Tax litigation in Italy: overview

A Q&A guide to civil and criminal tax litigation in Italy.

This Q&A provides a high level overview of the key practical issues in civil and criminal tax litigation, including: pre-court/pre-tribunal process, trial process, documentary evidence, witness evidence, expert evidence, closing the case in civil and criminal trials, decision, judgment or order, costs, appeals, and recent developments and proposals for reform.

To compare answers across multiple jurisdictions, visit the Tax Litigation: Country Q&A tool.

The Q&A is part of the global guide to tax litigation. For a full list of jurisdictional Q&As visit www.practicallaw.com/taxlitigation-guide.

Contents

Overview of tax litigation

Issues subject to tax litigation

1. What are the most common issues subject to tax litigation in your jurisdiction?

The most common issues subject to tax litigation in Italy include:

  • Transfer pricing.

  • Tax abuse/avoidance.

  • Mergers and acquisitions.

  • Tax residence and/or permanent establishment issues.

Several famous international groups active in the e-commerce market (goods and services) have recently been under investigations by the Italian tax authorities regarding tax residence issues. The authorities seek to establish that, due to their Italian structure and the number of sales, these groups are tax resident in Italy, or have a permanent establishment in Italy.

Legislative Decree No. 128/2015 has introduced a new definition of tax avoidance (Elusione)/abuse of the law (Abuso del diritto) in the Italian tax system. In particular, tax avoidance is defined as "one or more transactions without economic substance which, despite formal observance of the tax laws, essentially procure undue tax benefits". The definition is based on the two following elements:

  • Transactions without economic substance, which means facts, documents and contracts, even connected, that do not produce significant economic effects other than tax benefits.

  • Undue tax benefits, which means any tax benefits that do not comply with tax laws principles.

Legislative Decree No. 128/2015 provides that all tax violations arising from an abusive/avoidance conduct cannot constitute a tax crime.

Under the Italian legal system, criminal and civil tax proceedings are wholly autonomous and subject to different rules. However, at the end of a tax crime investigation, Italian tax authorities are usually informed for the purpose of their consequent tax assessment. Similarly, the Italian tax authorities must inform the Public Prosecutor's office at the end of a tax inspection regarding any possible tax crimes.

Legislative framework

2. Outline the legislative framework and principal pieces of legislation governing both civil and criminal tax litigation.

Italy follows a civil law system. Therefore, Italian tax law is based solely on written sources at both national and European level.

The primary Italian source of law is the Constitution. European law can be considered as a primary source of law (as recognised by several decisions issued by the Constitutional Court). Other sources of Italian law must comply with primary sources of law.

Civil tax litigation

In addition to the Italian Civil Code and the Italian Civil Procedure Code, the following laws govern civil tax litigation:

  • Presidential Decree No. 917/1986 regarding the income taxes.

  • Presidential Decree No. 633/1972 regarding VAT.

  • Presidential Decree No. 600/1973 regarding the assessment procedures and withholding tax rules.

  • Legislative Decree No. 471/1997 and 472/1997 regarding penalties for tax violations.

Criminal tax litigation

The Italian Criminal Code and the Italian Criminal Procedure Code govern criminal tax litigation. The criminal procedure applicable to tax litigation is the same as that applicable for other criminal offences.

Tax evasion and other criminal tax offences

3. What are the key elements that constitute tax evasion and other main criminal tax offences in your jurisdiction?

Legislative Decree No. 74/2000 sets out all the tax crimes. As a general rule, the existence of a tax crime requires:

  • A tax violation.

  • The taxpayer's intentional conduct.

The most common tax crimes are:

  • Omitted/untruthful tax return (reato di dichiarazione infedele).

  • Fraudulent tax return (reato di dichiarazione fraudolenta).

  • Omitted tax payment (reato di omesso versamento).

The crimes of omitted/untruthful tax return and omitted tax payment are extinguished when the taxes due are paid before the start of the criminal trial (Legislative Decree No. 158/2015). For other tax crimes, voluntary payment of taxes reduces the applicable punishment.

Legislative Decree No. 128/2015 provides that all tax violations arising from an abusive/avoidance conduct cannot constitute a tax crime.

For further information on recent changes to tax crimes see Question 37.

 

Pre-court/pre-tribunal process

Assessment, re-assessments and administrative determinations in civil law

4. Outline the procedure for tax assessments, re-assessments and administrative determinations in civil law.

The Revenue Agency (Agenzia delle Entrate) is the public authority responsible for the administration of tax. In addition, other entities are entitled to administer taxes in specific areas, such as municipalities (which are responsible for the administration of municipal taxes on real estate properties) and the Customs Agency, which is responsible for the administration of custom duties.

Tax inspections are divided into:

  • Automatic tax inspections (Accertamento formale), aimed at checking the correspondence between the taxes due (as established in the tax return) and the amounts effectively paid by the taxpayer (Articles 36-bis and 36-ter, Presidential Decree No. 600/1973).

