Tax Disputes Comparative Guide

1 Legal framework

1.1 Which laws govern taxation and tax disputes in your jurisdiction?

In Italy, the legal framework governing taxation and tax disputes is comprehensive and stratified, encompassing various laws at the national and supranational level. The primary sources of tax law in Italy are as follows:

• Constitution: The Italian Constitution lays the foundational principles for taxation. Article 53 states that everyone is required to contribute to public expenditure based on their ability to pay, ensuring a fair and equitable tax system.
• Presidential Decree 917/1986: The Consolidated Income Tax Act is a critical law that consolidates various provisions related to income tax. It substantially covers:
• • personal income tax; and
  • corporate income tax.
• Legislative Decree 446/1997: This decree governs regional taxes on productive activities (IRAP). It outlines the rules and regulations for the imposition and collection of IRAP, which is a tax on the value of production generated by businesses.
• Legislative Decrees 471/1997 and 472/1997: These decrees set out the general rules for administrative penalties in tax matters:
• • establishing the framework for imposing penalties for tax violations; and
  • outlining the procedures for challenging such penalties.
• Presidential Decree 600/1973: This decree regulates assessment proceedings.
• Legislative Decrees 545/1992 and 546/1992: These decrees regulate tax litigation procedures. They set out:
• • the rules for appealing against tax assessments and decisions of the tax authorities, ensuring that taxpayers have a clear path to dispute resolution; and
  • the rules relating to the organisation of the tax courts.
• Law 212/2000: This law, known as the Taxpayer's Bill of Rights, contains general rules concerning the relationship between taxpayers and the tax authorities.
• Presidential Decree 633/1972: This decree governs value-added tax and is aligned with the EU VAT Directives. The decree outlines the rules on VAT registration, reporting and payment.
• International tax treaties and EU regulations: Italy is a member of the European Union and adheres to EU regulations and directives concerning taxation. Additionally, it has entered into numerous double taxation treaties with other countries to prevent double taxation.

Through Delegated Law 111/2023, Parliament instructed the government to reorganise tax legislation by issuing consolidated texts in order to make them less fragmented and clearer.

1.2 Do any other regional, national or supranational rules or regulations have relevance in this regard?

A number of taxes have been devolved or established in favour of regional or municipal administrations, which in some cases are also responsible for the assessment and collection of these taxes. The most important example is the municipal property tax, for which municipal administrations are competent for the assessment and collection of the tax. However, this devolution does not affect the identification of the competent jurisdictional bodies, which in any case are identified by the competent tax courts according to the general rules.

1.3 Which authorities are responsible for enforcing the tax laws? What is their general approach to enforcement?

Except for the municipal taxes mentioned in question 1.2 (which are enforced by the same municipal administrations), the competent authorities for the enforcement of the tax laws are:

• the Revenue Agency;
• the tax police; and
• for import VAT and customs duties, the Customs Agency.

The Revenue Agency is the main authority responsible for the administration and collection of taxes. It handles tasks such as:

• processing tax returns;
• issuing tax assessments; and
• managing tax disputes.

The Revenue Agency also provides taxpayer services, including guidance and support to ensure compliance with tax obligations. The Revenue Agency adopts a multifaceted approach to enforcement, which includes:

• routine audits;
• risk-based assessments; and
• targeted investigations.

The tax police are a military corps with a specialised mandate to challenge financial crimes, including tax evasion and fraud. They operate under the authority of the Ministry of Economy and Finance and have extensive powers to investigate and enforce tax laws. These include:

• conducting inspections;
• seizing assets; and
• pursuing criminal prosecutions.

The tax police adopt a more investigative and enforcement-oriented approach than the Revenue Agency. Their activities often involve:

• complex financial investigations;
• undercover operations; and
• collaboration with other law enforcement agencies.

The Customs Agency is responsible for:

• the enforcement of customs regulations; and
• the collection of excise duties.

