Modal Donation and Taxation: Commentary on Ordinance No. 8875 of 2024

The recent Ordinance No. 8875 of April 4, 2024, issued by the Court of Cassation, has raised important questions regarding the nature of modal donations and their taxation. This ruling fits into a complex regulatory context where the distinction between donation and income is crucial for the correct application of taxes. Let us analyze the content of this ordinance and its implications.

The Context of the Decision

The legal issue addressed by the Court concerned a case in which a mother had made a business donation to her son, imposing the burden of paying a sum to the father. This situation led to litigation regarding the taxability of the amounts paid to the third party, which, according to the contested ruling, had been considered as income assimilated to that of dependent employment, pursuant to Article 50 of the T.U.I.R.

In general, a modal donation in favor of a specific third party constitutes a double donation, one made in favor of the donee and the other in favor of the beneficiary, which realizes the patrimonial enrichment of the latter through the material intermediation of the donee, so that the sums paid to the third party in fulfillment of the burden cannot be qualified for tax purposes as income assimilated to that from dependent employment taxable under Article 50 T.U.I.R. (In this case, the Court of Cassation overturned the contested ruling which, regarding a business donation from the mother to the son with the provision of the obligation to pay a sum in installments to the father, had deemed the taxability of the periodic payment made to the third party under the cited norm without assessing the liberal nature of the modal provision emerging from the donation deed itself).

The Liberal Nature of the Modal Donation

The Court clarified that, in the presence of a modal donation, a double donation is realized: one in favor of the donee and one in favor of the beneficiary. This distinction is fundamental because it implies that the sums paid to the third party, in fulfillment of the burden, cannot be considered as income from dependent employment. The decision is based on principles of civil law, particularly Articles 769 and 793 of the Civil Code, which govern donations and their modalities.

  • The modal donation creates patrimonial enrichment for the beneficiary.
  • The sums paid for the fulfillment of the burden are not taxable as employment income.
  • The Court overturned the contested ruling, considering the liberal nature of the donation not evaluated.

Conclusions

In conclusion, Ordinance No. 8875 of 2024 represents an important clarification regarding modal donations and taxation. The Court of Cassation reiterated the need to consider the liberal nature of donations, avoiding improper equating with income from dependent employment. This ruling provides valuable guidance for professionals in the legal sector and for taxpayers, marking a significant step in the protection of the rights of donees and beneficiaries.

Bianucci Law Firm