Executive summary

On 23 October 2018, Italy’s Council of Ministers enacted a Law Decree (the Decree) which provides for urgent measures on tax matters. The Decree was published in the Official Gazette on 24 October 2018 and it is immediately in force although it must be converted into Law by the Italian Parliament within 60 days. In the meantime, it is possible that amendments may be inserted even though it is likely that its key provisions will remain the same.

The most relevant tax measures may be summarized as follows:

1. Settlement of tax audit reports
2. Settlement of tax assessments
3. Settlement of tax collection deeds
4. Annulment of tax debts up to €1,000
5. Settlement of tax collection deeds concerning the “own resources” of the European Union (EU)
6. Settlement of pending tax litigations
7. Settlement of consumption taxes
8. Special amended tax return

Detailed discussion

Settlement of tax audit reports (Art. 1)

Tax audit reports (PVC), delivered to taxpayers before 24 October 2018 (the date of the Decree publication), may be settled, provided that:

• No subsequent invitations and/or tax assessments are made to the taxpayer.
• The PVC is related to income taxes and/or additional taxes, social security contributions, withholding taxes, substitute taxes, regional tax on productive activities, tax on foreign real estate and financial activities and valued added tax (VAT).

This procedure allows the taxpayers to pay only the additional taxes requested by the PVC, without penalties and interests.

To benefit from the settlement, the taxpayers must file an amended tax return by 31 May 2019 and pay, by the same date, all the corresponding taxes due (in a lump sum or in three equal monthly installments).

In the case of failure to settle the PVC regarding the fiscal years (FYs) up to 31 December 2015, the Italian Tax Authority (ITA) may issue the related tax assessment relying on an extension of the ordinary statute of limitations for an additional two years.

Settlement of tax assessments (Art. 2)

Along with the Decree’s law provisions, the Regulations of 9 November 2018 and 13 November 2018, issued by the Director of the ITA, have established the procedural guidelines to implement the settlement at stake.

The tax assessments, the deeds challenging the undue tax credits, and the invitations issued to appear before the ITA may be settled, if:

• The mentioned deeds were notified to the taxpayer (and the Settlement deeds were signed) before 24 October 2018; and
• On the same date:
  • The tax assessments and the deeds challenging undue tax credits are still pending for the appeal
  • The invitations are not ordinarily settled or followed by a tax assessment

Through this procedure, taxpayers shall only pay the additional taxes requested by the ITA, without penalties and interests.

The settlement is finalized by paying the challenged amount in a single payment or through 20 equal three-monthly instalments, within 30 days from the entry into force of the Decree (i.e., 23 November 2018) or, if longer, within the term set forth for filing the appeal.

The deeds issued in the so called “voluntary disclosure procedure” framework do not fall within the scope of such a settlement procedure.

Settlement of tax collection deeds (Art. 3)

The taxpayer may settle all tax collection deeds whose execution have been attributed to the Tax Collector during the period ranging between 1 January 2000 to 31 December 2017 (so-called Rottomazione-ter).

The settlement allows the taxpayer to pay just the additional taxes challenged, the related interest and collection fees, without penalties or interest for late payment. The payment has to be made by 31 July 2019 either in a lump sum or in 10 equal bi-annual installments.

In order to benefit from this settlement, the taxpayer has to file a request by 30 April 2019. By 30 June 2019, the ITA shall communicate to the applicants the exact amount due (in a single payment or through installments) and all the pending tax litigation procedures against such deeds must be terminated.

With reference to the taxpayers who benefitted from the previous version of this settlement (so called Rottamazione-bis, provided by the Law Decree 148/2017), the Decree sets forth specific rules for the taxpayers not fulfilling all the payments under Rottamazione-bis and entitled to benefit from the new Rottamazione-ter.

Annulment of debts (up to €1,000) (Art. 4)

The annulment automatically applies to debts inserted in the collection deeds whose execution has been attributed to the Tax Collector from 1 January 2000 to 31 December 2010, up to the amount of €1,000 including tax, interests and penalties.

The annulment applies immediately without need for any request or payment by taxpayers.

Settlement of the tax collection deeds concerning own resources of the EU (Art. 5)

The taxpayer may settle debts resulting from the collection deeds whose execution has been attributed to the Tax Collector in the period ranging from 1 January 2000 to 31 December 2017.

The debts have to concern VAT paid on import and/or the traditional own resources of the EU as set out in Article 2 paragraph 1, letter (a), of Council Decisions 2007/436/EC, Euratom dated 7 June 2007 and 2014/335/EU, Euratom of 26 May 2014 (i.e., custom duties on EU imports, resources based on VAT and calculated as a percentage of Country VAT; resources based on Gross Domestic Product (GDP), and calculated as a percentage of the GDP).

In order to benefit from this settlement, the taxpayer has to file a request according to Article 3 of the Decree.

