount (pursuant to Art. 7.1, para. 4-ter of Italian securitisation law) on transfer deed concerning real estate properties which were previously subject to non-performing or terminated financial lease agreements. Such peculiar circumstances of fact must be explicitly documented in the relevant public deed of transfer. Conversely, in any other case registration, mortgage and cadastral taxes will be due at their ordinary proportional rates.
The Ruling is likely to represent a boost for the implementation of securitisation transactions carried out pursuant to Article 7.2. Indeed, the substantially neutral income tax regime applicable to RE SPVs de facto assimilates such vehicles to the tested structure of the real estate investment funds and is likely to attract the interest of foreign investors that can benefit from a full tax exemption on the proceeds derived from their investment in the notes issued by the RE SPV.
Hogan Lovells debt capital markets and tax teams are available to assist on the above new Article 7.2 securitisations.
Authored by Serena Pietrosanti and Maria Cristina Conte