  • Case-by-case tax inspections, aimed at checking a taxpayer's tax return compliance with tax law (Article 37-43, Presidential Decree No. 600/1973).

If the interpretation of a tax provision is uncertain, a taxpayer can file a request for a ruling (Interpello) to the Revenue Agency, requesting the correct interpretation of the tax law. Following amendments that entered into force on 2015, there are four different categories of tax ruling:

  • Ordinary ruling (Interpello ordinario). This is a ruling on the interpretation of a tax law in the case of objective uncertainty regarding the application of this law to the taxpayer's specific case.

  • Probatory ruling (Interpello probatorio). This is a ruling on the existence of the requirements for the application of a particular tax regime claimed by the taxpayer.

  • Anti-abuse ruling (Interpello anti-abuso). This is a ruling on whether a potential transaction represents a case of abuse of tax law.

  • Disapplication ruling (Interpello disapplicativo). This is a ruling for the disapplication of specific disadvantageous tax provisions (such as restrictions on deductions, tax credits and so on).

Resolving disputes before commencing court proceedings

5. What are the main procedures used to resolve disputes before commencing proceedings in a civil court/tribunal?

Several procedures are available under Italian tax law before commencing court proceedings and/or in order to avoid such proceedings.

These procedures can take place at different stages:

  • Before the tax investigation. This procedure is the voluntary tax correction (Ravvedimento Operoso), which allows the correction of possible omissions or irregularities in the tax returns submitted or in the payment of taxes. Starting from 2015, it is also possible to apply for a voluntary tax correction after the conclusion of a tax investigation (including on an "invitation" by the Revenue Agency), and before the tax assessment. In the case of voluntary correction, the taxpayer must pay taxes, interest and a reduced penalty, ranging from one-tenth to one-fifth of the ordinary applicable penalty. This reduction depends on the stage at which the tax correction is made.

  • During/after the tax investigation. These procedures are:

    • self-defence (Autotutela), through which the Revenue Agency can cancel or reduce the tax assessment if the tax violation claimed does not comply with tax law. The cancellation/reduction can be annulled independently by the Revenue Agency or at the taxpayer's request. However, the submission of the request does not suspend the term for filing an appeal before the relevant provincial tax court. The cancellation/reduction can be carried out even if the judgment is pending or has already become final due to the expiry of the deadline for filing an appeal; and

    • voluntary tax correction (Ravvedimento Operoso) (see above), through which the taxpayer voluntarily accepts all or part of tax violations claimed, pay the amount due and reduced penalties. In the case of partial acceptance, the remaining tax violations subsist.

  • After the tax assessment. These procedures are:

    • tax settlement (Accertamento con adesione), which allows the taxpayer to settle the tax assessment before filing a tax appeal. The amount to be paid is set in an agreement between the taxpayer and the Revenue Agency at the end of a settlement procedure. This procedure can be activated either by the taxpayer or the Revenue Agency. The deadline to request tax settlement is 60 days from the notification of the tax assessment. If the parties reach an agreement, the contents of the agreement are set out in a written deed, which is signed by both parties. The tax settlement is not subject to appeal and cannot be modified by the Revenue Agency. In the case of settlement, the taxpayer will benefit from a reduction of penalties of up to one-third. The settlement procedure cannot last more than 90 days. If an agreement is not reached within that time, the taxpayer can file an appeal before the Tax Court (adding the 60 days from the notification of the tax assessment to the 90 days of the settlement procedure, this means that the taxpayer has 150 days to file an appeal); and

    • settlement of tax penalties (Definizione agevolata delle sanzioni), which allows the taxpayer to settle on the tax penalties only, paying one-third of the amount applied. For taxes and interest, the taxpayer can decide to file an appeal. In the event of a favourable decision of the tax court with regard to the taxes assessed, the taxpayer cannot request any refund of the settled penalties already paid.

  • During tax proceedings. The procedures that can take place during the tax proceedings are:

    • judicial settlement (Conciliazione giudiziale), which allows the parties to tax proceedings to settle the dispute before the tax court issues a decision. This procedure applies to all disputes and can be activated no later than the first hearing stage. If a settlement is reached, the agreement between the parties is reported in the minutes of the hearing and the tax court, after reviewing the agreement, declares the proceedings closed. If the agreement is considered inadmissible by the tax court, it must schedule a hearing date and the proceedings will continue as usual. In judicial settlement, the amount of taxes is set in order to close the dispute. Judicial settlement allows the taxpayer to obtain a reduction of 40% to 50% of the tax penalties and a set-off of expenses incurred for the judgment. Since the entry into force of Legislative Decree No. 156/2015, the judicial settlement procedure is also available in proceedings before the regional tax courts (previously, this procedure was only available at the provincial tax court level); and

    • conciliation (Mediazione), which is compulsory if a tax assessment is for an amount below EUR20,000. Taxpayers that intend to appeal against such an assessment must submit an application for conciliation. The application must contain a reasoned proposal to settle the taxes claimed. If the Revenue Agency does not accept the taxpayers' proposal, it will provide an alternative proposal. The taxpayer's application is treated as a formal appeal. This means that, other than the above proposal, it must comply with all the requirements for appeal (see Question 33). If the parties do not reach a settlement within a 90-day term from the presentation of the application, the taxpayer must make an application for appeal to the tax court within 30 days starting from the expiration of the 90-day term.