It ensures that goods entering or leaving Italy comply with national and EU customs laws. The Customs Agency also oversees the regulation of monopolies, such as tobacco and gaming, ensuring that relevant taxes are properly collected.

Where a breach of tax rules may have criminal relevance, the relevant criminal proceedings are instituted by the Public Prosecutor's Office, sometimes in response to a report from the tax authorities.

The Tax Collection Agent is responsible for collecting amounts due (taxes, interest and penalties) according to tax assessments and/or judgments of the tax courts.

1.4 To what extent do the tax authorities cooperate with (a) other national authorities and (b) their international counterparts in enforcing the tax laws? Does this vary depending on the applicable tax?

In Italy, the Revenue Agency cooperates extensively with other national authorities to enforce the tax laws. This cooperation is facilitated through various mechanisms and legal provisions that allow for the sharing of information and joint enforcement actions. The Revenue Agency works closely with entities such as the tax police, which play a primary role in investigating financial crimes, including tax evasion (see question 1.3).

This cooperation also extends to other government bodies, such as the Social Security Institute and the Workers' Compensation Authority, especially when dealing with employment taxes and contributions. Additionally, the Tax Collection Agent collaborates with local municipalities for the collection of local taxes such as municipal property tax and waste tax).

On the international side, the Italian tax authorities cooperate with their counterparts through various frameworks and agreements. Italy is a signatory to several double taxation agreements, which often include provisions for the exchange of information to prevent tax evasion and avoidance. Furthermore, Italy is a member of the European Union and participates in the automatic exchange of information between EU member states under directives such as the Directive on Administrative Cooperation.

Italy also adheres to global standards set by international organisations such as the Organisation for Economic Co-operation and Development. The Common Reporting Standard is one such global initiative for the automatic exchange of financial account information, to which Italy is a participant.

The extent of cooperation varies depending on the type of tax involved. For instance, for VAT, which is regulated at the EU level, there is a high degree of cooperation among EU member states. For direct taxes, such as personal income tax or corporate tax, cooperation is also significant but may depend on the specific agreements in place with each country.

In conclusion, the Italian tax authorities actively cooperate with both national and international bodies to enforce tax laws. This cooperation is comprehensive and includes various forms of information exchange and joint enforcement efforts. The level of cooperation is consistent across different types of taxes, although the mechanisms and intensity of cooperation may vary depending on the specific tax and the frameworks in place for international collaboration.

2 Tax investigations

2.1 How do the tax authorities monitor compliance with the tax laws? Does this vary depending on the individual taxpayer or the applicable tax?

The methods used by the tax authorities to ensure compliance vary depending on the type of taxpayer and the specific tax involved. Key points regarding how the tax authorities monitor compliance are summarised below:

• Self-assessment system: Italian taxpayers, including both individuals and companies, are required to self-assess and self-liquidate their tax liabilities. This means that they must calculate their own taxes due and submit their tax returns accordingly.
• Large companies:
• • For large companies (ie, taxpayers whose yearly revenues are equal to or exceed €100 million), the tax authorities often conduct more rigorous and frequent audits (the law provides that in principle – based on the outcome of a specific risk analysis – these companies can be audited every fiscal year). These audits can include detailed audits and reviews of financial statements, transactions and other relevant documents.
  • Large companies may also be subject to specific compliance programmes, such as the Cooperative Compliance Programme, which aims to foster a collaborative relationship between the tax authorities and large companies to ensure timely and accurate tax compliance.
• Control methods:
• • Questionnaires and requests for information: The tax authorities may send questionnaires or requests for information to taxpayers to gather additional details about their financial activities and tax positions. These requests are typically used to clarify specific items on a tax return or to obtain more information about certain transactions.
  • Access and inspections: The tax authorities have the power to conduct on-site inspections and access the premises of taxpayers. During these inspections, they can review books, records and other documents to verify the accuracy of the tax returns filed.
  • Electronic invoicing: Since 1 January 2019, electronic invoicing has been mandatory for all businesses in Italy for both business-to-business and business-to-consumer transactions. This system is also applicable for value added tax (VAT) purposes. The introduction of electronic invoicing aims to reduce tax evasion and improve the efficiency of tax collection. All invoices must be transmitted through the Sistema di Interscambio, a government platform that ensures the authenticity and integrity of the invoices.
  • Electronic data analysis: The tax authorities increasingly use electronic data analysis tools to monitor compliance. This includes cross-referencing data from various sources – such as bank records, invoices and third-party reports – to identify discrepancies or potential areas of non-compliance.
• Risk-based approach: The tax authorities often adopt a risk-based approach to select taxpayers for audits and investigations. This means that taxpayers that exhibit certain risk factors, such as significant discrepancies in reported income or unusual financial transactions, are more likely to be subject to scrutiny.
• Specific taxes: The monitoring methods can also vary depending on the type of tax. For example, VAT compliance may involve different verification processes compared to corporate income tax or personal income tax. Indeed, VAT compliance is monitored closely through electronic reporting systems and cross-border transaction checks.

