The international dimension of the FIDINAM Group translates into cross-border planning, built around the specific circumstances of each client.
In this column we look at entrepreneurs who have built their business in the United Arab Emirates but intend to spend the years ahead elsewhere — often while already laying the groundwork for their own generational transfer.
One jurisdiction turns out to be unexpectedly well suited to that plan: Italy. The country is commonly associated with a heavy tax burden. Yet when it comes to passing a business to the next generation, it reveals itself as a genuine tax haven: where certain conditions are met, the transfer of businesses and shareholdings to a spouse or to descendants can qualify for a full exemption from inheritance and gift tax.
The relief exists to protect the continuity and the generational transfer of family businesses. Transfers of businesses, business divisions and shareholdings in favour of a spouse or descendants can be excluded from gift and inheritance tax in Italy, provided the specific statutory requirements are met.
The exemption applies only where:
A point of particular interest concerns the holding of shareholdings in foreign companies.
The Italian relief may also apply to shareholdings in companies resident in States or territories that ensure an adequate exchange of information under international treaties. Shareholdings held abroad can therefore take their place in succession planning on the same footing as domestic ones.
For entrepreneurs resident in the United Arab Emirates this matters a great deal — and, at first sight, it looks like a contradiction: the Emirates were long regarded by Italy as a privileged tax jurisdiction, precisely because of an exceptionally favourable tax system. Yet a treaty between Italy and the United Arab Emirates is in place and the exchange of information is operational: the relief on generational transfer is therefore available by express provision of law. Shareholdings in Emirati companies fall within its scope, provided all the requirements set out in the legislation are met.
Where the conditions described above are satisfied, the transfer of shareholdings held in the Emirates therefore qualifies for the exemption.
Many entrepreneurs moved their residence to the United Arab Emirates in order to build and consolidate their business in one of the world's leading financial hubs. Living abroad, however, is not necessarily a permanent choice. Over time, different needs emerge — personal, family, or simply a fresh assessment of one's own priorities — which bring a further move into consideration, particularly in later life.
In those situations, the most common concern is the tax impact of the move on the generational transfer — and the concern is well founded: gift and inheritance tax, in the vast majority of systems that levy it, follows the donor's residence and reaches foreign assets as well. The Emirati shareholding would therefore fall within the tax net of the new country of residence.
It is a fear that is not always justified. There are jurisdictions that nobody would associate with advantages of this kind, and Italy is one of them. Where the conditions are met, the transfer of controlling shareholdings to a spouse or to descendants is exempt — and the exemption is complete on both sides of the transaction: in Italy, the donor's country of residence, by virtue of the generational transfer relief; in the United Arab Emirates, the country where the asset being transferred is located, because gift and inheritance tax simply does not exist.
In other words, there is no need to remain resident in the United Arab Emirates for the future generational transfer of an Emirati business to take place entirely free of tax. What matters is sound planning: reviewing the structure and establishing how control is to be passed on.
The opportunities offered by Italian legislation deserve careful analysis. Structuring a generational transfer properly means addressing tax, corporate and succession questions that are tightly connected to one another.
In a global environment, managing and passing on wealth calls for specialist expertise and a working knowledge of the rules applicable in each of the countries involved.
Through its international presence, FIDINAM supports entrepreneurs and families in succession planning and in structuring assets held across multiple jurisdictions: the analysis of the Emirati company and the analysis of the Italian succession regime take place within the same Group, carried out by professionals operating in the jurisdictions concerned.
The objective is to identify the most effective solutions to secure the continuity of the business and its transfer to the next generation.
This article is edited by Iacopo Carraro, Tax Manager Italian Desk at Fidinam Dubai, and Cristina Jelmini, Consultant at Fidinam Italia. If you require clarification or wish to request a tax consultancy, please use the form below.