The Court of Cassation (judgement No. 24970 of 6 November 2013) confirmed that the VAT refund claim must be considered as a secured claim pursuant to Art. 2758, second paragraph, ICC and must be fully satisfied even if the specific assets on which the lien can be enforced are missing, unless the debtor proposes that it be only paid in part according to Art. 160, second paragraph, IBL

The case

A company filed a plan for a concordato preventivo providing that creditors would be paid out of future earnings, which the Tribunal of Lucca refused to confirm, because:

  1. the claim for contributions by Consorzio Nazionale Imballaggi (“Conai”) – which was considered as an unsecured claim by the debtor – must be instead considered as a secured claim;

  2. the plan was not feasible.

The company lodged an appeal before the Court of Appeal of Florence, which reversed the decision of the Tribunal, ruling that Conai could not claim the special privilege pursuant to Art. 2758, second paragraph, ICC, concerning the credit for VAT refund on the relevant contributions, considering that the request was not properly made by Conai and that the asset on which the lien was enforceable is missing from the estate.

The issue

The credit for VAT refund arises in favour of the supplier of goods and services who paid to the tax authority the VAT relevant to his supply or services, which he has the right to be refunded by the beneficiary of the same supply or services. The lien pursuant to Art. 2758, second paragraph, ICC is enforceable exclusively on the assets being the subject matter of the supply or services, irrespective from the priority of the claim arising from the transaction on which VAT was levied. Therefore, this is not a claim by the Tax Office thereby enjoying a general privilege, but this is a private individual’s claim with special privilege.

The issue drawn to the attention of the Court of Cassation regards different aspects: (i) the kind of security of the VAT refund claim; (ii) the need to fully pay such claim within the concordato even lacking the asset on which the lien is enforceable; (iii) the possibility to provide only a partial payment of such claim according to Art. 160, second paragraph, IBL.

The decision of the Court

The Court of Cassation ruled that the VAT refund claim must be considered as a secured claim according to Art. 2758, second paragraph, ICC, as well as to Art. 2778, No. 7, ICC, with the consequence that the same should be fully paid within the concordato, even if the assets on which the lien is enforceable is missing from the estate. This issue was already addressed by the Court with the decision No. 12064/2013, relevant to a concordato proposal subject to Art. 160 IBL prior to the amendments enacted with the Legislative Decree No. 169/2007. In such a context the Court of Cassation ruled that “the absence in the estate of the debtor of the asset on which the lien is enforceable does not prevent, unlike in bankruptcy, that the claim can be considered as a secured claim, with the consequence that the claim must be paid in full.” Indeed, Art. 54 IBL (which in bankruptcy limits the satisfaction of secured claims to the proceeds from the assets on which the lien is enforceable) is not recalled by Art. 169 IBL and does not apply in the concordato preventivo.

The Court confirms such rule of law also according to the new Art. 160 IBL, pursuant to which the debtor can propose less than a full payment to those secured creditors whose claims are not fully secured by the assets of the debtor (i.e. the value of the assets on which the specific lien is enforceable is less than the amount of the claim) and the concordato provide for a payment which is at least equal to the liquidation value of the specific asset. The Court here underlines that such a reduction is allowed only based on an agreement underlying the concordato arrangement: therefore, in case the reduction is not expressly provided in the concordato proposal, the general rule requiring full payment must be applied.

Comment

In single specific cases, the uncertainty surrounding VAT refund claims can be related to identify the asset on which the lien could be enforced. When specific assets are supplied and can be identified within the debtor’s estate, no issue arises, while instead this is the case when such assets are bulk materials or otherwise cannot be separated or identified specifically; moreover, in case of supply of services, often (e.g., for professional services) by definition there are no assets on which the lien can be enforced, while in other cases (i.e. maintenance services of specific assets) the lien can be enforced on an identified asset.

Where specific assets are missing or cannot be identified, the issue arises whether the claim can be considered as a unsecured claim (with the consequence that such claims can be listed without any formalities among the unsecured claims for concordato proposal purposes), or instead should be considered as secured claims (with the need to comply with the requirements provided for in Art. 160, second paragraph, IBL and, therefore, to provide a specific statement by an expert complying with all the requirements of Art. 67, third paragraph, lett. d), IBL on the liquidation value of the asset on which the lien can be enforced).

On this issue different and contrasting decisions by lower courts were issued, until the Court of Cassation provided its guidance.

The issue is therefore not whether or not the claim can be paid less than in full, since it is not a Tax Office claim which is subject to limitations according to Art. 182-ter IBL within a tax settlement proposal.

The concordato proposal could, then, provide that the VAT refund claim can be paid less than in full, as long as payment is at least equal to the proceeds in case of liquidation of the asset: (i) if an asset can be identified but its value is lower than the amount of claim, whereas (ii) in case the asset is missing from the estate, by definition such a claim would not have any chance to an additional satisfaction with respect to that proposed to the unsecured creditors.