Exceptions to the forfeiture of tax benefits in case of renting the fund before the five-year period from the purchase

The main instances of forfeiture of the favorable tax regime, with effects retroactive to the time the deed was signed, are explained in Art. 7 l. 604/1954, which provides for the forfeiture of benefits for a claimant who has voluntarily alienated the land or partial rights to it purchased, or who has ceased cultivating it directly before five years have elapsed since the purchase of the real right that is the subject of the subsidized contract.

Indeed, in the event of alienation, lease to third parties or cessation of farming before this time period has elapsed, the underlying purpose of the provision of the subsidized scheme to encourage the establishment and/or rounding out of farming property would be thwarted.

It is precisely the latter assumption that has allowed for further consideration and resolution regarding the applicability or non-applicability of the penalty of forfeiture in cases where the direct farmer establishes an agricultural corporation and grants the leased land to it before the five-year period has expired.

The qualification as a direct cultivator, a requirement that must necessarily exist on the part of the acquiring party throughout the five-year period following the purchase, is the fulcrum around which the extensive interpretation of Art. 7 l. 604/54. Based on this assumption, it has been stipulated that the lease of the fund to an agricultural company of which the partner is a member is not in itself sufficient to result in the forfeiture of the application of the subsidized scheme, provided that the member continues to have the status of a direct farmer in the partner’s head and the exercise of agricultural activity.

This statement was arrived at through an analysis of the combined provisions of the aforementioned Art. 7 l. 604/54 – on forfeiture – and Art. 9 of the legislative decree concerning the Orientation and Modernization of the Agricultural Sector (Legislative Decree 228/2001). The latter article stipulates that the tax and credit rights and benefits already provided to individuals in possession of the status of direct grower or principal farmer should continue to be recognized and applied to partners in partnerships engaged in agricultural activities.

Where, therefore, a sole proprietor, direct cultivator or professional agricultural entrepreneur, as a partner, decides to establish together with other individuals–not necessarily direct cultivators–a partnership, to which he or she will lease the land acquired before the lapse of the five-year period, there will be no forfeiture if the aforementioned individual retains the status of direct cultivator and continues the exercise of agricultural activity within the same and even after the establishment of the partnership.

Continued land tenure, in fact, satisfies the rationale of incentivizing the formation and rounding out of small peasant property, which, by virtue of the above extensive interpretation, is not harmed by the direct cultivator subject, who has purchased under the subsidized scheme, forms a partnership to which the land is leased, and continues active tenure even as a partner.

Attorney Chiara Roncarolo

Attorney Maurizio Randazzo