Luiss Libera Università Internazionale degli Studi Sociali Guido Carli CERADI Centro di ricerca per il diritto d impresa Some reflections about the Italian exit tax after the Hughes de Lasteurie du Saillant judgment Giuseppe Melis [Aprile 2006] Luiss Guido Carli. La riproduzione è autorizzata con indicazione della fonte o come altrimenti specificato. Qualora sia richiesta un autorizzazione preliminare per la riproduzione o l impiego di informazioni testuali e multimediali, tale autorizzazione annulla e sostituisce quella generale di cui sopra, indicando esplicitamente ogni altra restrizione
Intervento tenuto alla Open Conference del Wintercourse 2006 sul tema Open questions in EC Tax Law Tilburg, 1 aprile 2006 The recent judgment in the French Hughes de Lasteyrie du Saillant case (C-9/02) has deeply influenced the subject of domestic exit taxes and, in particular, their relationship with EC law. As it is known, in the Italian tax system exit tax does not concern accrued capital gains on company securities belonging to individuals who move their residence abroad and who do not carry on a business activity, as it was in the French case, but only those subjects individuals, partnerships and companies who exercise an entrepreneurial activity. According to art. 166 of the Italian Consolidated Tax Act, if these subjects move their residence abroad, an exit tax is levied on the unrealised capital gains of the company assets, unless these are kept in a resident permanent establishment. Foreign permanent establishments are liable to tax on the unrealised capital gains of their assets in any case. To analyse the compatibility of Italian legislation with the EC Treaty according to the ECJ s conclusions in the Hughes de Lasteyrie du Saillant case, we have first to consider the applicability of the freedom of establishment provisions, stated in articles 43 and 48 of the EC Treaty itself.
As we know, in the Daily Mail case 1, the European Court of Justice ruled against the taxpayer, stating that the question of transfer of seat was a matter of national law and, therefore, not entitled to Treaty protection. The result of this case was that companies were not granted the primary freedom of establishment. Actually, this judgment is not rid of criticism, since the Court, by excluding the applicability of the freedom of establishment on the basis of the differences in national legislation concerning the required connecting factor, not only left the harmonization of different national company laws to Member States, but also disregarded the fact that the procedural restriction was not based on UK private international law, but on UK tax rules. That is, there wasn t any deemed liquidation in the UK according to international private law, as it happens in France and in Germany because of the application of the real seat theory ; the obstacle was therefore just a fiscal one. Moreover, the principle stated by the ECJ according to which the adoption of the deemed liquidation approach and the levy of an exit tax can be considered as the consequence of the existing differences among Member States private international rules can not be applied in the Italian system, which never considers the company transfer of seat as a deemed liquidation, ensuring, on the contrary, the continuity of the company. In the light of these arguments, we can thus assume that the Italian exit tax constitutes a restriction according to EC law both for individual entrepreneurs and companies. 1 European Court of Justice, judgment in case Daily Mail, C-81/87, in ECR, 1988, p. 5483 and ff. In this case a company incorporated and centrally managed in UK wanted to move its place of management to the Netherlands in order to become fiscal resident of the Netherlands and sell some shares under the dutch participation exemption. However, under UK Income and Corporation Law the company had to obtain the consent of the UK Treasury in order to be able to move to another country.
The same could not however be stated, in my opinion, in the case a deemed liquidation would occur, as the ECJ judgement in the Centros, Überseering and Inspire Art cases do not contain new elements to overrule the Daily Mail decision as far as private international law consequences in the emigration Country are concerned, analysing only the immigration State legislation. So, there wouldn t be in that case any treaty protection. Now our reasoning has to focus on possible justifications for this restriction in Italy, analysing, in particular, the arguments of the fiscal coherence and prevention of tax avoidance. Starting with the fiscal coherence justification of the Italian exit tax and its taxation of accrued capital gains before the moment of emigration, one may argue that it is just an application of general Italian tax law principles, such as the equal treatment of taxpayers or the personal and progressive base of taxation. Moreover, with regard to entrepreneurial activities, the exit tax could be considered in line with one of the general rules of Italian business taxation, according to which accrued capital gains are taxed whenever the corresponding assets go out of the business regime, even if not actually sold. Finally, it could be considered as a way to assure intercountry equity among States, by taxing capital gains accrued during the period of fiscal residence in the State of emigration. Nonetheless, the coherence justification could not be argued whenever the company assets (and the corresponding capital gains) were still taxable in Italy, even after the company transfer of residence. This is not only the case, expressly stated in the Italian tax provisions, of assets kept in an Italian permanent establishment, but also the case of capital gains on immovable assets, which are still taxable in Italy according to double taxation conventions. Anyway, an important argument in favour of the fiscal coherence justification and in particular from the interjurisdictional equity point of
view could be represented by the similarity between transfer of residence and cross-border mergers, regulated by the Merger directive n. 90/434/EEC. As we know, this directive states the fiscal neutrality of cross-border mergers only if the assets are kept in a resident permanent establishment, which is the same approach adopted by the Italian exit tax provisions. The fact that interjurisdctional equity can be considered coherent, doen t however mean that it is also proportional. With regard to the second argument we mentioned, that is the prevention of tax avoidance justification, the Italian exit tax could be considered as directed to prevent temporary transfer of tax residence outside Italy exclusively for tax reasons. On behalf of this justification, it could be argued that the exit tax was introduced in the Italian tax law system through a law decree (February 23 th 1995, n. 41) containing measures directed to the prevention of tax avoidance. However, differently from the French provision, the Italian provision doesn t contain any period of time after which the presumption of tax avoidance can be dropped, nor the possibility of a deferred payment subject to the set up of a guarantee is provided, nor a credit for foreign taxes is allowed. So, it seems that the main aim of the Italian exit tax is to prevent the loss of tax revenues, which has never considered by the Court of Justice as an acceptable justification. Nonetheless, even accepting an avoidance justification, the exit tax could not meet the proportionality test, as far as the immigration state taxes accrued capital gains on company assets and the taxpayer does not come back to the emigration state in a short period of time. In fact, under these circumstances the tax avoidance scheme could easily be excluded. Moreover, the exit tax could be levied at the moment in which the taxpayer comes back in the emigration state, being this a clear indication of a tax avoidance purpose behind his prior transfer of residence. This approach
would also be consistent with the ECJ statements towards anti-avoidance measures, as fixed in the Leur Bleum judgment, according to which tax avoidance has to be proved by the tax administration. Nor can be the permanent establishment solution, provided in Directive n. 90/434, considered as proportional. In fact, the obligation to keep the business activity in Italy actually means that it is impossibile to transfer this activity to another State without paying taxes on accrued capital gains, so that a more proportional means has to be introduced, like for instance a previous assessment of accrued capital gains, which will be taxed only in case of actual disposal by using the Mutual Assistance Directive. A final remark on the new European rules on Societas Europaea, which allow inter alia the transfer of seat between Member States without any deemed dissolution effect, so preventing the negative effects at the basis of the Daily Mail decision. On this point, we have however to consider that these subjects are incorporated under EC law rules and, consequently, are EC law entities. This does not thus solve the real problem above mentioned, concerning the transfer of residence of those companies incorporated under the different national laws and the deemed liquidation effect deriving from the application of the real seat theory in the State of emigration. Prof. Giuseppe Melis Professore Associato di Diritto Tributario nella Facoltà di Giurisprudenza dell Università degli Studi del Molise