Drafted by Carlo Romano and Marco Longobardi
The Court of Cassation with ordinance no. 6626 filed on March 1, 2022 issued a ruling, as part of a tax dispute, on tax breaks for Amateur Sports Associations (ASDs) as established by the previously in force Law no. 398/1991. It upheld that there is: i) the obligation to motivate the rulings of the Tax Court of second instance (CTR) and: ii) the individual and joint liability, as pursuant to article 38 of the Italian Civil Code, of the legal representative of the ASD for the tax debts of the association itself.
The Revenue Agency, following a tax audit against a “leader” (ASD) and nine other “connected” sports associations (ASDs), ordered distinct tax assessments for each entity on corporate income tax (IRES), VAT (IVA) and Regional tax on productive activities (IRAP) in relation to fiscal year 2004. The Revenue Agency issued notices of assessment also for the members and individuals who, having acted in the name and on behalf of the associations. It examined, based on declarations acquired during the tax audits (not included in the tax assessment) if the nine sports associations were involved in issuing invoices through an illegitimate intermediary. According to the Revenue Agency, the “leader” ASD declared only a minimal part of its revenues and benefited from the favourable tax regime for ASDs pursuant to the above-cited Law. Therefore, ASDs benefited illegally, according to the Revenue Agency, from tax benefits as established by the previously in force Law no. 398/1991 (i.e. flat rate’s taxation; no keeping of accounting records; no VAT tax return submission).
The second-degree decision
After hearing the joint appeals, the second instance judges (CTR Emilia Romagna sent. N. 486/2015), rejected the appeal of the “leader” ASD on the same grounds as the first instance judges. Moreover, according to Court’s decision, the Court of second degree did not re-examine the original evidence and assumed as proved the evasive architecture of the operation. The “leader” ASD, in proposing an appeal before the Supreme Court, raised, among other reasons, the omitted or ostensible motivation of the second instance Tax Court. Further it complained that the Tax Court of second instance, had not ruled on the illegitimacy of the tax assessments. Furthermore, the ASD alleged the violation and the false application of article 38 Italian Civil Code, when the second instance judges confirmed the joint and several liability of the legal representative of the ASD for the tax debts of the association itself although there was no proof of any further activity on behalf of the ASDs.
The Supreme Court decision
The Court of Cassation with the ordinance no 6626/2022, accepted the appeal of the ASD and in line with case law, ruled that the grounds for the appealed sentence were founded on to the first-degree sentence (so called “motivazione per relationem”) and were thus null and void due to a lack of motivation and the absence of an autonomous deliberative process. In fact, according to the Supreme Court, the Tax Court of second degree passively acknowledged the first instance decision, without any re-writing and re-examining the grounds raised in the appeal.
Furthermore, the Supreme Court considered the sentence invalid due to the violation and false application of Article 38 of the Civil Code, as the personal and joint responsibility of the legal representative of the ASD was erroneously recognized. While this liability, according to the Court, exists if the legal representative effectively acts on behalf of the ASD.
The Supreme Court, according to order no 6626/2022 confirms the validity of the so called “motivazione per relationem” to the sentence of first instance by the judges of the second instance if the latter carry out an independent assessment of the grounds for appeal and of the evidence. Otherwise, the appeal sentence is void due to an absolute lack of justification for decision. The order in question also takes on particular importance with reference to the personal and joint responsibility profiles of the legal representatives of the ASDs for the tax debts of the association. In fact, according to the Supreme Court, it is not enough to give prominence to the mere ownership of the office; instead, it is necessary to evaluate the actual performance, on behalf of the ASD, of negotiation activities with third parties (including sponsors). Therefore, the ASD should be represented, during tax audits or tax assessments, by a tax consultant in order to clarify and prove to Tax Police and Revenue Agency, the real role of the legal representative. The aim is to prevent that the liability jointly and severally for the tax debts of the ASD would be extended to the legal representative.
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PwC TLS Avvocati e Commercialisti
PwC TLS Avvocati e Commercialisti