Italian tax court refers post-Brexit fiscal rules on property to CJEU

A recent interlocutory order of the Como Court of First Instance for Tax Matters, adopted on June 8 2026, brings Italy’s rules for valuing foreign property under EU scrutiny. The court has referred their compatibility with the free movement of capital to the Court of Justice of the European Union (CJEU).

The reference concerns IVIE, Italy’s tax on foreign immovable property. Its implications extend beyond Brexit: it calls into question the justification for excluding foreign fiscal values solely because the property lies outside the EU and European Economic Area (EEA), where international cooperation may nevertheless allow those values to be effectively verified.

Article 19, paragraph 15 of Decree-Law 201/2011 generally determines the IVIE taxable base by reference to acquisition cost or, where unavailable, local market value. For property in EU member states or EEA states ensuring adequate information exchange, it instead prescribes the cadastral value determined and revalued locally for wealth or income tax purposes, with the ordinary rules applying if no such value exists.

The distinction concerns the measure of taxable wealth, rather than the rate. A uniform rate can produce substantially different liabilities when applied to different valuation bases.

Before the end of the Brexit transition period, the Italian Revenue Agency recognised council tax valuations for UK property in Circular 28/E of July 2 2012. From 2021, the UK’s exclusion from the statutory territorial category triggered the ordinary valuation rules. The reference questions whether that consequence is compatible with articles 63 and 65 of the Treaty on the Functioning of the European Union (TFEU).

Article 63 of the TFEU expressly protects capital movements between member states and third countries. Property investment falls within its scope. Brexit therefore changes the applicable legal context without removing Italian tax measures affecting UK investments from EU scrutiny.

Nor does Article 64 of the TFEU offer an obvious defence. Its standstill provision preserves specified restrictions existing on December 31 1993. The IVIE regime was introduced much later.

The relevant comparison is particularly clear within IVIE itself. Italian residents holding property in different foreign jurisdictions are subject to the same tax on the same category of wealth. Their situations cannot be treated as incomparable merely by restating the geographical distinction whose legality is disputed.

In Verest and Gerards (C-489/13), the CJEU addressed unequal property income valuation methods. Although that judgment concerned income taxation, its reasoning illustrates why the assessment of a restriction must examine the resulting burden, rather than nominal rates alone.

A closer territorial analogy is BA (C-670/21), decided on October 12 2023. The CJEU rejected an inheritance tax rule reserving reduced valuation to property within the EU or EEA. Neither judgment determines the IVIE issue, but both support scrutiny of valuation advantages allocated by location.

Article 65 of the TFEU permits certain distinctions and recognises legitimate enforcement interests. However, effective fiscal supervision cannot be invoked in the abstract: the restriction must be suitable and necessary to secure that objective.

The loss of cooperation under Directive 2011/16/EU does not, by itself, establish that relevant UK information has become unobtainable. Automatic exchange and exchange on request serve different functions. The legal question is whether the available arrangements permit effective verification of the particular valuation claimed.

This distinction is supported by BA, especially paragraphs 78–84, where the CJEU examined the authorities’ ability to obtain the necessary information under a tax agreement. Third-country relationships require their own analysis, but a different institutional framework does not invariably justify worse treatment.

For IVIE, the OECD–Council of Europe Convention on Mutual Administrative Assistance in Tax Matters is particularly relevant. Article 5 provides for information exchange on request, and Italy expressly includes IVIE in its Annex A notification. That offers a more precise basis for examining verification capacity than a general reference to international tax transparency.

The inquiry should therefore identify the information required, the legal route for obtaining it, and any actual impediment to verification. Where reliable official records can be checked through binding cooperation arrangements, excluding them solely by reference to geography appears difficult to reconcile with proportionality.

The UK context also separates two issues that should remain distinct: the suitability of the valuation method and the means of checking its application. Brexit did not itself alter the valuation system previously accepted for IVIE. Any enforcement justification must explain why the available safeguards are now insufficient.

This does not mean that every foreign assessment must be accepted, or that a cadastral figure is necessarily below acquisition cost. A claim requires an identifiable fiscal value satisfying the relevant substantive conditions and evidence of disadvantage under the statutory distinction.

Equally, EU law does not prescribe a universal property valuation model. The objection concerns Italy’s selective recognition of foreign fiscal values. It leaves room for proportionate documentation requirements and the rejection of figures that cannot be substantiated. A verification requirement directed at those deficiencies would be more closely connected to the stated enforcement objective than an absolute territorial exclusion.

The compatibility of the IVIE rules remains for the CJEU to determine. The reference nevertheless directs attention to whether excluding a foreign fiscal value is necessary to ensure effective tax supervision.

The case law discussed above and the applicable international cooperation framework suggest that the Italian tax authorities’ position requires more than reliance on the UK’s departure from EU administrative cooperation. Binding mechanisms for obtaining relevant information must be assessed on their actual scope and effectiveness. The absence of automatic exchange does not, without more, establish that a valuation cannot be reliably verified.

An approach centred on the suitability and verifiability of the foreign fiscal value would appear more consistent with that framework. It would preserve Italy’s legitimate enforcement interests while respecting the protection afforded by Article 63 of the TFEU to third-country investments. Although the court’s answer remains awaited, the availability of effective cooperation leaves limited scope for justifying an absolute territorial exclusion where proportionate verification requirements would achieve the same objective.