Italy's tax authority has rejected two common strategies for reducing gift tax on business transfers to children, ruling that formal ownership or voting rights alone do not qualify for exemption. The decisions reinforce a single, unforgiving requirement: the next generation must gain genuine control and management of the company, or face full taxation.
Italy’s tax administration issued two critical rulings on 4 June 2026 dismissing attempts to minimise gift tax during generational corporate transfers. Both decisions reinforce a core principle: transferring shares to the next generation only qualifies for tax relief if children gain genuine control and management of the business, not merely legal ownership on paper.
Holding company structure rejected
Response 115/2026 examined a father’s plan to transfer shares to his children through a newly created holding company (NewCo), designed to reduce the taxable value of the gift. While the children received shares granting them a voting majority under Article 2359 of the Civil Code, the father retained special “C-class” shares with veto powers over critical decisions and profit distribution.
The tax authority ruled that this arrangement fails to meet Article 3, paragraph 4-ter of Legislative Decree 346/1990 (the gift tax exemption framework). The exemption requires effective control, not just formal voting rights. Because the father’s special powers left children unable to make independent business decisions, the transfer was taxed at ordinary rates under Article 16 of the consolidated tax law.
The Agency also found the NewCo structure itself constituted an abuse of rights. By housing the shares in a shell company with lower net assets (EUR 97 million versus the original company’s EUR 1 billion-plus), the donation’s taxable base—calculated under Article 16, paragraph 1, letter b)—dropped significantly. This artificial reduction lacked genuine commercial purpose and conflicted with the law’s aim to measure true taxable capacity.
Ownership on paper is not enough
Response 116/2026 addressed a different strategy: a father transferred partnership shares to his children as bare owners while retaining usufruct (the right to income and management control). The question: does bare ownership alone qualify for the five-year exemption under Article 3, paragraph 4-ter for partnerships?
The Agency’s answer was no. Drawing on Constitutional Court guidance (ruling 120/2020) and recent case law from the Court of Cassation (order 6799/2026) and Supreme Court (ruling 7619/2026), the administration clarified that ownership must be substantive. A child holding bare title on deed but excluded from day-to-day operations and strategic decisions does not genuinely own the business.
In this case, family agreements ensured the father retained all decision-making authority despite the formal transfer. The exemption thus did not apply, and ordinary gift tax rules governed the transaction.
