ALSO IN ITALY THE INLAND REVENUE " Talks " TO THE TAXPAYER

In actual fact, the Italian legislation has provided for some time

( L413/ 91) the " right of request" , a sort of pre-transaction ruling which allows the taxpayer to have the right to know the interpretation given by the Revenue to tax laws whose applicability is unclear. Law no. 413 expressly provides for the establishment of a Committee, whose role is to issue judgements on the application of certain specific tax matters as identified by the Ministry of Finance.

Unfortunately, the absence of the implementing decrees which were to define the topics of the "right of request" on which the Committee could issue judgements and the procedures through which the taxpayer could use this, have prevented so far the use of this ruling, thus depriving Italy of a tool that is largely and advantageously used in most economically advanced countries.

However, now, this void has been filled. The Ministry of Finance has issued the rules for the implementation of the right of request ( D. M. 13 June 1997 n. 194 and 195 and also has issued circular n.135/E of 28 May 1998 which defines the matters which are the subject of this ruling (see Tab. A).

Those, who wish to forward a request to obtain a pre-transaction ruling must first present a written request to the Regional Tax Office ( Direzione Regionale delle Entrate). The written request must detail all the aspects of the case for which a judgement is requested and any other factors that may be of use to the Committee in formulating it's ruling. Should the tax payer not receive a reply within sixty days , he can forward the documented request directly to the Committee, which has a further sixty days to provide it's ruling. After this time has lapsed without reply the tax payer has the right to order the Committee to fulfill its obligation to reply: in this case, another sixty days are required before the lack of reply from the administrative authority can be interpreted as approval of the interpretation made by the tax payer. Therefore in total between the request and the receipt of the opinion a maximum of 180 days can elapse.

In any case, it is best to specify the peculiarity that distinguishes the Italian pre-transaction " ruling " from those extant in other countries such as the United States of America or the Netherlands — the "right of request " cannot be utilised should the tax have been already assessed.

Furthermore, a positive judgement from the Italian Inland Revenue does not shield the tax payer from future tax assessments if the contents of the judgemental ruling given by the Committee have not been fully respected. In this case, it is not possible to invoke any extenuating circumstances in any tax proceeding.

Therefore, in essence ,with the regulations on the "right of request" the Italian tax legislator reaffirms a fundamental principle that forms the basis of any ruling in all the Countries that provide for this: the tax payer can rely on the benefits of this ruling as long as the transaction does not depart from the "path " established by the Inland Revenue.