THE NEW REAL ESTATE SECURITISATION: THE SAME TAX REGIME FOR REOCO AND SPV

The Decree-Law No. 34/2019 (hereinafter,  the “Growth Decree-Law, ratified, with amendments, by  Law No. 58/2019), has modified the Law No. 130/1999 regulating the securitisation of loans, in order to clarify some doubts of interpretation resulting from the last amendments to Law No. 130/1999 made by the Decree-Law No. 50/2017.

In fact, in the recent years, the attention of the legislator on securitisation transactions carried out by banks and financial intermediary has increased, in order to speed up the disposal procedures of non-performing loans (hereinafter, the “NPL”) and to comply with the capital reserve ratio established by regulatory authorities for carrying out the activities of issuing loans.

It is known however that the management of the NPL becomes particularly complex when they are secured by a mortgage on real estate because their collection is hindered by the long duration of the auctions and by the low adequacy of sale procedures.

It is for this reasons that the legislator has initially modified the law on securitisation with the above-mentioned Decree-Law No. 50/2017 (converted with amendments, by Law No. 96/2017), introducing art. 7.1 which provides for the possibility to set up companies operating in the real estate (hereinafter, “Real Estate Owned Company” or “Reoco”), in order to assist the Securitisation Companies (hereinafter, “SPV”). The Reocos purchase real estate (and registered movable property), including assets covered by finance leases, and manage them in order to increase their value and to satisfy the rights incorporated in the financial instruments issued by SPV, avoiding the devaluation deriving from the enforcement measures.

Despite such important innovation, until the entry into force of the Growth Decree-Law, there were many doubts concerning Reocos development. The most significant perplexities have revealed in the field of taxation, as evidenced by the recently Italian Revenue Agency’s replies No. 18 of 30 January 2019, in which it has been taken a restrictive position on Reoco. In fact, it has been said that the Reocos have to tax (IRES and IRAP) their annual results, i.e. the revenues that derive from the management and disposal of the assets described above.

The Growth Decree-Law seems to have another set, since it pursues the aim of facilitating the NPL management process.

Pursuant to what the law already stated (and states) – i.e. that the revenues which derive from the possession, management or disposal of the assets and which are transferred from the Reoco to the SPV are intended to satisfy exclusively  the rights incorporated in the financial instruments issued by the SPV (see art. 7.1., par. 4, Law No. 130/1999) – the Growth Decree-Law has now explicitly established that the above-mentioned revenues constitute a cover pool. It means that only the SPV and no other creditor can attack the revenues deriving from the management and disposal of the assets and the assets themselves. Therefore the legislator has implemented the asset segregation scheme (already provided for the SPV) for the Reoco. This significant innovation enables to overcome the fiscal uncertainties since it appears to recognize to Reoco the tax neutrality already applied to SPV.

Moreover, Growth Decree-Law has introduced a preferential tax regime concerning indirect taxes. In fact, the application of the registration duty, the mortgage tax and the cadastral duties is provided at a fixed amount (200 euros for each tax) in case of transfer to Reoco of real estate and registered movable property  (see art. 7.1., par. 4-bis) as well as for the subsequent transfer of such assets from the Reoco to third parties (see art. 7.1., par. 4-quarter). The third parties have to be: (i) subjects who carry out  business activities, provided that they declare the intention to sell the asset within 5 years; (ii) subjects who don’t carry out business activities and who meet the requirements for application of the special tax regime provided by Italian law in case of purchase of the first house.

The Growth Decree-Law (art. 7.1., par. 4-ter) provides for the application of the preferential tax regime set out by art. 35, par. 10-ter.1, Decree-Law No. 223/2006, i.e. the application at a fixed amount of the registration duty, the mortgage tax and the cadastral duties also, to the transfers of the assets covered by finance leases (which are terminated, also in case of insolvency proceeding brought against the lessee) to the Reoco. This rule was already specified, before the Growth Decree-Law, only for the transfers of the assets from the Reoco to third parties.

In conclusion, the legislator intervened on the subject of the securitisation of loans, providing significant clarifications on fiscal matters, in order to facilitate the use of the Reoco, which, before the legislative amendment, was perceived as a risk by the operators involved, because of the uncertainties regarding the tax regime applicable. Moreover, we need to consider that this legislative innovation has been requested also at a supranational level, to allow banks to manage in a correct and effective way the NPL and to dispose of it more quickly.

It is pointed out that, despite the Growth Decree Law’s clarifications, there remain significant concerns. For example, what is the most suitable method for the Reoco for carrying out the segregated liability, in order to benefit from the recent provisions?

In short, the new rules must be treated carefully, waiting for further regulatory and practices developments.