Budget Law 2023 provisions for wealth planning

Budget Law 2023 introduced interesting concessions for an efficient wealth planning, also in a succession/donation perspective.

Revaluation of participating interests, UCIs shares and insurance policies

Participating interests and land

Few weeks after the closure of the term available for the revaluation of participating interests and land, i.e. 15.11.2022, the original term introduced by Law 448/2001 (which should have been an extraordinary provision in 2001 but which was repeatedly proposed) was re-opened, allowing individuals, general partnerships, non-commercial entities and non-resident persons without a permanent establishment in Italy to revaluate participating interests and land held at 01.01.2023 outside the scope of their business activity.

The relevant substitute tax has been increased to 16% and 15 November 2023 has been established as the deadline to swear the expert’s report and pay the substitute tax (or the first instalment, in case of payment by instalments).

An important update introduced by Budget Law 2023 is the possibility to also revaluate participating interests held in listed companies, thus extending the number of taxpayers that can benefit from this provision.

It is specified that the benefits of the revaluation of the cost of participating interests made by the testator lapse in case of subsequent transfer due to inheritance succession. In fact, following the re-introduction of the inheritance tax, the tax cost of participating interests for heirs is equal to the value relevant for the purposes of the declaration of succession, rather than to the tax cost for the testator – as it happens in the case of donations. This implies the need to carefully evaluate, within the wealth and succession reorganization and planning activities, the opportunity to redetermine participating interests either entirely or partially, as well as the opportunity to transfer them through a deed of donation inter vivos rather than in the will.

UCI and insurance policies

The Law provides for the possibility to revaluate shares in UCIs and life insurance policies classified under number 1 and 5 (respectively, concerning the duration of human life and capitalization contracts) by paying a substitute tax equal to 14% on a value represented by:

• the difference between the value at 31.12.2022 recorded in periodic statements and the interest subscription cost – as concerns UCIs; and
• the difference between the mathematical reserve at 31.12.2022 and premiums paid – as regards life insurance policies.

With regard to UCIs, the legislator opted for an “intermediate” solution, pending a reform on the taxation of financial income, which has been thoroughly discussed in the recent past and which supposed the unification of other income with capital income.  

The possibility to re-determine the value of UCIs and align them to their value at December 2022 allows investors, in fact, to disinvest capital gain funds, benefitting from a reduced tax rate (14%) compared to the ordinary one (26% or IRPEF progressive tax).

The above implies the need to carry out a careful analysis of investors’ fund portfolio, in order to identify those UCI shares subscribed at a cost that is lower compared to their market value at December 2022.

As explained for participating interests transferred due to inheritance succession or donations, a careful analysis is required for UCIs shares, too, in order to evaluate the opportunity to benefit from this provision.

Pending clarifications on the concept of "homogeneous category" of funds, which the revaluation is to be applied to, it is advantageous for taxpayers to identify the capital gain funds among their (Italian and foreign) asset, since, should the revaluation of the cost be convenient, the option must be notified to the Italian intermediary by 30.06.2023 and, in the case of a foreign intermediary, if the term for exercising the option is longer (as exercised in the 2022 tax return), the substitute tax must still be paid by 30.06.2023.

The Legislator also introduced for the holders life insurance policies classified under number 1 and 5 (respectively, concerning the duration of human life and capitalization contracts), whose expiry is after 31.12.2024, the possibility to release the difference between the value of mathematical reserves at 31.12.2022 and the premiums paid by that date. If, on the one hand, policyholders are required to carry out an accurate assessment of the effective benefit deriving from exercising this option, since the payment of the substitute tax is due before the actual collection of the policy itself (by 16.09.2023), on the other hand, insurance companies are required to identify those policies concerned by this provision (making sure that, also from a fiscal point of view, they can actually be considered as classified under number 1 and 5) and to correctly calculate the value of the relevant mathematical provisions to be (timely) communicated  to subscribers.

Concessional assignment, transfer and transformation

The last provision among those introduced by the 2023 Budget Law to favour an efficient wealth and succession planning concerns the reintroduction of the regulation on the concessional assignment and transfer of real estate and registered movable assets to shareholders of certain types of companies, as well as the possibility to minimize the tax burden in case of transformation of such companies into general partnerships.

In fact, this regulation not only allows reorganizing the real estate of many Italian families by optimizing the tax burden in terms of IRES, IRAP, IRPEF, registration tax, mortgage and cadastral taxes, but also to solve the regulatory issue concerning non-operating companies and assets to shareholders.