At the beginning of the new year, we cannot but deal with a topic which is very ‘dear’ to terminal operators operating in Italian ports, namely the cadastral registration of real estate properties within ports and the relevant payment (or non-payment) of the Italian municipal property tax (“IMU”).
Italian Law no. 205 of 27 December 2017 (“2018 Budget Law”) has introduced, effective from 1 January 2020, new classification criteria for certain real estate properties located in ports of national and international economic importance.
Indeed, from 1 January 2020, “quays and uncovered areas of ports of national and international economic importance falling within the competence of the Port System Authorities [...], used for the port operations and services referred to in paragraph 1 of Article 16 of the same law [n.d.r. Law No. 28 of 28 January 1994], the related road and railway infrastructure, as well as depots located therein strictly functional to the aforementioned port operations and services, represent real estate properties for special use, to be registered with the Land Registry in category E/1, even if granted under concession to private entities” (see Article 1, par. 578 of 2018 Budget Law).
2018 Budget Law further states that “Category E/1 must also be used for the registration of quays and uncovered areas of said ports that are used for passenger services, including cruise passengers” (see Article 1, par. 578 of 2018 Budget Law). However, the cadastral census excludes facilities intended for tourist and leisure services and cruise activities from the E group categories.
In order to ensure uniformity of cadastral classification between real estate units already registered with the Land Registry and those subject to the declaration of new construction, paragraph 579 of Article 1 of 2018 Budget Law provides for the possibility of filing, as of 1 January 2019 (but still with effect from 1 January 2020), cadastral updating deeds, for the revision of the classification of properties already registered, in compliance with the criteria set out in paragraph 578 mentioned above.
The introduction of such regulations seems to be an attempt by the legislator to put order in the IMU issue in Italian ports, but only as far as the future is concerned. For the past, unfortunately, the uncertainty continues to remain, forcing the concessionaires of port terminals to continue to defend their rights before the appropriate fora.
By Circular no. 16/E of 1 July 2019 ("Circular")[1], to which reference should be made for purely practical information relating to cadastral registration and updating procedures for real estate properties already registered with the Land Registry, the Inland Revenue Office tried to clarify some crucial aspects of the provision included in 2018 Budget Law.
First of all, it was made clear that the regulatory provision does not constitute an authentic interpretation rule and therefore does not apply to the past and its fiscal effects will only be applicable from 1 January 2020.
It was then clarified that this provision applies to buildings located within ports of national and international importance, included in the list contained in Annex A to Law No. 84 of 28 January 1994 . The ports listed in Annex A are those falling under the control of the fifteen Port System Authorities referred to in Article 6 of Law No. 84 of 28 January 1994[2].
The Circular further specifies that areas are considered “uncovered" even if they are provided – including on a permanent basis - with equipment functional to the performance of port operations and services (e.g. facilities for loading, unloading, transhipment and handling of goods or for the embarkation and disembarkation of persons and vehicles, shelving for the storage of goods or containers, facilities for the monitoring of thermo-hygrometric conditions of goods, shelter protection from weather, etc.).
As regards warehouses and their cadastral registration under category E/1, the Circular clarifies that:
a) in case of customs warehouses, the requirement of “strict functionality” is presumed to be met on account of the purpose underlying the specific suspensive and economic procedure authorized by the Customs Authority;
b) in case of non-customs warehouses, the requirement of “strict functionality” must be deemed to be satisfied if there is an authorization pursuant to Article 16 par. 3 of Law No. 84 of 28 January 1994.
Given all the above, the Circular underlines that the following must be considered excluded from the application of the provision of paragraph 578 of Article 1 of 2018 Budget Law and therefore from category E/1:
The Inland Revenue Office further specified that, in case of composite real estate properties (i.e. with different uses), it is necessary to understand whether it is possible to split the property into different units or whether the whole property should be considered as a single real estate unit[3]. In the first case, the individual property units will be registered with the Land Registry according to the most suitable cadastral categories, including - if applicable – category E/1. In the second case, instead, the entire property shall have to be registered with the Land Registry choosing the most relevant cadastral category depending on the prevailing use.
The provision introduced by 2018 Budget Law and the clarifications provided by the Circular are certainly important, as they finally give a clear interpretation of which are the properties that can be registered with the Land Registry under category E/1. Indeed, in the past, there have been different and conflicting case-law interpretations about the correct cadastral category to be attributed to the various real estate properties located in the port.
The 2018 Budget Law and the Circular might, however, even lead judges to believe that up until 31.12.2019 the IMU was due and the assets listed above could not be registered under category E/1. If this were the case, we would end up with the situation of the Legislator having basically adopted a retroactive provision for financial purposes (budget law) and capable of affecting the great deal of pending litigation (making it, as a matter of fact, useless), thus impacting on the independence of the judiciary.
It should be noted that similar initiatives taken by Italian lawmakers in the past in connection with the budget law were challenged by the European Court of Human Rights ("ECHR").
More specifically, the ECHR indeed ruled that "Financial considerations cannot by themselves warrant the legislature substituting itself for the courts in order to settle disputes[4]". The ECHR is not convinced that there are any "compelling general interest reasons " "capable of outweighing the dangers inherent in the use of retrospective legislation which has the effect of determining pending proceedings in favour of the State. In conclusion, the State violated the applicants' rights ... by intervening decisively to ensure that the outcome of the proceedings to which it was a party would be favorable to it” [5].
Given all the above, in practice, the importance of the cadastral category lies primarily in the fact that category E/1 is not subject to the payment of IMU. Therefore, appropriate cadastral registration of real estate property may result in saving on the costs to be incurred by terminal operators every year.
This article is for information purposes only and is not intended as a professional opinion.
For further information, please contact Ekaterina Aksenova o Mattia Salvatori.
[1] www.agenziaentrate.gov.it/portale/documents/20143/1677290/2019_07_01_CIRCOLARE_PORTI%2BDEF_circ 16.pdf/a82e488a-7909-5749-c07a-94b6eacdc7c5
[2] “Port" means the area defined by the Port Regulatory Plan (“PRP”) referred to in Article 5 of Law No. 84 of 28 January 1994 or, in the absence of a PRP, by the port planning instrument in force.
[3] According to Article 2, paragraph 1, of the Ministry of Finance decree No. 28 of 2 January 1998, “the real estate unit consists of a portion of a building, ... which, ... has the potential for functional autonomy”.
[4] See ECHR Judgment, Section II, 11 December 2012 (De Rosa and Others v. Italy).
[5] See ECHR Judgment, Section II, 11 December 2012 (De Rosa and Others v. Italy).