2.2 What typically triggers a tax investigation in your jurisdiction?

Tax investigations in Italy can be initiated by the tax authorities for various reasons. Some of the most common triggers include the following:

• Discrepancies in tax returns: Significant inconsistencies or errors in tax returns can prompt an audit. These include discrepancies between reported income and expenses, or between different tax filings.
• Unusual financial transactions: Large or unusual financial transactions that do not align with the taxpayer's declared income or business activities can raise red flags. These include:
• • large cash deposits;
  • international transfers; or
  • significant asset purchases.
• Third-party reports: Information provided by third parties – such as banks, employers or other financial institutions – can trigger an investigation if it does not match the taxpayer's declarations.
• Random audits: The tax authorities conduct random audits as part of their routine checks to ensure compliance with tax laws. These audits are not necessarily triggered by any specific suspicion.
• Industry-specific risks: Certain industries are more prone to tax evasion and may be subject to more frequent investigations.
• Anonymous tips and whistleblowers: Anonymous tips or information from whistleblowers can lead to an investigation. The tax authorities take such information seriously and may initiate an audit based on credible tips.
• Previous non-compliance: Taxpayers with a history of non-compliance or previous tax issues are more likely to be investigated again. This includes:
• • late filings;
  • underreported income; or
  • failure to pay taxes owed.
• Cross-border activities: International business activities, such as foreign investments or income from abroad, can trigger investigations due to the complexity and higher risk of tax evasion in cross-border transactions.
• Lifestyle inconsistencies of individuals: A lifestyle that appears inconsistent with declared income can also trigger an investigation. For example, owning luxury cars, properties or other high-value assets without a corresponding income declaration may raise suspicions.
• Data matching programmes: The tax authorities uses sophisticated data matching programmes to compare information from various sources. Discrepancies identified through these programmes can lead to an investigation.
• Extraordinary operations: Mergers, the sale of branches of businesses, contributions, business reorganisations, group restructurings and similar often involve transactions for significant amounts, which can trigger an audit.

2.3 What is the limitation period for commencing a tax investigation in your jurisdiction?

There is no limitation period for commencing a tax investigation. Nonetheless, the tax authorities must observe the following limitation periods for the notification of deeds of assessment:

• for fiscal years before 2016, in case of an incorrect (but not omitted) tax return, the notice of assessment must be served by 31 December of the fourth year following the year in which the tax return was submitted. In case of an omitted tax return, the notice of assessment must be served by 31 December of the fifth year following that in which the tax return should have been submitted. In the event of a violation that triggers an obligation to report a crime to the public prosecutor pursuant to the Code of Criminal Procedure for one of the offences envisaged by Legislative Decree 74/2000, the ordinary deadlines for serving the notice of assessment are doubled (ie, the statute of limitations for the year 2015 expires on 31 December 2024 for incorrect tax returns and on 31 December 2026 for omitted tax returns). This doubling of the statute of limitations does not apply if the criminal notice is submitted after the ordinary deadline for serving the notice of assessment; and
• starting from fiscal year 2016 (inclusive), the notice of assessment must be served – in case of incorrect (but not omitted) tax returns – by 31 December of the fifth year following that in which the tax return was submitted. In the case of omitted tax returns, the notice of assessment must be served by 31 December of the seventh year following that in which the tax return should have been submitted. Correspondingly, starting from fiscal year 2016, the provision that envisaged the doubling of the statute of limitations in case of tax crime was repealed.

