Posted on: 23/12/2021

    The EU Court of Justice rules that the 50% reduction of mortgage and cadastral taxes on the transfer of commercial immovable properties apply also to foreign real estate investment funds.


    Transfers of commercial properties involving foreign real estate funds can benefit from the 50% reduction of mortgage and cadastral taxes applicable to the transfers involving Italian real estate funds (which can only be closed-ended funds).


    This is the decision dated November 16 of the Court of Justice of the European Union in relation to a request for a preliminary ruling made by the Italian Supreme Court in a litigation between the Revenue Agency and a German open-ended real estate fund.


    The Court of Justice stated that precluding the application of the tax reduction provided for closed-ended real estate funds to open-ended ones violates the free movement of capital principle, provided that those two categories of funds are in objectively comparable situations, unless such a difference in treatment is justified by the objective of limiting systemic risks on the real estate market.


    It is for the national judges to decide whether the justification based on the objective of limiting systemic risks apply but the Court itself seems to doubt its existence when it states that “the open-ended or closed-ended nature of a fund does not appear to be linked to the level of speculation of the investments made by that fund or to the more or less certain nature of the intentions harboured in that regard, and that the feature of being closed-ended does not oblige such a fund to hold the property it has acquired for a longer time than if it were open-ended”.


    In our view, this ruling also takes for granted the applicability of the tax reduction to closed-ended foreign funds, a circumstance that in the past had instead been challenged by the Revenue Agency with respect a French closed-ended fund.

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