Elements of the offence in criminal law

6. What are the elements of the main criminal law offences in tax litigation?

See Question 3 for more information on the most common tax crimes.

Early resolution

7. What are the main procedures used for the early resolution of criminal law offences before trial?

Under Italian criminal law, plea bargaining (Patteggiamento) is available to avoid trial, but only in relation to minor crimes (that is, crimes punished by less than five years' imprisonment). Under the plea bargaining procedure, the taxpayer's legal counsel and the Public Prosecutor agree on a punishment before commencing the trial. Plea bargaining allows a reduction of up to one-third of the criminal punishment provided by law. Plea bargain must take place before the judge presiding over the preliminary hearing (Giudice per l'udienza preliminare).

The judge verifies the classification of the offence, and that the agreement includes an appropriate penalty.

It is also possible to request an abbreviated trial procedure (Rito abbreviato). In this case, there is a trial but the trial stages and the length of each stage are reduced. In the case of conviction, the taxpayer benefits from a one-third reduction of the applicable punishment.

 

Trial process

Format of the hearing/trial

8. What format does the hearing/trial take?

As a general rule, civil tax litigation is private, which means that provincial tax courts issue decisions only on the basis of the documents deposited and arguments proposed by the parties. Each party can request a public hearing up to ten days before the scheduled (private) hearing. Usually, parties request a public hearing.

Under the criminal tax procedure, the hearing is always public, except where the judge issues a specific decision if he considers it proper (for security reasons) to hold a private hearing (that is, with the sole attendance of the Public Prosecutor and legal counsel).

Civil tax litigation will take place if a party fails to attend. If a party fails to attend in criminal tax proceedings, the judge will postpone the hearing. If the party fails to attend again, the criminal tax litigation will take place in any case.

Role of the judge/arbitrator/tribunal members

9. What is the role of the judge/arbitrator/tribunal members in both civil and criminal tax litigation?

Civil tax litigation

Under Italian tax law, the tax courts have exclusive jurisdiction over all tax matters. Tax courts consist of:

  • Provincial tax courts (Commissione Tributaria Provinciale), at first instance.

  • Regional tax courts (Commissione Tributaria Regionale), at second instance.

The tax-related decisions that can be challenged include (Article 19, Legislative Decree No. 546/1992):

  • Tax assessments.

  • Deeds providing for the application of tax penalties.

  • Notices of payment.

  • Registrations of mortgages over real estate assets.

  • Deeds related to cadastral qualifications.

  • Denial of tax refunds, or penalties and interests not due.

  • Denial or revocation of benefits.

The tax courts must verify the procedural legality of the appealed decision and the substantive legality of the tax obligation (that is, that the tax violations claimed by the Revenue Agency are made out under tax law).

Decisions of the regional tax courts can be appealed to the Supreme Court (Corte di Cassazione).

Criminal tax litigation

The tribunals (Tribunale) (first instance) and the courts of appeal (Corte d'Appello) (second instance) have exclusive jurisdiction over all criminal tax trials. The competent tribunal is that of the place where the tax crime has been committed.

Decisions of the courts of appeal can be appealed to the Supreme Court (Corte di Cassazione).

Commencement of proceedings: civil law

10. What is the procedure for commencing tax litigation proceedings in civil law and/or a taxpayer appealing a decision of the tax authority?

Litigation is initiated by filing a tax appeal, which must contain the following information:

  • Provincial tax court to which the appeal is submitted.

  • Revenue Agency's office against which the appeal is filed.

  • Details of the tax assessment appealed.

  • Identification of the taxpayer and its legal representative.

  • Address of the taxpayer's residence, registered office or domicile.

  • Reasons for appealing.

  • Taxpayer's requests.

The appeal must be filed within 60 days starting from the date of receipt of the tax assessment. In the case of a tax settlement procedure, this term is extended to 150 days (see Question 5).

A taxpayer that starts a trial must pay a contribution for all the trial expenses. This contribution does not include legal counsel's fees. The contribution is paid on filing of the appeal before the relevant tax court. No other cost is otherwise incurred by the taxpayer. The amount of the contribution depends on the value of the dispute. As a general rule, the amount of the dispute is equal to the additional taxes requested from the taxpayer (in the tax assessment). The maximum amount of the contribution is EUR1,500.