For certain kind of formal controls and for assessments of the Customs Agency, the deed of assessment must be served by 31 December of the third year subsequent to the tax period to which the controls are referred.

2.4 How does a tax investigation typically unfold in your jurisdiction?

See question 2.1.

The inspections of the tax auditors usually focus on the administrative and accounting departments, in which the most relevant documents are generally kept. Attention is also paid to the tax and legal departments due to the existence of folders containing tax and legal opinions that may be relevant to the audit. Auditors often visit the personal offices of key executives, where they may find important and relevant documents (including digital) for the audit. The persons empowered to speak with the tax authorities are:

• those with the power to represent the company; or
• individuals with delegated functions.

The tax authorities have the power to request information from any person within the company who might have information that is relevant to the audit.

Access must be carried out in a way that causes the least possible disruption to the activities and commercial/professional relations of the taxpayer

If it is necessary to force the opening of bags, sealed cases, safes or similar, the tax auditors must seek authorisation from the public prosecutor.

At the end of each access, the tax auditors must draft a report setting out:

• a list of the operations carried out;
• questions for the taxpayer (if any);
• the answers provided; and
• any spontaneous declaration of the taxpayer.

2.5 What is the typical timeframe for the investigation?

The tax authorities' stay at the taxpayer's premises may not exceed 30 working days (including non-consecutive days), which may be extended for a further 30 days where the audit is particularly complex.

Investigations at the premises of taxpayers must be carried out during normal working hours.

The taxpayer may request that administrative and accounting documentation be examined:

• in the tax authorities' office; or
• at the premises of a professional assisting the taxpayer.

2.6 What powers do the tax authorities have in conducting their investigation, in relation to (a) the taxpayer itself, (b) its employees and (c) third parties?

The Revenue Agency and the tax police have extensive powers to conduct tax investigations, which are designed to:

• ensure compliance with the tax laws; and
• detect and prevent tax evasion.

The powers can be categorised based on their application to:

• the taxpayer itself;
• its employees; and
• third parties.

(a) The taxpayer itself

The tax authorities have the right to access the taxpayer's business premises, including offices, warehouses and other relevant locations. They can conduct inspections and searches to gather evidence of tax compliance or evasion. The tax authorities can request a wide range of documents, including:

• financial statements;
• invoices;
• contracts; and
• other records that are relevant to the taxpayer's financial activities.

Access to private homes is permitted only after authorisation by the public prosecutor, who must verify the existence of serious suspicions of tax violations.

Tax officers can interview the taxpayer and ask questions relating to its financial activities and tax filings. The taxpayer is generally required to cooperate and provide truthful information.

The tax authorities can also request access to electronic data, including:

• emails;
• accounting software; and
• other digital records.

In certain cases, if there is a suspicion of significant tax evasion, the authorities may seize assets to secure potential tax liabilities.

(b) Employees

The tax authorities can:

• interview employees of the taxpayer to gather information about the company's financial activities and practices; and
• request documents from employees that are relevant to the investigation, such as:
• • internal communications;
  • reports; and
  • other records.

Employees are expected to cooperate with these inquiries.

In some cases, tax officials may observe the activities of employees in order to:

• understand the business operations; and
• identify any discrepancy in reported income or expenses.

(c) Third parties

The tax authorities can request information from third parties that have dealings with the taxpayer, including:

• banks;
• suppliers;
• customers; and
• other business partners.

These third parties must provide the requested information.