This procedure allows taxpayers to pay only the taxes, the interest for late payment and the collection fees, arising from the collection deeds. For debts consisting of the traditional own resource of EU, the taxpayer is due to pay the following further interest:

• From 1 May 2016 until 31 July 2019, the interest due for late payment
• From 1 August 2019, interest at the rate of 2% per year

The taxpayer can pay in one single payment or by installments.

Settlement of pending tax litigations (Art. 6)

Tax litigations still pending, including those before the Supreme Court, can be settled if they meet the following requirements:

• The ITA has to be a party of the tax litigation
• The appeal has to be filed before the First Degree Tax Courts by 24 October 2018
• At the date of submission of the settlement request, the tax dispute has to be still pending (i.e., not concluded with a definitive decision)

The admission request has to be submitted by 31 May 2019 and the ITA may reject the request by notifying its decision to the taxpayer by 31 July 2020.

In order to settle litigation, taxpayers have to pay:

• The higher taxes assessed, net of any interest and penalties, whenever the litigation is pending before the First Degree Tax Court and/or has been concluded with a favorable decision for the ITA
• 50% of the taxes assessed, net of interest and penalties for litigation concluded with a favorable decision for the taxpayer at first instance
• 20% of the tax, net of interest and any penalties for litigation concluded with a favorable decision for the taxpayer at second instance
• For litigation exclusively related to penalties not connected to the tax: (i) 15% of the penalties in the case of a decision favorable for the taxpayer in the last or in the only one decision issued by 24 October 2018; and (ii) 40 % in all the other cases
• For litigation exclusively related to penalties connected to the tax: no penalty is due provided that the related taxes have been completely paid or settled

The deadline sets forth for the tax appeals against the deeds falling within the scope of the settlement, which expires on 24 October 2018, are suspended for nine months until 31 July 2019.

Taxpayers benefitting from this procedure, have to pay the amounts as above in a single payment by 31 May 2019 or in installments. In this latter case, the first installment has to be paid by 31 May 2019.

Settlement of consumption taxes (Art. 8)

The Decree provides the possibility to settle certain consumption taxes due by 31 December 2018 and for which no definitive judicial decision has been filed.

Taxpayers have to pay only 5% of the amount due, net of interest and penalties. The payment is due in 60 days starting from the communication (concerning the indication of the amount due) issued by the Customs Agency.

The admission request has to be filed by 30 April 2019. Such request suspends for 90 days the timeline set forth to file the appeal against the tax deeds and the collection deeds related to the consumption tax, as well as judicial decisions regarding such deeds.

The Custom Agency has to notify its approval of the admission request within 120 days from the request and the taxpayer has to pay within the following 60 days, in a lump sum or by installments up to a maximum of 120 monthly installments, by providing a guarantee.

Special amended tax return (Art. 9)

By 31 May 2019 the taxpayer may file a special amended tax return in order to correct incorrect tax returns that meet the following criteria:

• Filed by 31 October 2017
• For corporate income tax and related additional taxes, VAT, tax on regional productive activities, substitutive taxes, withholding taxes and social security contribution purposes
• For which the integration of the taxable basis does not exceed €100,000 for each FY (or 30,000 where the declared taxable basis is lower than €100,000 or due to the existence of tax losses) and in any cases 30% of the declared taxable basis
• Which, as of 24 October 2018 are still subject to potential tax assessment

and provided that:

• The taxpayer has filed the tax returns for all FYs ranging between 2013 to 2016 and must not be aware of accesses, inspections, audits, invitations or questionnaires or of the starting of any tax assessment activity or criminal tax proceedings related to the item to be amended
• The amendment is not aimed at disclosing financial activities or assets established or held abroad

In order to finalize the procedure, the taxpayers have to pay by 31 July 2019 a substitute tax at a 20% rate on the higher taxable basis declared (or, for VAT, a medium rate), without penalties, interest and other ancillary charges. The payment may be made in a lump sum or in 10 bi-annual instalments (the first installment shall be paid within 30 September 2019).

For additional information with respect to this Alert, please contact the following:

Studio Legale Tributario, Tax Controversy, Milan

• Maria Antonietta Biscozzi | maria-antonietta.biscozzi@it.ey.com
• Pasquale Cormio | pasquale.cormio@it.ey.com
• Enrico Ceriana | enrico.ceriana@it.ey.com

Studio Legale Tributario, Tax Controversy, Rome

• Paola Lumini | paola.lumini@it.ey.com
• Umberto Iannarilli | umberto.iannarilli@it.ey.com
• Raffaele Sgambato | raffaele.sgambato@it.ey.com
• Michaela Antonella Prencipe | michela-antonella.prencipe@it.ey.com

Ernst & Young LLP, Italian Tax Desk, New York

• Emiliano Zanotti | emiliano.zanotti2@ey.com
• Fabrizio Iachini | fabrizio.iachini1@ey.com

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