 
11. Must a taxpayer pay the disputed tax before leave to appeal the tax authority's decision is granted?

In the case of an appeal, the Revenue Agency will request the taxpayer to pay one-third of the taxes and interest (but not penalties) claimed in the tax assessment.

Payments can be enforced after 270 days from notification of the tax assessment. The collection procedure starts with a notice of payment (Cartella di pagamento) issued by the tax collector.

To avoid advanced payment (that is, payment before a verdict that could recognise the taxpayer's case), the taxpayer can request a suspension of payment from the relevant provincial tax court. This request can be contained in the appeal notice or filed separately.

The provincial tax court will suspend the advanced payment where the payment may cause a serious damage to the taxpayer (periculum in mora) and the appeal appears to be well-grounded (fumus boni juris). The suspension remains until the date of the verdict.

With the introduction of the tax litigation reform (Legislative Decree No.156 of 24 September 2015) (see Question 36), a taxpayer can now request a suspension of advanced payment before the regional tax courts (second instance).

If the taxpayer loses the trial:

  • Before the provincial tax court, it must pay the amount fixed in the judgment (in any case not higher than two thirds of the taxes and interest claimed).

  • Before the regional tax court, he must pay the amount fixed in the judgment (including penalties).

The tax court cannot decide on split payments of the amount due. If the taxpayer wants to pay in instalments, it must make a request to the Revenue Agency.

Commencement of proceedings: criminal law

12. What is the procedure for commencing tax litigation proceedings in criminal law?

To prosecute a criminal tax offence, the Public Prosecutor (Pubblico Ministero) must formally include the taxpayer in the register of persons under investigation (Registro degli indagati). The investigation phase lasts for six months, with the possibility of an extension of up to 18 months.

After the investigation, the Public Prosecutor must send a specific deed (Avviso di conclusione delle indagini preliminari) to the taxpayer, who is entitled to reply with counter-arguments and to produce documents. All the arguments and documents are submitted to the preliminary hearing's judge, who will evaluate whether the prosecution has established grounds for trial.

Criminal prosecutions are conducted before tribunals at first instance and the courts of appeal at second instance.

Criminal and tax proceedings are independent from one another. This means that a final settlement with the Revenue Agency does not preclude the commencement of criminal proceedings.

Government response

13. How has the government responded to recent civil and criminal law cases to improve the court procedure?

See Questions 36 and 37.

Burden of proof

14. What is the burden of proof in both civil and criminal tax litigation proceedings?

The burden of proof in both civil and criminal tax litigation rests with the public authority.

However, in civil tax litigation, the Revenue Agency can use certain presumptions specifically set out under tax laws. When this is the case, the burden of proof shifts to the taxpayer.

In criminal tax litigation, which involves issues of personal freedom issues, the burden of proof rests on the Public Prosecutor (and is more stringent than in civil tax litigation).

The judge's final decision is based on the evidence and arguments submitted by the parties. To satisfy their respective burden, each party must produce the evidence necessary to prove their arguments.

Main stages

15. What are the main stages of typical court proceedings for tax disputes?

Civil law

The main stages of civil tax litigation proceedings are as follows:

  • The taxpayer must notify the appeal (Ricorso) to the Revenue Agency within 60 days from the notification of the tax assessment.

  • The taxpayer must produce the appeal and all required documents before the provincial tax court within 30 days from the notification of the appeal to the Revenue Agency.

  • The Revenue Agency must file its reply and produce the required documents before the provincial tax court within 60 days from the notification of the taxpayer's appeal.

  • A public hearing for the suspension of the tax assessment (if requested by the taxpayer) is scheduled by the provincial tax court, and the parties are informed of the date of hearing.

  • After the suspension hearing, another public hearing is scheduled (if requested by the parties) to discuss the merit of the tax assessment. The hearing is scheduled by the provincial tax court, and the parties are informed of the date of hearing.

  • Other documents must be filed 20 days before the date of the hearing.

  • Replies must be filed ten days before the date of the hearing.

  • A decision is issued after the hearing.

  • The verdict must be issued to the parties within 90 days from the date of the hearing.

The Revenue Agency is represented in the proceedings by its own officers. The Collector of Taxes is usually represented by external tax lawyers.

Criminal law

See Question 12.

 

Documentary evidence

Disclosure of documents in civil proceedings

16. What documents must the parties disclose to the other parties and/or the court in civil proceedings? Are there any detailed rules governing this procedure?

Each party can produce any kind of document that can be useful to prove its case.

There are no specific disclosure obligations (that is, each party is free not to produce documents that are deemed improper or prejudicial to its case).

The provincial or regional tax courts can request the parties to provide any further documentation that is necessary to decide on the tax dispute.