In Italy, bank secrecy laws do not prevent the tax authorities from accessing bank information. The tax authorities can request bank statements and other financial records directly from financial institutions.

For international transactions, the tax authorities can cooperate with foreign tax authorities to obtain information about the taxpayer's activities abroad.

The tax authorities can also request information from professional advisers such as accountants, lawyers and auditors who have provided services to the taxpayer.

2.7 On what grounds, if any, can taxpayers refuse to disclose commercial information during the investigation?

In Italy, taxpayers are generally required to:

• cooperate with the tax authorities during investigations; and
• provide the necessary commercial information.

Any documents or information not provided during the investigation cannot be used by the taxpayer in subsequent stages of the proceeding, unless the taxpayer can demonstrate that it was unable to produce them due to reasons beyond its control. This principle ensures that taxpayers cannot withhold information strategically and then use it later to their advantage.

2.8 Can the taxpayer object to or challenge the tax investigation? Are any other avenues available for resolving the matter?

During the tax investigation, it is not possible to challenge before an administrative/jurisdictional authority any eventual claim which might arise during the audit.

If the taxpayer considers that the auditors are acting against the law, it can refer the case to the Taxpayer's Guarantor, which may investigate whether the behaviour of the auditors is correct.

If the taxpayer is subject to a tax audit at its offices, at the end of the audit, the auditors (which may be part of the audit department of either the Revenue Agency or the tax police) will draft a final tax audit report in which all allegations are listed. This report does not contain a final claim.

Once the report has been served, the taxpayer can consider filing an application to start a settlement procedure in relation to the contents of the report. The settlement procedure may lead to a reduction in the assessed tax, although there is no obligation for the tax authorities to enter into a settlement. If a settlement is reached, the penalties are reduced to one-third of the minimum amount on the settled tax.

The taxpayer can decide to accept the findings of the tax audit report and pay the higher tax due, together with interest and penalties. In this case, the penalties are reduced to one-sixth of the minimum. This rule was introduced by Legislative Decree 13/2024 and applies to tax audit reports notified after 30 April 2024.

2.9 What actions can the tax authorities take if the taxpayer does not cooperate in the investigation?

If a taxpayer does not cooperate during a tax investigation, the tax authorities have several measures that they can take to ensure compliance and gather the necessary information.

If a taxpayer does not provide the requested documentation or information, the tax authorities can proceed with an assessment based on the information they have available. This may include:

• data from third parties;
• previous tax returns; and
• information from other sources.

The tax authorities can use presumptive methods to estimate the taxpayer's income or tax liability. This involves using statistical data, industry averages and other indirect methods to determine the amount of tax due.

The tax authorities have the power to access the taxpayer's bank accounts and financial records. This can be done without the taxpayer's consent if there is a suspicion of tax evasion or fraud.

Non-cooperation can result in administrative penalties, which can vary depending on the severity and nature of the non-compliance. For example, failure to provide requested documentation or information can lead to formal penalties.

2.10 Can the tax authorities exercise discretion in their treatment of the taxpayer in exceptional circumstances (eg, insolvency)?

The Revenue Agency has the discretion to exercise leniency in exceptional circumstances, such as insolvency. This discretion is particularly relevant where it is likely that the tax authorities would collect less if the standard procedures were followed through to their conclusion.

During insolvency procedures, the Revenue Agency can negotiate and accept a reduction in the taxpayer's debt. This is often done through a formal agreement known as a 'concordato preventivo' (preliminary agreement) or another restructuring plan.

The primary goal is to maximise the recovery of tax debts while considering the financial viability of the taxpayer.

2.11 Do tax authorities have any leeway to settle in the course of tax investigations?

See question 2.8.

2.12 If the investigation concludes that taxes are overdue, what powers do the tax authorities have to collect them? Does this vary depending on the applicable tax?

If a tax investigation concludes that taxes are overdue, the following rules apply.

