New provisions on tax litigation

Budget Law 2023 includes an “enhanced” version of the tax amnesty already introduced in Italy with Law Decree no. 119/2018. These measures are aimed, on the one hand, at preventing disputes arising between the Tax Authorities and taxpayers and, on the other hand, at settling the pending litigations, regardless of whether they were promptly initiated with a tax court or other civil court.

The two provisions which most impact taxpayers are: (i) the possibility to settle tax payables entrusted to the tax collection agency between 01 January 2000 and 30 June 2022 and (ii) the possibility to settle tax litigations still pending at 01 January 203. 

According to the first provision, so-called “rottamazione quarter", tax payables entrusted to tax collection agents from 1 January 2000 to 30 June 2022 can be paid off by settling only the amount due as principal (and amounts possibly due as refund of expenses for enforcement procedures and notifications), without interest or penalties.

This favourable provision applies to all tax payables entrusted to a tax collection agency with the exception of: customs duties and taxes; import VAT; amounts due after the recovery of State aids; receivables originating from rulings of the Court of Auditors; fines and penalties for criminal convictions; driving penalties, with the exception of interest; social security contributions to pension funds, if they do not adopt this provision).

The provision above allows debtors to settle their payables and return to a “better fortunes” status, as regards both tax and social security contributions, thus preventing precautionary and/or enforceable procedures (besides allowing the termination of open enforcement actions); in addition, the interesting possibility is provided to settle payables in 18 instalments, the first due on 31 July 2023 and the last on 30 November 2027.

The possibility to settle tax payables entrusted to a collection agency is available also to those debtors who did not opt to do so when the possibility was previously granted, to those who applied but forfeited, or simply to those who applied but wish to further defer the payment of the residual amount due.

In short, this provision is aimed at helping all those businesses and individual taxpayers facing financial difficulties and at risk of suffering enforcement actions by the tax collection agent, which could further and irrevocably undermine them. An aspect of said provision needs to be specifically underlined, i.e. the forfeiture of the relevant benefits in case of late payment of even only one of the instalments for over 5 days. Instalments will therefore have to be managed very carefully, as it is not even possible to offset the amounts due with other tax credits by filing an F24 form.

The settlement of pending litigations concerns other aspects.

From a literal point of view, this provision seems to impact all litigations handled by tax courts (the only proceedings expressly excluded are those concerning the EU’s traditional own resources and amounts due as recovery of State aids) in which the Italian Revenue Office is a disputing party, pending in all member States and at all levels of jurisdiction - including those before the Court of Cassation, also due to adjournment - as at 01 January 2023.

In case of proceedings regarding taxes, penalties and interest, disputes are settled as follows: pending appeals before the Court of first instance, with the payment of 90% of the taxes due; judgements of the court of first instance (filed by 01 January 2023) in favour of the taxpayer (provided that it is the last judgement filed), with the payment of 40% of the taxes due; judgements of the court of second instance (filed by 01 January 2023) in favour of the taxpayer (provided that it is the last judgement filed), with the payment of 15% of the taxes due; tax litigations pending before the Court of Cassation in which the Revenue Office is the losing party in all previous instances, with the payment of an amount equal to 5% of the value of the taxes due; in all other cases, with the payment of 100% of the taxes due (e.g. when the taxpayer is the losing party in the last judgement issued). Disputes concerning only penalties (not related to an underlying tax) can be settled with the payment of 15% of the amount in case of judgement in favour of the taxpayer in the last judgement issued (and filed by 01 January 2023) and with the payment of 40% of the penalties in all other cases.

Also in this case, in order to help taxpayers in financial distress, the possibility is granted to settle the payment in 20 quarterly instalments for the same amount (the first one due by 30 June 2023).

Two “critical” aspects of the dispute settlement above need to be highlighted.

The first one is the uncertainty regarding the possibility to settle disputes concerning tax bills deriving from an automatic control on tax returns (typically, those disputing amounts stated but not paid). From a literal point of view, the provision also seems to include litigations against these deeds. The explanatory report, however, limits the measure only to “enforcing” deeds.

However, it is deemed that these disputes should be included within the scope of the law. Primarily, because the legitimacy case law has repeatedly highlighted that the explanatory report is not relevant since each law must be interpreted according to its objective content, while preparatory activities are not decisive for its interpretation. Secondly, because the Court of Cassation clarified that disputes concerning tax bills taxes indicated by the taxpayer in the tax return can be settled without any correction made by the office, since such tax bills represent the first deed received containing the claim and, therefore, they can be qualified as "enforceable”.

The second aspect concerns the impossibility to settle disputes by offsetting amounts due in F24 forms. Though this provision can be justified, in relation to “rottamazione quater”, by the material impossibility to promptly verify whether the credit to be offset is authentic and existing, as concerns the settlement of pending litigation – where Revenue Office is in the front line in checking the regular settlement and notifying any refusal – this need appears less binding and, considering the current socio-economic context, the adoption of a less restrictive regulation would have been desirable.