Italy’s Revenue Agency has confirmed that a foundation’s merger with a simple agricultural partnership can qualify for no capital gains tax or VAT, with fixed rates applying to registration, mortgage, and land registry taxes.
Italy’s Revenue Agency confirmed on 11 September 2026 that a foundation can merge with a simple agricultural partnership while avoiding capital gains tax, VAT, and most other direct taxes. The ruling, contained in response no. 171, applies to transactions where the transferred assets remain outside the foundation’s commercial activities.
How the merger worked
A foundation registered with Runts (the national registry for Third Sector organisations) acquired full ownership of an agricultural partnership. The partnership had originally received a controlling interest from a German company.
Over time, the partnership leased its entire farm to another agricultural company and stopped conducting independent business. In 2025, the foundation completed the merger by incorporation, transferring all farm properties directly to the foundation’s assets.
The foundation intended to use these holdings to pursue its stated mission of protecting and enhancing cultural and landscape heritage.
No tax on the transferred assets
The Revenue Agency determined that no capital gains tax applies to the transfer. Under Article 172 and Article 174 of the TUIR (the national income tax code), mergers between companies normally generate no taxable gains.
This protection extends to non-commercial entities when the transferred assets stay outside their commercial activities. Since the foundation declared that all acquired property would be used exclusively for its institutional, non-commercial work, the tax authorities concluded that any gains remain non-taxable. The agricultural holding continues to operate under its existing lease agreement.
VAT is not triggered
The simple partnership no longer qualified for VAT purposes. It had already leased the entire farm and ceased all direct agricultural activity. The partnership had also excluded rental income from the VAT scope and abandoned its right to deduct input tax. Because the partnership lacked the status required for VAT application at the time of merger, the transaction falls completely outside VAT rules. This outcome occurred under Article 2, paragraph 3, letter f) of Presidential Decree No. 633/1972.
Fixed rates apply to indirect taxes
The most favourable element came from Article 82, paragraph 3 of the Third Sector Code (Legislative Decree No. 117/2017). This provision grants fixed rates for registration tax, mortgage tax, and land registry tax on mergers conducted by Third Sector entities.
Although one merging party was a simple partnership rather than a Third Sector organisation, the foundation retained its registered status throughout. Consequently, the merger deed qualifies for the fixed-rate treatment designed to ensure tax neutrality for Third Sector reorganisations.
The ruling demonstrates that when transferred assets continue serving purposes aligned with a foundation’s mission and do not enter commercial operations, the transaction achieves substantial tax neutrality: no capital gains taxation, no VAT, and application of fixed indirect tax rates.