Legislative Decree 219/2024 introduced a requirement for the tax authorities to conduct a mandatory preliminary administrative discussion before issuing a deed of assessment. In particular, the tax authorities must notify the taxpayer of a preliminary deed of assessment. After notification of the preliminary of deed of assessment, the following scenarios may occur:

• The taxpayer may file observations within 60 days (or within a longer time limit granted by the tax authorities);
• The taxpayer may file a settlement request within 30 days; or
• The taxpayer may await notification of the final deed of assessment.

If no settlement request is filed by the taxpayer, the tax authorities may notify the deed of assessment once the 60-day period (or such longer time limit as has been granted by the tax authorities) to file the observations has elapsed. If the taxpayer has filed observations, the tax authorities must explain in the final deed of assessment the reason why they did not agree with the taxpayer's observations.

Following notification of the final deed of assessment, the taxpayer may pay the assessed tax within 60 days, together with reduced penalties. In such cases, the penalties are reduced to one-third of the assessed amount, while the higher amount of tax assessed is definitively due. Alternatively, the taxpayer may file a settlement request within 15 days of notification of the deed of assessment (only if the settlement request was not filed after the notification of the preliminary deed of assessment). In such cases, the 60-day deadline for appeal is suspended for 30 days.

If a preliminary deed of assessment is not mandatory, the settlement request can be filed within the deadline for the appeal. In such cases, the deadline for the appeal is suspended for 90 days.

Regardless of whether the tax settlement request is filed before or after notification of the deed of assessment, the settlement may lead to a reduction in the assessed tax, although there is no obligation on the tax authorities to enter into a settlement. If a settlement is reached, the penalties are reduced to one-third of the minimum amount on the settled tax.

If a tax settlement is not reached and the taxpayer fails to appeal and does not pay the amounts due within the prescribed timeframe, the amounts requested in the notice of assessment may be collected by the Tax Collection Agent.

2.13 On what grounds are penalties imposed and how are these calculated?

Depending on the gravity of the infringement, administrative penalties may be divided into three categories:

• Formal infringements (ie, infringements that do not lead to a failure to pay tax): These penalties are set out within a range of fixed amounts.
• Infringements related to tax returns: These penalties are set out within a range that depends on the amount of unpaid tax. For example:
• • for failure to file an income tax return, the penalties range from 120% to 240% of the tax due; and
  • for filing of a false income tax return, the penalties range from 90% to 180% of the higher amount of tax due.
• Further to amendments introduced by Legislative Decree 87/2024, for infringements committed from 1 September 2024 onwards:
• • the penalty for failure to file an income tax return is equal to 120% of the tax due; and
  • the penalty for filing an incorrect income tax return is equal to 70% of the higher amount of tax due.
• These penalties may be increased by between half and double if the violation was committed by using false documents or non-existent transactions.
• Failure to pay tax (including delayed payment of tax): The penalty is equal to 30% of the tax due (or paid late). Due to the amendments introduced by Legislative Decree 87/2024, starting from 1 September 2024, the penalty for failure to pay tax is equal to 25%.

If a range is provided, the amount of the penalty is assessed by the tax authorities based on the seriousness of the infringement, which is evaluated in light of the behaviour of the taxpayer. The application of higher penalties must be justified by the tax authorities.

Penalties for violations committed before 1 September 2024 are increased:

• by 30% in the case of income sourced outside Italy; and
• by 50% where the violation was carried out through fraudulent conduct (eg, non-existent transactions).

Additional penalties – such as a ban on participating in public tenders – may also apply.

Penalties do not apply in cases that involve objective uncertainty in the interpretation of the law, although in practice this safe harbour is rarely accepted by the tax authorities (or the courts).

2.14 On what grounds is interest levied and how is this calculated?

The interest is levied on the mere circumstance that the taxpayer failed to pay the taxes due by the relevant deadlines.

Interest is calculated based on the period which elapsed between the original deadline for payment and the date on which the payment is effectively completed. The applicable rates may vary depending on the kind of assessment procedure, as follows:

• In case of self-regularisation, interest is calculated on the basis of the legal rate established by the government and usually adjusted every year (currently this rate is 2.5%);
• In case of a settlement, the interest rate is 3.5%; and
• In case of litigation, the interest rate is 4%.

