Italy vs Felofin S.p.A. , November 2021, High Court, Case No 36093/2021

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In 2007, the majority of the shares in the company Villa d’Este S.p.A. (53% of the capital) was held by a Luxembourg company Regina S.A. of which Felofin S.p.A. was a shareholder.

Three “families” each held 29.41% of Regina S.A, for a total of 88.23% (while the remaining 11.77% was held by three other minority shareholders), and they also held direct stakes in the capital of Villa d’Este S.p.A. (Felofin S.p.A., in particular, held 5.09% of the shares in Villa d’Este S.p.A.).

In 2007, Felofin S.p.A. sold its 5.09% stake in Villa D’Este S.p.A. to Finanziaria Lago S.p.A. for a total of 303,369 shares and a consideration of Euro 8,565,000.00, i.e. at the price of € 28.23 per share.

On the same date, Regina S.A. sold the majority shareholding (53%) in Villa d’Este S.p.A. to Finanziaria Lago S.p.A (holding company of the Fontana family, which in the meantime had left the shareholding structure of Regina S.A.). The sale of the shareholding provided for the payment of € 240,000,000.00 (price per share equal to € 76.26).

In 2012, the tax authorities determined that the capital gain in Felofin S.p.A. from sale of the shares in Villa d’Este S.p.A in FY 2007 should have been € 9,781,785.00 higher and issued an assessment.

The additional capital gain had been calculated based on a “normal value” of the shareholding which, according to the Office, would have been € 61.00 per share. The “normal value” of €61.00 per share had been obtained by reducing the price agreed (€76.26) by Regina S.A. by a percentage equal to 25% which, according to the tax authorities, would usually be recognised as a “majority premium” for shareholders who transfer a controlling stake.

Felofin S.p.A. appealed against this tax assessment to the Varese Provincial Tax Commission, requesting its annulment. The Tax Commission of the Province of Varese upheld the appeal and cancelled the notice of assessment.

This decision was then appealed to the Regional Tax Commission by the tax authorities

The Regional Tax Commission upheld the appeal filed by the Tax authorities and set aside the decision of the Provincial Tax Commission. The Court stated that it appeared “improbable and uneconomic that Felofin S.p.A. could sell its shareholding to Finanziaria Lago S.p.A. at the price of Euro 28.23 per share, i.e. at a price three times lower (Euro 48.03) than the price agreed on the same day by Regina S.A. of Euro 76.26. Such sale cannot appear to represent a “normal value”, given that, contrary to what was held by the first judges, the company Felofin S.p.A., with the exit from the shareholding of Regina S.A., held 41.67% and not 29.41% in Villa d’Este S.p.A.

This decision was then appealed to the High court by Felofin S.p.A.

Judgement of the High Court

The Court upheld the decision of the Regional Tax Commission and dismisses the appeal of Felofin S.p.A.


“In the present case, as we have seen, the appellate court held that the Revenue Agency’s analytical assessment was legitimately founded, in light of the significant difference in the price of the shares sold to the financial company Lago S.p.A., which was excessive considering that the appellant, at the time of the sale to the finance company of the portion of shares it held directly in Villa D’Este S.p.A., did not have to pay, like any other minority shareholder, the price imposed by Finanziaria Lago S.p.A..”

The judgement on the uneconomic nature of the sale and the correctness of the value attributed to the shares sold is also left exclusively to the judge of merit, except for the examination of the failure to examine a decisive fact, which is the subject of discussion between the parties, pursuant to Article 360, first paragraph, no. 5, of the Code of Civil Procedure.”

“The fourth plea in law, alleging failure to state reasons on account of failure to examine decisive facts, which were the subject of discussion between the parties, and incorrect assessment of the relevant documents, is likewise inadmissible. In fact, “the complaint for failure to state reasons with regard to the use or non-use of presumptive reasoning cannot be limited to affirming a different belief from that expressed by the judge of merit, but must bring out the absolute illogicality and inconsistency of the decisive reasoning, it being excluded that the mere failure to assess a circumstantial element can give rise to the fault of failure to examine a decisive point” (Cass. Ord. no. 5279 of 2020).

In the present case, therefore, the plea is inadmissible, since the appellant complains of the failure to examine circumstantial evidence, such as the strained relations within the corporate structure, the advantageousness of the sale in relation to the original purchase price of the shares and the non-applicability of the Pex regime to the sale of the direct minority shareholding only, considered by the appellate court to be recessive in comparison with the evidence put forward by the office as the basis for the assessment and, in any event, lacking adequate proof.”


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ITA 20211123


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