Italy: introduction into italian law of the demerger by spin-off

Fidinam & Partners News Tax Consultancy
Implementing the European Directive 2019/2121 issued at the European level to amend the previous Directive 2017/1132 on cross-border conversions, mergers and divisions, with the approval of Legislative Decree No. 19 of 2 March 2023, Article 2506.1 was introduced into the Civil Code, regulating the new demerger by spin-off operation.
Such an operation, although included in the part of the Civil Code regulating extraordinary transactions, nevertheless presents elements typical of the contribution of assets; for this reason, in the following, in outlining its civil law discipline, an attempt will be made to highlight this 'hybrid' nature, and then to dwell on certain considerations relating to the possible (but not yet specifically regulated) tax treatment.

Civil framework: the rules contained in the new Article 2506.1

From the definition given in the new Article 2506.1 of the demerger by spin-off as the operation whereby 'a company assigns part of its assets to one or more newly incorporated companies and to itself the relevant shares or quotas (...) while continuing its activity', the main features of the operation in question can be deduced and specifically how:
  • this operation, unlike the other forms of demerger envisaged to date and more similar to the contribution operation, provides that the shares/quota of the beneficiary companies are, like the contribution operation, assigned directly to the demerged company and not to its shareholders;
  • object of demerger may be not only companies/branches thereof, but also individual assets and liabilities: in this sense, henceforth, where it is intended to proceed with the extraction of assets (companies/branches or individual assets that is) for the benefit of one (or more) beneficiary companies, the demerging company may no longer only do so by way of contribution but also by way of demerger;
  • after the spin-off, the company to be spun off must continue to carry on its business: this means that the spin-off transaction should/could only concern a (even large) part of the assets of the company to be spun off, whereas, where the intention is to transfer all the assets, the only (still) viable transaction remains the contribution transaction;  
  • beneficiary of the spin-off must necessarily be one or more newly incorporated companies: where, therefore, the extraction of assets is to be made for the benefit of a pre-existing beneficiary company, the contribution operation remains the only viable option where it is to be made in a 'direct' manner.
The insertion of the article in question has also been accompanied by additional provisions aimed at simplifying, as compared to the 'ordinary' demerger transaction, the procedural aspects/fulfilments required at the execution stage; although the demerger also provides for the preparation of the demerger plan, containing a detailed description of the assets/legal relationships that are to be transferred, the rules provided for the preparation of the balance sheet of the demerging company, the report justifying the demerger plan from a legal/economic point of view and the expert's report on the fairness of the exchange ratio do not apply.
Lastly, it is worth noting that in the transposition phase of the Directive (and as suggested by the Directive itself), Article 51 of Legislative Decree No. 19/2023 extended the applicability of the new rule, as of 22 March 2023, also domestically, thus legitimately allowing demerger operations with spin-off involving only domestic companies.

Fiscal framework: which rules apply?

It is on the tax side that the underlined hybrid nature of the transaction in question creates more doubts since in the current legal framework, in the absence of specific regulations or (as yet) clarifications on the matter by the tax authorities, it is not clear whether the tax treatment reserved to demerger transactions, characterised by a substantial tax neutrality for direct tax purposes, or that provided for contribution transactions, which are generally taxable (except in specific cases), should be applied. As pointed out by some scholars at the time of the first review, having been specifically introduced as an alternative transaction to the transfer of individual assets/activities, the tax regime typical of demerger transactions should be fully applicable to the demerger by way of spin-off.
A further assumption of this 'equivalence' of the demerger transaction by way of spin-off with respect to the contribution transaction should be that the choice between spin-off and contribution should not give rise to abuse under Article 10-bis of Law No. 212/2000, but fall within the scope of the taxpayer's freedom of choice between transactions having 'equal dignity' (albeit entailing a different tax burden).


The introduction of this new operation within the Italian legal system is to be welcomed as it appears to be a very attractive (and 'streamlined') solution where one intends to implement a corporate reorganisation operation aimed at either the establishment of a sub-holding company or the takeover of any new shareholders limited solely to that part of the business to be transferred to the newly established beneficiary. The use of this new operation, however, will inevitably depend on legislative or practical confirmation that clarifies the relevant tax rules, thus placing its use as a legitimate alternative to the contribution outside of any possible anti-abuse challenge by the tax authorities.

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This article is edited by Luca Guidotti, Manager of Fidinam & Partners' International Tax Consultancy Competence Center.
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