2.15 What defences are typically available to the taxpayer?

See question 2.8.

During an audit, the taxpayer can address claims to the Taxpayer's Guarantor, which is a monocratic body regulated by the Taxpayers' Rights Charter (Law 212/2000), appointed by the president of the Tax Court of Second Instance. Its function is to:

• protect the rights of taxpayers; and
• guarantee a relationship of trust between taxpayers and the tax authorities.

The Taxpayer's Guarantor can:

• make recommendations to the tax authorities in respect of the Taxpayers Rights Charter; and
• report cases of particular importance to the competent authorities.

However, the Taxpayer's Guarantor cannot exercise binding powers.

After the deed of assessment has been issued, any relevant irregularities can in principle be challenged only by appealing against the deed of assessment.

That said, Legislative Decree 219/ 2023 introduced the following possibilities for self-review for the tax authorities:

• compulsory self-review, where:
• • the deed of assessment is manifestly wrong or ungrounded; and
  • the deadline to appeal expired less than one year ago; and
• discretionary self-review, where:
• • the deed of assessment is ungrounded; and
  • the deadline to appeal expired more than one year ago.

In the above cases, the tax authorities shall or may cancel, even partially, the deed of assessment. The self-review procedure can be requested by the taxpayer through an application for self-review. Once the application is filed, two scenarios are possible:

• The tax authorities issue a deed stating that they will not proceed with the self-review, in which case the taxpayer can appeal the deed to the tax court; or
• The tax authorities do not reply, in which case the self-review request is deemed to have been implicitly denied after a 90-day period. The implicit denial of compulsory self-review may be challenged before the tax court within 10 years.

In case of a discretionary self-review, an implicit denial cannot be challenged by the taxpayer.

2.16 Can the results of the tax investigation have criminal implications for the taxpayer? Does this vary depending on the individual taxpayer?

Generally, any large tax dispute will trigger a criminal investigation, as the thresholds for triggering a tax crime are very low. For instance, the crime of filing an incorrect tax return is triggered (irrespective of fraud, for which no threshold is applicable) where:

• there is a difference of more than €100,000 between the tax declared and the tax assessed; and
• the higher amount of tax assessed represents more than 10% of the declared turnover (or the costs disallowed are more than 10% of the turnover).

The 10% turnover test is irrelevant if the higher taxable base is greater than €2 million.

For tax crimes, the criminal investigation only involves individuals – for example:

• the legal representatives of the company in the years in which the tax returns had to be filed;
• the individual who signed the tax returns; or
• both.

However, tax crimes can trigger the administrative responsibility of legal entities under Legislative Decree 231/2001. This decree outlines the pecuniary and administrative sanctions that may be imposed on companies for failing to prevent or benefiting from offences committed by their employees and directors. In the case of tax offences, these sanctions are in addition to the penalties provided for tax infringements.

Normally, tax audit reports or tax assessments indicate whether the auditors have informed the public prosecutor about a potential crime. The public prosecutor will then decide in parallel:

• whether the conditions for the crime have been met; and
• ultimately, whether to start a criminal proceeding.

2.17 If the tax investigation has criminal implications for the taxpayer, are the answers to any of the above questions different?

See questions 1.3 and 2.15.

3 Voluntary disclosure and amnesties

3.1 Are any voluntary disclosure or amnesty programmes applicable in your jurisdiction? Does this vary depending on the applicable tax?

If the infringement has not yet been assessed or investigated by the tax authorities, the taxpayer may self-correct within certain timeframes through the payment of reduced penalties. In such cases, the amount of the reduced penalty varies depending on the point at which the violation is self-corrected by the taxpayer.

The self-regularisation procedure generally applies to all taxes, but a reduction in penalties or remediation of the violation does not apply to all kind of infringements – for example, a failure to file a tax return cannot be self-regularised.