Special rules/considerations

17. Are there any special rules or considerations concerning the disclosure or discovery of documents in civil tax litigation?

There is no particular limitation on the production of documents in tax trials. The parties must only comply with the deadlines for submission indicated in Question 15, Civil law.

The information in documents issued by a notary or any other public officer is deemed to be true. To refute these documents, it is not sufficient to produce a contrary document, but a party must start a specific civil procedure called Querela di falso.

The communications between lawyers and their clients are protected from disclosure under the rules of professional secrecy.

Disclosure in criminal proceedings

18. What documents must the parties disclose to the other parties and/or the court in criminal proceedings? Are there any detailed rules governing this procedure?

The Public Prosecutor must submit to the tribunal (or court of appeal) all the documents collected during the preliminary investigation. These documents are available to the taxpayer and his legal counsel. Additionally, the accused taxpayer can produce any type of document that he deems useful to prove its innocence.

Special rules/considerations

19. Are there any special rules or considerations concerning the disclosure of documents in criminal tax litigation?

All the documents and evidence collected by the Public Prosecutor during the investigation must be made available to the tribunal and the taxpayer (who can use some of them to demonstrate his innocence).

Before the first hearing, the tribunal must evaluate the weight of the parties' evidence (considering the case at hand) and its legality (that is, whether it was obtained legally).

The information in documents issued by a notary or any other public officer is deemed to be true. To refute them, it is not sufficient to produce a contrary document, but a party must start a specific civil procedure called Querela di falso.

 

Witness evidence

Trial considerations

20. Do witnesses of fact give oral evidence or do they just submit written evidence? Is there a right to cross-examine witnesses of fact?

Civil law

Confessions and witness testimony are not admissible at trial. Witness testimony does not include third parties' statements recorded in the Tax Police's minutes or the Revenue Agency's audit reports. Instead, the Constitutional Court has classified these statements as indirect evidence. This means that such statements can be used as a basis of judicial decisions, provided that they are not the sole basis for the decision. Additionally, the taxpayer can produce written declarations issued by third parties, which will also have the value of indirect evidence.

Criminal law

In the criminal context, witness testimony is generally admissible. Both the parties and the judge can conduct an examination-in-chief and a cross-examination of witnesses. The criminal judge can exclude vexatious or irrelevant questions. In addition, the taxpayer's relatives can refrain from testifying.

Witness preparation

21. Provide a brief outline of the procedure for preparing witnesses in both civil and criminal cases. Are there any special or unique features to consider for witness evidence in criminal cases?

Civil law

Witness testimony is not admitted at tax trials. A taxpayer can produce written declarations issued by third parties, but these will be considered as indirect evidence (see Question 20, Civil law).

Criminal law

In criminal litigation, witness preparation is not allowed, as witnesses have the obligation to say the truth.

Hearsay evidence in civil and criminal trials

22. Are there any rules concerning the introduction of hearsay evidence in civil and criminal trials?

Civil trials

Confessions and witness testimony are not admissible at trial.

Criminal trials

In the criminal context, witness testimony is generally admissible. However, criminal trials on tax issues are based on written documents. Consequently, hearsay evidence has a very low evidential value.

 

Expert evidence

Expert reports in civil trials

23. What are the rules concerning the introduction of expert reports in civil trials?

As tax trials are documentary proceedings, both the taxpayer and the Revenue Agency can submit expert reports. The judge can evaluate expert reports and other elements and documents that have been filed during the tax proceedings.

The evaluation of documents is carried out in accordance with the general rules on the evaluation of proof, which require the exercise of careful and diligent judicial discretion.

Expert evidence in civil trials

24. What are the rules concerning the introduction of expert evidence in civil trials?

For complex matters, the tax courts can request technical advice from the tax authorities or other public administrations. Additionally, tax courts can appoint an expert (different from the parties' experts) to answer specific and technical questions. In this case, the parties can submit their comments on the answers given by the tax court's expert.

Tax courts are not bound by the answers given by experts they have appointed.

Expert evidence in criminal trials

25. What are the rules concerning the introduction of expert evidence in criminal trials? Is it possible to introduce expert reports?

Expert evidence and report

As judges of the criminal tribunals and courts of appeal often do not have a background in tax law, they can request an expert's opinion for clarification.

Experts can conduct investigations, collect data or make evaluations using their specific technical skills. The parties can also appoint their own experts and submit expert reports. Additionally, the parties' experts can be present during the investigations and can submit additional questions, comments and concerns to the court-appointed expert.

Special considerations

26. Are there any special considerations for introducing expert evidence/reports in both civil and criminal trials?

In both civil and criminal tax proceedings, parties are free to appoint an expert and to submit expert evidence or reports. The tax court's or tribunal's expert has an independent status and, as a consequence, its opinion has more weight than the parties' experts opinions on the determination of the court/tribunal decision.

