THE INCEPTION OF RULING IN ITALY

As reported in the previous article, back in 1991 the Italian lawmaker introduced the institution of ruling with law 413. However, it was never implemented due to the lack of rules that should have defined its enforcement.

Recently, however, the Ministry of Finance finally drafted such regulations. The first, which concerns the requests for opinions by the internal revenue service, was submitted in March to the Council of State, which is still examining it. On the other hand, the Council of State has already expressed its consensus over the second rule, which establishes the operation of the Advisory Committee (the body required to express its opinion after the internal revenue service).

Nonetheless, it should be pointed out that the present climate of uncertainty may be likely to postpone the deadline originally set for the enforcement of this institution.  

Having said this, with ruling taxpayers will be able to seek previous or subsequent advice in relation to the operations that they intend to carry out or that they have already executed. However, once this institution enters into force, its sphere of application will be rather restricted. Indeed, it will only apply to rules to combat evasion in capital concentration, transformation, breakdown and reduction operations, to ownership of income through a third party, as well as advertising, propaganda and entertainment expenses.

Finally, it will also apply to the expenditures deriving from operations occurring between resident businesses and companies with a fiscal domicile in countries or territories outside of the EU with a privileged tax system, and that are part of the special black list drafted by the Italian Finance Ministry. Although the institution is quite an innovation for Italy, its scope is not very extensive. Indeed, according to the way in which ruling was conceived in Italy, taxpayers will be able to ask the internal revenue to interpret the rules and assess their prevalence over other regulations. On the other hand, in other legislations, ruling is often the instrument through which taxpayers are able to obtain from the internal revenue what they otherwise would not have been able to achieve. It is our opinion that such limits should be overcome shortly, in order for the institution to duly compare with that implemented in other countries.

In accordance with the afore-mentioned regulations, the opinion must be requested to the Ministry of Finance - Income Department, and must be addressed to the Regional Income Direction competent for the area in which the party has his fiscal domicile.   The undersigned application must contain the identification data of the taxpayer (or those of his legal representative) and of the other parties. A detailed exposition of the case must also be provided, along with the solution submitted by the taxpayer. The Advisory Committee will then be notified of the opinion issued by the Income Department.  
If the response is not the same as the solution suggested by the taxpayer, or if the Income Department does not reply within 60 days, the taxpayer may appeal to the Advisory Committee. At this second level, the application will be addressed to the Secretariat of the Advisory Committee for the application of rules against evasion at the taxpayer’s information bureau. A copy of the application submitted previously will have to be enclosed.   In this case too, the Committee must issue its response within 60 days.
If it fails to do so, the taxpayer may give the Committee a warning and urge it to comply with the deadline. If an additional 60 days go by and the Committee still has not issued a response, its silence will be interpreted as an approval (see outline). The Advisory Committee must express its opinion on the request that it is submitted (its opinion will be effective exclusively within the framework of the tax relationship).

However, the Committee’s opinion will have no effect if the taxpayer has provided false indications or has stated inaccurate information. The Committee may also request that additional inquiries be carried out, thus interrupting the terms indicated above for a period no longer than 30 days. The total ruling procedure would thus be extended from 180 to 210 days. It therefore seems clear that within the afore-mentioned limitations, this new instrument will secure a more transparent relationship between taxpayers and the internal revenue. Indeed, it appears to be an extremely interesting instrument, for it introduces a new way of conceiving the revenue authorities-taxpayers relationship in Italy. However, in order to make ruling a useful instrument to be utilized in most potential conflicts between the internal revenue authorities and taxpayers, its scope of application would have to be extended. Especially, it should be implemented promptly so that its modes of operation are perfected progressively and the scope of issues that may be subject to ruling may be broadened.

PROCEDURE FOR THE REQUEST OF A RULING PROCEDURE IN ITALY