Prepared by Carlo Romano, Michele Lenotti and Maurizio Foti
With the stamp of the State Accounting Service and the signature by the President of the Italian Republic, the draft bill of the Budget Law (“draft”) has been handed over to the Chamber of Deputies by the Government, commencing legislative process aimed at the final approval by the end of the year.
The stamped draft, which will obviously be subject to amendments and additions, unravels a number of measures encouraging the taxpayers to enter into settlements with the tax authorities, relating to the deeds of assessment, the notices of tax collection and the pending tax controversies.
Such draft, despite not final, is already driving choices and defensive strategies of the taxpayers and of the Revenue Agency.
On the other hand, if these measures are confirmed, they will certainly represent a good opportunity for taxpayers to reduce their debt to the Revenue Agency.
In fact, the taxpayer would benefit, depending on the different cases, from the cancellation or reduction of both penalties and taxes (the latter possibility is, however, provided for cases of settlement of tax controversies, but it will depend on the state in which the said disputes will be at the date of entry into force of the future budget law).
1. Settlement procedure of pending tax controversies
One of the main measures contained in the draft is the possibility for the taxpayer to settle tax controversies pending before courts at any stage of proceedings (even before the Supreme Court).
More specifically, the measure that the Government is planning (and which is fashioned on the settlement of tax controversies introduced in 2018 with Article 6 of the Legislative Decree no. 119/2018) would allow the taxpayer to settle pending disputes only by paying an amount based on the value of the dispute (the latter being the amount of disputed tax deficiency) and no penalty due.
However, should the taxpayer have been granted with a favorable decision before first-tier tax court (within the entry into force of the Budget Law), the amount to be paid will be further reduced to 40% of the value of the dispute; if the taxpayer has won the case before the second-tier tax court, the amount due to settle the dispute will equal 15% of the value of the dispute. Lastly, if the taxpayer holds favorable decision by both first-tier and second-tier tax courts, the due amount to settle the dispute will be 5% of the value of the dispute.
These percentages are applicable also where tax disputes exclusively relate to penalties, i.e. for alleged breaches of tax law with no outstanding tax debts at stake, unless that is the result of a previously made tax payment: in this event, the settlement will not require any further payment.
In order to evaluate the appeal of this measure, it will be necessary to consider how much has already been paid during the proceeding. In fact, the settlement will not entitle the taxpayer for a refund of the excess amounts even if it is possible to deduct what has already been paid.
In light of the draft bill, this settlement procedure will only affect tax disputes commenced with an appeal before first-tier tax court served to the counterparty by the entry into force of the budget law and for which no final decision has been delivered yet. Therefore, those taxpayers that are interested in the said settlement need to steadily align to the relevant requirements by the end of the year.
Disputes related to (i) taxes counting towards to the EU’s own resources (e.g. VAT on imports) and (ii) recovery of illegal state aids under European Union law are excluded from the settlement procedure.
As an alternative to the abovementioned settlement procedure, the draft bill also provides for the possibility of benefiting from a settlement before court (“conciliazione”), allowing the payment of penalties reduced to one eighteenth. The same penalties reduction, in addition to the payment of due taxes and interest, is applicable in the event that the taxpayer waives the litigation pending before Supreme Court.
2. Settlement of the deeds within the tax assessment process
The draft bill provides for the possibility to settle a number of deeds within the tax assessment process, i.e.: 1) the deeds of settlement (“accertamento con adesione”, literally “agreed settlement) referred to in Articles 2 and 3 of Legislative Decree no. 218/97 stemming from final tax audit reports delivered by March 31st, 2023; 2) the deeds of settlement following the invitations referred to in Article 5-ter of Legislative Decree no. 218/97; 3) the deeds of assessment, the adjustment notices, and the tax quantification notices that are still subject to appeal at the date of entry into force of the Budget Law and those served thereafter by March 31st, 2023; 4) the credit recovery notices, served by March 31st, 2023, still subject to appeal (but not yet appealed) at the date of entry into force of the Budget Law.
The benefits entailed by such measure consist of the payment of a reduced penalty (i.e. to one eighteenth) in addition to the due taxes and interest. The amounts may be paid lump sum or into installments (up to 20 on a quarterly basis).
3. Settlement of the notices of tax collection
The Government is also planning a new special settlement program concerned with debts entrusted to the tax collection agent from January 1st, 2000 to June 30th, 2022.
That would allow taxpayers to settle their debts toward tax collection agent by paying (even in installments) only the due taxes, without penalties, interest and collection fee.
The access to such settlement would also have immediate positive effects in relation to the tax collection enforcement as, for example, it would suspend payment obligations arising from previous outstanding deferments, prevent the registration of new administrative detentions and mortgages, (without prejudice to those already registered) and prevent the initiation of new enforcement procedures or the continuation of those already started.
4. Settlement procedure of the notice of tax deficiency and special amends for tax violations
The measure the Government is aiming at introduce would provide for a beneficial settlement of notices of tax deficiency by requiring the taxpayer to pay a reduced penalty of 3% (instead of full penalties) jointly with taxes, interest and additional amounts. The notices of tax deficiency falling within the scope of such measure are those issued pursuant to Article 36-bis of the Presidential Decree no. 600/73 and Article 54-bis of the Presidential Decree no. 633/72, pertaining to fiscal years 2019, 2020 and 2021, and provided that the relevant payment deadlines are not expired at the date of entry into force of the Budget Law.
Instead, with respect to tax returns relating to the fiscal year 2021 and to previous fiscal years, a different settlement measure would allow the taxpayer to regularize those tax returns by paying one eighteenth of the applicable penalties, in addition to the tax and interest due.
Furthermore, the Government intends to allow the taxpayer to regularize breaches of mere compliance rules and fulfilments, i.e. of a formal nature, that do not affect the calculation of the taxable base for the purposes of income taxes, value added tax and regional tax on business activities, by means of a lumpsum payment, currently EUR 200, for each fiscal year of the relevant breaches.
Conclusion
The package of measures that the Government has in mind for 2023 seems particularly advantageous for the taxpayer who, therefore, should start making proper evaluations based on his tax debt and interim outcome of the court proceedings.
For some of the aforementioned measures, the access will depend (in addition to the personal savings) on the timing of the actions that will be carried out by the Revenue Agency (e.g. the deeds of assessment to be settled must be issued by March 31st, 2023) or already carried out (e.g. the tax debts have to be handed over to the tax collection agent over years 2020-2022 as a precondition for access to the relevant settlement).
Instead for the settlement of the pending tax controversies, the taxpayer may play a more proactive role, without being subject to Revenue Agency’s conducts in evaluating the convenience of the settlement and the relevant requirements to be met. In fact, in order to access to the settlement of pending tax controversies, relevance must be given (i) to the date of service of the of the first instance appeal (by December 31st, 2022), and speed it up accordingly for those proceedings not started yet, and (ii) to all other procedural deadlines for subsequent appeals in order not to incur in their expiration with respect to all the proceedings that are already pending started.
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