 

Closing the case in civil trials

27. What are the rules governing the submission of both written and oral argument in closing a civil trial?

As tax trials are documentary proceedings, it is more effective to file written arguments. If the parties have requested a public hearing, they can submit oral arguments during the hearing.

All the grounds must be filed together with the appeal (that is, the taxpayer cannot add other grounds after filing the appeal). However, new evidence and arguments can be introduced at any stage of the trial (that is, any reasons in support of the grounds for appeal).

 

Closing the case in criminal trials

28. What are the rules governing the submission of both written and oral argument in closing a criminal trial?

The closing arguments in criminal tax prosecutions are the last opportunity for the parties to present arguments as to why the tribunal should decide in their favour.

In particular, the taxpayer's counsel will present legal and factual evidence to prove that no criminal offences have been committed, and that the prosecution has not showed any grounds for criminal conviction.

 

Decision, judgment or order

Civil law cases

29. What are the rules governing the issuance of a decision in civil cases?

In civil tax trials, the decision must include:

  • The names of the judge, of the parties and of the professionals representing the parties.

  • A short summary of the proceedings.

  • A summary of the parties' requests.

  • An explanation of the grounds for the decision.

  • The verdict (referred to as the dispositivo).

The relevant tax court is not obliged to explain the reasons for rejecting all the parties' grounds, but it is important that the decision specifies the crucial reasons for the judge's decision.

Decisions are written. They must specify the date of the verdict, the date of deposit of the verdict (that is, when the verdict become public) and must be signed by the Chairman and another member of the tax court.

The tax courts must deposit their decisions within 90 days from the date of the last hearing, although delays are not sanctioned.

Criminal law cases

30. What are the rules governing the issuance of a decision in criminal cases?

In criminal proceedings, the tribunal will either issue a guilty verdict or an acquittal of the taxpayer. If the tribunal finds the taxpayer guilty, it will apply the punishment provided by law. The reasons of the decision must be detailed. The detailed judgment should be rendered within 90 days of the decision, but this term is not compulsory.

 

Costs

31. How is the issue of costs determined in both civil and criminal cases?

Civil law

In tax proceedings, each party can ask for the unsuccessful party to bear the costs of litigation. These costs mainly include the legal counsel's fees. The tax courts can require the unsuccessful party to bear the costs of the litigation, or these costs can be allocated equally if both parties lose the lawsuit or the judge considers it appropriate to do so.

Criminal law

In criminal proceedings, the trial costs are always born in advance by the state. If the tribunal finds the taxpayer guilty, these costs can be added to the applied punishment.

 

Appeals

Right to appeal in civil law

32. What are the main grounds for appealing a civil law decision?

Decisions of the provincial tax courts can be appealed before the regional tax courts. Decisions of the regional tax courts can be appealed to the Supreme Court.

Provincial tax courts' decisions can be appealed on the following grounds:

  • Wrong evaluation of the facts crucial to the decision.

  • Wrong interpretation/application of a legal provision.

Appeals before the Supreme Court can be made on the following grounds:

  • Lack of jurisdiction.

  • Violation of the rules on territorial jurisdiction.

  • Violation and misapplication of rules of law.

  • Invalidity of the decision or of the proceedings.

  • Lack of grounds concerning a decisive fact of the dispute.

Procedure to appeal in civil law

33. What is the procedure for appealing a civil law decision?

Appeals before the regional tax courts

Appeals before the regional tax courts must be filed within 60 days from receiving notification of the relevant provincial tax court's decision.

If the provincial tax court's decision is not notified (by the successful party), an appeal before the relevant regional tax court must be filed within six months from the date of deposit of this decision.

An appeal before a regional tax court must include:

  • A summary of the proceedings.

  • The subject matter of the appeal.

  • The specific grounds for appeal.

The appellant cannot submit requests/grounds that have not been submitted in the first instance proceedings.

Documents obtained during the trial before the provincial tax court are automatically submitted to the regional tax court for review. Issues and objections that are not raised in the second instance proceedings are deemed to be waived.

The regional tax court can:

  • Declare that the appeal is not admissible.

  • Order the abandonment of the proceedings.

  • Decide on the merits of the dispute.

In the first two cases, the tax proceedings end and the provincial tax court's decision becomes final and enforceable. Otherwise, the judge will consider the merits of the dispute, and can decide to accept or reject the appeal in whole or in part.

Regarding the collection of evidence, the procedures and deadlines of second instance proceedings are the same as for first instance proceedings.

Appeals before the Supreme Court

A regional tax court's decision can be appealed before the Supreme Court (Article 62, Legislative Decree No. 546/1992). Proceedings before the Supreme Court are governed by Article 360 et seq. of the Civil Procedure Code and are aimed at resolving disputes on the basis of legal grounds only.

