The sale of an Italian hotel and its quotas (i.e. shares) led to a complication in registration tax.

The buyer had initially been advised that they would attract €200 registration tax on the acquisition of quotas, and 22% recoverable VAT (plus 2% mortgage and cadastral taxes) on the purchase of the hotel. However, a risk was identified whereby the Italian tax authorities could challenge this treatment on the basis that the acquisition could be classified as a “unitary sale of a business” and charge a 9% registration tax on the hotel and 3% registration tax on the quotas (all unrecoverable).

Italian advisors stated that there was a 2019 ruling on a similar case (with worse facts), which held that such a transaction would not be viewed as abusive and so the tax authority would not be able to challenge the tax treatment of the transaction. The advice was therefore that (provided we do not cover the valuation element) the risk was good with strong arguments. Based on this, and our own review of the advice received, we were able to offer an insurance solution.