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 is part of a complex regulatory framework where the distinction between donation and income is crucial for the correct application of taxes. Let us therefore analyze the content of this ordinance and its implications.

The Context of the Decision

The legal issue addressed by the Court concerned a case where a mother made a business donation to her son, but imposed the burden of paying a sum to the father. This situation led to a dispute over the taxability of the sums paid to the third party, which, according to the appealed judgment, had been considered as income assimilated to dependent employment income, pursuant to art. 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 results in the patrimonial enrichment of the latter through the material intermediation of the donee. Therefore, the sums paid to the third party in fulfillment of the burden are not classifiable for tax purposes as income assimilated to dependent employment income taxable under art. 50 T.U.I.R. (In this case, the Supreme Court quashed the appealed judgment which, in relation to a business donation from the mother to the son with the provision of the burden to pay a sum periodically to the father, had considered the taxability under the aforementioned provision of the periodic allowance paid to the third party, without assessing the liberal nature of the modal disposition emerging from the donation act itself).

The Liberal Nature of Modal Donation

The Court clarified that, in the presence of a modal donation, a double donation occurs: 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 dependent employment income. The decision is based on principles of civil law, particularly on articles 769 and 793 of the Civil Code, which govern donations and their modalities.

• Modal donation creates patrimonial enrichment for the beneficiary.
• Sums paid for the fulfillment of the burden are not taxable as employment income.
• The Court quashed the appealed judgment, deeming the liberal nature of the donation to have been unassessed.

Conclusions

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