An appeal before the Supreme Court must be filed within 60 days from the notification of the relevant regional tax court's decision. If the regional tax court's decision is not notified (by the successful party), the appeal before the Supreme Court must be filed within six months from the date of deposit of the regional tax court's decision.

The Supreme Court can only examine issues regarding possible violations of the law (that is, it cannot re-examine the facts).

If the appeal is accepted, the Supreme Court will cancel the previous judgment. In this case, the Supreme Court must remand the judgment to a lower tax court to determine the amount to be paid. In the latter case, the Supreme Court will require the regional tax court to impose a specific decision.

Right to appeal in criminal law

34. What are the main grounds for appealing a criminal law decision?

As a general rule, either the prosecutor or the defendant can appeal against a tribunal's decision. An appeal can seek to challenge the judgment on both points of law and findings of fact.

However, in certain cases, the appeal right is excluded. For example, it is not possible to appeal in the case of plea bargaining.

When the appeal is submitted by the accused, the prohibition of reformatio in pejus applies. This means that if the relevant criminal court of appeal considers that the taxpayer is guilty, it can only confirm the tribunal's decision and cannot apply a heavier punishment. The court of appeal can decide on a reduction of the punishment or the taxpayer's acquittal.

Procedure to appeal in criminal law

35. What is the procedure for appealing a criminal law decision?

Appeals before a criminal court of appeal are governed by Articles 593 et seq. of the Criminal Procedure Code. The proceedings before the criminal courts of appeal are structured similarly as first instance proceedings. Generally, the time limit to bring an appeal is 30 days from the day of the first instance decision.

The appeal judges cannot decide on statements of the appealed decision that have not been challenged. Instead, judges can only review issues relating to the subject matter of the appeal. Judges can gather additional evidence where they feel unable to issue a decision due to the lack of evidence in prior proceedings.

After the debate, the judge must issue a decision confirming or reforming the tribunal judge's ruling.

The taxpayer can file an appeal against the decision of the criminal court of appeal before the Supreme Court (Article 606, Criminal Procedure Code). New evidence cannot be collected for appeals at this level. An appeal before the Supreme Court is aimed at challenging any errors made by the judge in applying the rules of substantive law (error in iudicando) or procedural law (error in procedendo). Supreme Court rulings seek to verify the legitimacy of the challenged decision. The Supreme Court can either:

  • Decide on the merits of the tax offence.

  • Remand the judgment to the appellate court judge, to decide the matter based on the principles outlined by the Supreme Court.

 

Recent civil law developments and proposals for reform

36. Outline the main recent civil law developments in tax litigation in your jurisdiction. Are there any proposals to reform civil law tax litigation?

The Italian Government has recently approved five legislative decrees that reform various aspects of the Italian tax system. The most important amendments to tax law modifications are contained in:

  • Legislative Decree No. 156 of 24 September 2015 (Riforma del contenzioso tributario) (tax litigation reform).

  • Legislative Decree No. 157 of 24 September 2015 (Riforma delle agenzie fiscali) (Revenue Agency reform).

  • Legislative Decree No. 158 of 24 September 2015 (Riforma dei reati tributary) (tax crimes reform).

  • Legislative Decree No. 159 of 24 September 2015 (Riforma della riscossione) (tax collection reform).

  • Legislative Decree No. 160 of 24 September 2015 (Riordino delle agevolazioni fiscali) (reorganisation of tax advantages).

  • Legislative Decree No. 128 of 5 August 2015 (Disposizioni sulla certezza del diritto nei rapporti tra fisco e contribuente) (provisions on legal certainty in the relations between tax authorities and the taxpayer).

The above legislative decrees have introduced the following modifications:

  • Simplification of the rules for tax collection. A "slight non-fulfilment" criterion has been introduced in order to reschedule delayed/missed payments. It is now possible to reschedule payments delayed by up to five days and failed payments of an amount up to 5% of the whole payment due, provided that the amount does not exceed EUR10,000. In addition, a number of new provisions to increase tax compliance and the co-operation between the Revenue Agency and taxpayers have been introduced. In the case of conciliation, tax payment can be made within four years (instead of the previous three years), in a minimum of eight and a maximum of 16 instalments. These payments can be made to the Tax Collection Agency through both certified e-mail (Posta Elettronica Certificata) and registered mail.

  • Reorganisation of the Revenue Agency. The new rules are aimed at:

    • making tax inspections less invasive;

    • avoiding duplication of requirements; and

    • reducing the inconvenience to taxpayers caused by the duration of tax inspections.

  • Monitoring of tax evasion. Every year, the government will submit a report on tax evasion to the Parliament, with a precise estimation of the recovered missed taxes and an evaluation of the impact of the anti-evasion measures adopted. Additionally, the government will submit to the Parliament an annual report on the impact of fiscal measures in order to evaluate a possible rescheduling.

