The Italian legislation on tax litigation procedure (Legislative Decree No. 546/1992) regulates the procedure for commencing a tax dispute for all kinds of taxes.
This system is strongly influenced by the Italian tax system, which is based on self-assessment (i.e., taxpayers must file their tax returns on the basis of their interpretation of tax legislation). The tax authorities can rectify the tax return within certain deadlines by issuing a deed of assessment. In such cases, the tax dispute is initiated by the taxpayer challenging the deed of assessment issued by the tax authorities.
The deed of assessment may be challenged through two main procedures:
- If the case involves an amount of tax higher than €50,000, the assessment must be challenged by filing a deed of appeal before the court of first instance within 60 days of the date on which the deed has been notified. In particular, the deed of appeal must be served first to the administrative (tax) body that has issued the assessment. To commence litigation properly, the taxpayer must file the trial record with the competent tax court within 30 days of the date on which the deed of appeal was served to the counterparty. The trial record provides the relevant court with the deed of appeal, any documents or evidence, and proof that the deed has been properly served to the administrative body;.
- Regarding deeds of assessment of taxes (e.g., corporate income tax, personal income tax, VAT, regional tax on productive activities, registration tax) involving an amount of tax lower than €50,000, the legislature recently enacted an advanced compulsory mediation procedure (mediation can involve disputes relating to deeds of assessment, deeds issuing penalties, notices of payment, denials of tax refunds, withdrawals of tax benefits or denials of tax amnesties, or any other act that can be appealed before the tax courts). The value of the dispute is based on the higher amount of tax (interest and penalties are not relevant). In the event of an appeal against a deed issuing only penalties, the value is determined by such penalties. In such cases, taxpayers must file and give notice of both the appeal and the application for mediation to the competent office within the deadline for the appeal (see above) with a copy of the documentary evidence that the taxpayer intends to submit to the tax court. Mediation is compulsory; failure to submit to mediation leads to a claim preclusion. The tax authorities can accept (even partially) or reject the request, or may make an independent proposal for mediation. The mediation agreement is executed upon its endorsement by the tax authorities and on payment of the entire amount due (or of the first instalment due) within 20 days of the day of execution. In cases of mediation, penalties are due in a reduced amount of 35 per cent of the original amount. The collection of the sums due is suspended throughout the mediation procedure. If the request for mediation is rejected (or if no action is taken by the tax authorities within 90 days), the taxpayer must deposit the trial records with the court of first instance within 30 days. If the mediation procedure does not succeed, the unsuccessful party in the tax trial must pay, in addition to court costs, a sum of 50 per cent of the costs of the proceedings as reimbursement of the expenses of the mediation procedure.
However, tax litigation may also arise from the denial of a refund request filed by the taxpayer (rather than as the result of a tax authority deed of assessment). Reasons leading a taxpayer to apply for a refund may vary (e.g., the taxpayer paid more tax than was due or argues that the tax was not to be paid since the relevant legislation was contrary to the Italian Constitution or European law). The right to file an application for a refund must be exercised within certain deadlines provided by the law (e.g., the right to file an application for refund of income tax is generally exercised within 48 months of the date of payment; the right to claim a refund of VAT is generally forfeited after two years from the date of payment).
Once the application is filed, two scenarios are possible:
- the tax authorities issue a deed stating that the refund is not due, in which case the procedure challenging a deed of assessment, described above, is followed; and
- the tax authorities do not reply (silent denial), in which case the refund request is deemed to have been implicitly denied after a 90-day period. In such cases, the implicit denial may be challenged before the tax court within 10 years.
The above procedures apply irrespective of the tax involved (direct or indirect) and of the subject involved (individuals, companies or partnerships).