Purchase and sale with retention of title "retention of title agreement"

The civil code deals with 'sale with retention of title' in article 1523, which, regulating the 'sale in installments' of movable goods, establishes that «in the case of sale in installments with retention of title, the buyer acquires ownership of the thing paid for with the payment of the last installment of the price, but assumes the risks from the moment of delivery»; moreover, the 'sale with retention of title' contract can not only be peacefully used for contracts involving real estate but also in any other case of payment subsequent to the time of stipulation of the contract, and therefore not only in the case of postponed payment due to the installment of the price.

In other words, the 'sale in installments' is not the exclusive contractual scheme in which a 'sale with retention of title' can be framed.

Through the 'sale with retention of title' contract, the selling party therefore 'guarantees' itself against non-performance by the counterparty, retaining ownership of the goods covered by the contract itself until it receives the balance of the price due.

If, therefore, from a civil point of view, the sale with retention of title is mostly reconstructed as a particular case belonging to the more general category of contracts subject to a condition precedent (the event deduced in the condition is, in fact, the payment of the price), the tax legislator (with the evident aim of avoiding easy expedients on the part of the more 'shrewd' taxpayers) has provided that the contract of sale with retention of title be taxed from the outset (as a contract definitively conditional on non-payment of the price) and that is with the imposition that would be applicable if the contract did not contain the retention of title clause: in fact, for tax purposes, the clause of the sales contract, with which the translation effect is postponed to the payment of the last installment of the price (pursuant to the aforementioned article 1523 of the civil code), is qualified for tax purposes as not considered in terms of a clause containing a suspensive condition (article 27, paragraph 3, TUR), with the effect that the contract in question must be registered with the application of the proportional tax (without therefore being able to tax the deed, as happens for the suspensively conditioned deed, with the fixed tax and postpone the payment of the proportional tax until the moment in which the condition occurs).

In other words, it is a contract which, under the from a civil perspective, it is subject to the condition precedent of full payment of the price, while, from a fiscal perspective, it is a contract that immediately produces its effects (and to which, therefore, the consequent taxation is applied, which, as happens in the case of the resolutely conditional contract, remains definitively acquired by the treasury, whether the condition occurs or the condition is absent, i.e. whether the translational effect is fulfilled or not).

The rule referred to in Article 27, paragraph 3, TUR, is in short an anti-avoidance rule (also based on the consideration that the transfer of ownership is connected not to an event extraneous to the sphere of the contracting parties but to the event, planned from the outset, of the full payment of the price by the buyer), as it is aimed at avoiding the circumvention of the tax which could be achieved through the use of a contractual scheme which allows the legal and material availability of the asset from the moment of stipulation of the contract (in other words: if Tizio sells to Caio with retention of title, and if Caio then in turn intends to resell the asset, Caio could never 'redeem' the property, despite paying the full price and having obtained material availability, but indicate to Tizio the new buyer Sempronio; and Tizio could in turn resell the asset to Sempronio without the transfer between Tizio and Caio having been taxed, and so on.

From the fact that, from a tax perspective, sales with retention of title are considered not to be subject to a condition precedent (art. 27, paragraph 3, TUR, with the consequence that they cannot be registered with the fixed tax, but must be registered as if the translation effect had already occurred at the time of stipulation of the contract) it follows that:

in the case of termination of a sales contract with retention of title due to non-payment of the price, the contract with which the termination is agreed, resulting in the reconveyance of the asset which is the subject of the terminated contract, must be subject to proportional registration tax, with the rate envisaged for real estate transfers

if the contract of sale with retention of title is terminated due to non-fulfillment, since it is (fiscally speaking) the termination of a contract subject to the resolutive condition of non-full fulfillment of the obligation to pay the price by the buyer, the verification of this resolutive condition (a condition already present ab origine in the contract which could be terminated due to non-fulfillment) should not generate (art. 28, paragraph 1, TUR) the application of any taxation in a proportional manner. 

Sale with retention of title and 'FIRST HOME' BENEFIT

For the application to the 'sale with retention of title' contract of the relief for the purchase of the 'first home' it is therefore necessary to take into account that the immediate taxation received by this contract at the time of its stipulation evidently determines the need for the contract in question to already contain all the declarations that the law requires for the granting of the relief and that at the date of its stipulation all the other conditions required by law for the purpose of obtaining the tax benefit also exist.

Furthermore, given that the translation effect is civilly postponed to the moment of the occurrence of the condition represented by the payment of the entire price, it does not appear implausible to think that (where the conditions for the benefit do not yet exist at the moment of stipulation of the contract with retention of title, but it is foreseen that they will exist upon the fulfillment of said condition), in the contract with retention of title the buyer releases the required declarations, but with reference to the moment in which it will occur the translation effect; essentially, also replicating for this case the same treatment that the law expressly provides (referring to "the moment in which the translation effect is achieved": paragraph 2 of Note 11-bis to article 1, TP1) for the case of the preliminary contract which provides for advance payments taxable at VAT.

In the mirror situation, i.e. in the situation in which the conditions for the benefit already exist at the time of signing the contract, but no longer apply when the translation effect occurs (think of the case of an inherited purchase achieved in the meantime of the payment of the instalments), the benefit granted at the time of registration should remain stable and therefore not suffer any consequences.

Finally, the aforementioned particular nature of the sales contract with retention of title requires the examination of two complex issues, to answer the following questions:

Should the failure to verify the translation effect due to non-fulfilment, which occurs within five years following the signing of the contract, be equated with the intra-five-year sale, with application of the related consequences in terms of revocation of the benefit benefited from at the time of purchase?

during the payment period of the installments (and therefore before the translation effect occurs), can the seller make a new subsidized purchase legitimately declaring himself 'impossible'?

Could the buyer, even declaring himself 'impossible', make, with the benefit of the 'first home' relief, a purchase different from the one planned with the signing of the sales contract with retention of title (thus abandoning the relief on the latter)?

Well, in case a) it should be noted that from a fiscal point of view, the contract of sale with retention of title is, as mentioned, to be considered immediately effective and subject to the resolutive condition of the non-full fulfillment of the obligation to pay the price by the buyer, so that the verification of this resolutive condition (a condition already present ab origine in the contract which could be resolved due to non-compliance) does not generate the application of taxation in a proportional manner and therefore, much less, can it constitute a case of intra-five-year alienation from which derives recovery of higher tax and application of sanction (the only consequence remains that the tax paid upon stipulation of the contract which was subsequently terminated cannot be requested for reimbursement, despite the non-transfer of ownership, as it remains definitively confiscated by the treasury coffers, because it was due following the mere stipulation of the contract which then, from a civil point of view, did not unfold its planned translational effectiveness).

In case b), in the period of payment of the installments, the seller, despite the fact that he is, from a civil point of view, in continuing ownership of the property which is the subject of the contract of sale with retention of title, is probably to be considered (having been paid, for the stipulation of that contract, a transfer tax) no longer fiscally the owner of the rights which are the subject of the contract of sale with retention of title (since they have been subject to alienation, albeit from a fiscal point of view only), so that he should be able to legitimately make, having completes the purchase of a home, the declaration of 'impossibility' required by the law on the 'first home' subsidy as a prerequisite for the granting of the subsidy itself.

Vice versa . It does not appear that the buyer can declare himself to be 'impossible' (during the price installment period) since, although he does not have civil ownership of the rights covered by the contract of sale with retention of title, he has still made a purchase for which he has discounted a transfer tax, calculated with the application of the rules on the 'first home' subsidy.