EU & Italian International Tax Law Blog : International Tax Lawyer & Attorney : Marco Rossi Law Firm : Italy, New York, European Union, EU

The economic crisis measures enacted with Legislative Decree n. 185/2008 include special provisions for big taxpayers. Big taxpayers are defined as companies with annual revenue or receipts equal to or exceeding 300 million EUR, gradually phased down to 100 million EUR through December 31, 2011.

Big taxpayers are subject to automatic audit based on selective lists within one year from the filing of their tax return. The audit automatically extends also to the verification that taxpayers actually complied with the interpretative solutions and advice provided by the tax administration in rulings issued to those taxpayers.

Finally, all requests for a tax ruling will be filed and processed according to the same procedure that applies to the special tax avoidance ruling. The procedure requires that the ruling application be filed with the Regional Department and then passed on the Central Department, which must issue its reply within 120 days from the application. If the ruling is not issued within the 120-day deadline, the taxpayer can file a final reminder and the tax administration has additional 60 days to respond. If the tax administration fails to respond within the extended deadline the position taken by the taxpayer in the application for the ruling is deemed approved. 

The procedure referred to above applies to all three types of rulings currently available under Italian law, namely the ordinary interpretative ruling, the tax-avoidance ruling and the ruling for the exemption from the application of tax-abuse provisions limiting the deductions of costs and expenses incurred in transactions with low-tax jurisdiction enterprises .                  

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With Circular n. 5/E of February 24, 2009, Italy's tax administration clarified the new procedure for the request of tax avoidance rulings.

Taxpayers can apply for a special tax avoidance ruling in order to obtain guidance from the tax administration on specific transactions listed in the tax code that provide tax advantages and are perceived as potentially abusive. The listed transactions include conduit arrangements; tax free mergers, liquidations, change of corporate type, return of capital distributions or transfer of assets or going concerns; transfer of receivables; deductible interest and royalty payments to EU related companies controlled by non EU parents; payments charged between related companies one of which is a controlled foreign company, and costs and deductions arising from transactions with companies organized in low-tax jurisdictions.

The request for the ruling is addressed to the Direzione Centrale Normativa e Contenzioso (Central Department on Rules and Litigation) and filed through the Direzione Regionale (Regional Department). It must provide a detailed summary of the facts and an explanation of the position taken by the taxpayer on the issues of law, together with any relevant documentation relating to the transaction.

The Regional Department checks that the request is complete and in order and passes it on to the Central Department within 15 days from the receipt of the request. The Central Department must issue the ruling within 120 days from the filing of the request. 

In the event the tax administration fails to issue the ruling within the 120-day deadline, the taxpayer can send a final reminder. Failure to issue the ruling within 60 days following the receipt of the final reminder is equivalent to an approval of the position taken by the taxpayer on the relevant issues of law in the request for the ruling. As a result, the period of time for the issuance of the ruling cannot exceed 180 days or six months.

The ruling (or the silent approval of taxpayer's position) is binding for the tax administration (but not for the taxpayer).

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