  • Reform of tax litigation and ruling procedures. Mediation has been strengthened and new provisions have been introduced in order to allow taxpayers to remedy tax violations before a tax assessment is issued (with an important reduction of the applicable penalties). The ruling procedure has been improved and the response times have been reduced.

  • Reform of the tax penalties. Legislative Decree No. 158 provides for a general reduction of the penalties in the case of violations that are considered to be less serious, and for an increase of penalties in fraudulent cases (see Question 37).

  • Reform of the tax crimes. See Question 37.

Legislative Decree No. 128 has introduced a general definition of tax avoidance/abuse of law (previously, specific anti-avoidance provisions were applied in conjunction with a general principle against abuse of law). Article 10-bis of Law 212/2000 (Statute on Taxpayers' Rights) provides for a definition of tax avoidance which covers all types of taxes, both income taxes and indirect taxes.

Under the new rules, there is an abuse of law when one or more transactions without economic substance, even if compliant with the tax laws, provide tax benefits that are essentially unfair. An abuse of law occurs when the following conditions are met:

  • One or more transactions without economic substance are made.

  • The tax laws are formally observed.

  • The tax benefit constitutes the sole or the main goal of the operation.

  • An undue tax benefit is realised.

In the case tax avoidance is proved, the transaction maintains its civil effects but the Revenue Agency denies to the taxpayer the tax benefits that are unduly realised.

 

Recent criminal law developments and proposals for reform

37. Outline the main recent criminal law developments in tax litigation in your jurisdiction. Are there any proposals to reform criminal law tax litigation?

A revision of the regulatory framework for tax crimes has been introduced by Legislative Decree No. 158 of 24 September 2015. The criminal tax reform is aimed at:

  • Punishing less severely the tax crimes that do not involve fraudulent elements.

  • Increasing punishments for tax crimes that involve fraud and/or issuing of false document.

Consequently, all the tax penalties provided for omitted and/or unfaithful tax return have been reduced. The requirements for the crime of unfaithful tax return have been increased.

Additionally, the crimes of omitted/untruthful tax return and omitted tax payments (non-fraudulent crimes) are extinguished when taxes due are paid before the start of criminal litigation. For other tax crimes, voluntary payment of tax reduces the applicable punishment.

The reduced penalties apply to violations committed in 2015 (and in previous years), unless they have been settled by the taxpayer with a definitive payment.

Legislative Decree No. 128/2015 also provides that all tax violations arising from an abusive/avoidance conduct will never constitute a tax crime, regardless of the amount of the tax benefit achieved.

 

Online resources

Italian Parliament

W www.parlamento.it/519
www.senato.it/2867
www.normattiva.it

Description. These are the official websites of the Italian Parliament, on which all the laws and comments on promulgated and proposed laws are published. No official English translation is provided by the Italian Parliament, except for the Constitution, which can be found at http://en.camera.it/4?scheda_informazioni=23.



Contributor profiles

Alberto Russo, Founder

Russo De Rosa Associati

T +39 348 3908 054
E alberto.russo@rdra.it
W www.rdra.it

Professional qualifications. Italy, Certified Public Accountant and Auditor

Areas of practice. Taxation of financial and real estate entities and corporate reorganisations, with a particular focus on private equity, corporate finance and generation shift transactions.

Non-professional qualifications. Degree in Administration and Finance (summa cum laude), University of Pavia; Lecturer on the tax law and corporate reorganisations masters courses, Il Sole 24 Ore; Scientific co-ordinator, Il Sole 24 Ore

Publications. Takes part in meetings, seminars and writes contributions for leading business journals and newspapers.

Fabrizio Cavallaro, Partner

Russo De Rosa Associati

T +39 345 4118 014
E fabrizio.cavallaro@rdra.it
W www.rdra.it

Professional qualifications. Italy, Lawyer, 2002

Areas of practice. All tax issues of financial and real estate transactions, and mergers and acquisitions with a particular focus on private equity transactions, corporate finance and intergenerational transfers; acting as attorney before the tax court and drafting related documents.

Non-professional qualifications. Law Degree, University of Catania, 1999; Master in Tax Law, INFOR/IPSOA, 2000; Lecturer at tax meetings and conventions

Publications. Writes contributions published in the main tax magazines.

Filippo Tornambè, Associate Attorney

Russo De Rosa Associati

T +39 346 3948 553
E filippo.tornambe@rdra.it
W www.rdra.it

Professional qualifications. Italy, Lawyer, 2013

Areas of practice. Taxation of financial and real estate entities and corporate reorganisations, with a particular focus on private equity, corporate finance and generation shift transactions; acting as attorney before the tax courts and drafting related documents.

Non-professional qualifications. Law Degree, University of Parma, 2010; Master in Tax Law, Sole24Ore, 2013; Lecturer at tax meetings and conventions

Publications. Writes contributions published in the main tax magazines.


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