ROME: The Italian Government has finally approved the long-awaited act on “certainty of law in the relationships between tax authority and tax payers” (Certainty of Tax Law Act).
The Certainty of Tax Law Act represents an important piece of the mosaic depicted by the wide tax reform delegated to the Government by Law no. 23 of 11 March 2014. Other important acts implementing said tax reform have also been recently approved or are in the pipeline. A separate On the Subject will address the new tax provisions of main interest in the area, among others, of international corporate taxation.
The Certainty of Tax Law Act contains provisions mainly focused on three items:
The introduction of a new general anti-abuse rule (GAAR);
The amendment of the current rule concerning the doubling of the statute of limitations for tax assessments in case of tax violations that can result in a criminal infringement; and
The introduction of a new cooperative compliance regime for large taxpayer companies.
An extensive and detailed discipline of the abuse of (tax) law has been introduced, with the aim of minimizing the uncertainties on the interpretation and assessment of the existence of an abusive conduct by the taxpayer.
Under previously existing legislation, a “semi-general” anti-avoidance provision was enacted (Article 37-bis of Presidential Decree no. 600/1973), but its scope was limited to income taxes only. Moreover, as a pre-condition for such provision to apply, it was necessary that at least one of the transactions expressly listed by the law (“tainted transactions”) was included in the alleged tax-avoidance scheme carried out by the taxpayer.
However, in the last decade, the Italian tax courts, and particularly the Supreme Court of Cassation, have progressively developed an extremely wide doctrine of abuse of tax law, applicable beyond the narrow borders provided for by Article 37-bis as a consequence directly descending from the general principles set forth by the Constitution of Italy. Certain unreasonable applications of such doctrine in a number of important court cases created a great deal of uncertainty among taxpayers and practitioners, and the tax authorities started to use this powerful tool more and more aggressively. The need of a new legislation was strongly felt.