That said, voluntary disclosure and amnesty programmes have been implemented periodically to encourage taxpayers to come forward and declare previously undeclared income or assets. These programmes are designed to increase tax compliance and generate additional revenue for the government.

The most recent tax amnesty programmes were as follows:

• Tax amnesty for litigation pending as of 1 January 2023: Articles 1(186)–(205) of the Finance Bill for 2023 introduced a special tax amnesty for tax litigation pending before any tax court (including the Supreme Court) as of 1 January 2023. Based on this amnesty procedure, a taxpayer could close the litigation by paying the amount of tax due without penalties and interest. The amount of tax due under the amnesty could be reduced from the amount under litigation depending on:
• • the outcome of the last decision lodged as of 1 January 2023; and
  • the level of tax court in which the case was pending on the same date.
• In order to benefit from the amnesty, taxpayers had to file an application and pay the amount due – or the first instalment – by 30 June 2023.
• Tax amnesty for amount due to the Tax Collection Agent: Articles 1(231)–(252) of the Finance Bill for 2023 introduced a special tax amnesty for debts transmitted to the Tax Collection Agent from 1 January 2000 to 30 June 2022. Taxpayers could regularise their position by paying the principal amounts and those accrued as reimbursements of the costs of the proceedings without penalties and interest. In order to benefit from the amnesty, taxpayers had to file an application with the Tax Collection Agent before 30 April 2023. The Tax Collection Agent was then required to notify the taxpayer by 30 June 2023 of:
• • the amounts due under the tax amnesty; and
  • the methods and terms of payment.

4 Forum for tax disputes

4.1 In what forum(s) are tax disputes heard in your jurisdiction? Is there any choice of forum available?

Tax cases in Italy are dealt with by specialised tax courts, which are independent bodies.

The tax judiciary is organised in two tiers:

• the courts of tax justice of first instance, which are established in the seat of each province; and
• the courts of tax justice of second instance, which are the courts of appeal and are established in the seat of each region; certain decentralised sections of the second-instance tax courts have also been created, particularly in geographically extensive regions.

The competent court of first instance (which also determines the competence of the court of second instance) is determined by the place in which the tax office that issued the appealed act is seated. The competence of the tax office is generally determined by the place in which the taxpayer is established – that is:

• residence for natural persons; and
• legal seat for companies and other legal entities.

The territorial competence of the tax courts cannot be derogated by the tax authorities or the taxpayer.

Judgments of a second-instance tax court can be brought before the Tax Chamber of the Supreme Court only for specific reasons of appeal, including cases where:

• the substantive or procedural law was wrongly applied; or
• the motivation on the key facts of the matter was omitted.

4.2 Who is the fact finder in a tax dispute? Does this change based on venue?

The fact finder of a tax dispute is the same authority that is entitled to enforce the tax laws, which may vary according to the relevant tax (see question 1.3). Tax litigation before a tax court is generally managed by the legal department of the competent local office of the Revenue Agency. Before the Supreme Court, the Revenue Agency is represented by the state attorney.

5 Filing a tax dispute

5.1 What is the limitation period for filing a tax dispute in your jurisdiction?

The limitation period for filling a tax dispute varies according to the kind of act of the tax authorities that is being challenged by the taxpayer.

Generally, a deed of 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 is notified.

Tax litigation may also arise due to the denial of a refund request filed by the taxpayer (rather than as the result of a tax authority deed of assessment). The reasons for which a taxpayer may apply for a refund can vary – for example, the taxpayer may:

• have paid more tax than was due; or
• argue that the tax is not payable because 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 timeframes specified by the law – for example:

• the right to file an application for a refund of income tax must generally be exercised within 48 months of the date of payment; and
• the right to claim a refund of value added tax 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 is followed (please see question 2.14); or
• The tax authorities do not reply, 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.

5.2 What are the formal requirements for filing a tax dispute?

See question 5.3.

5.3 What are the procedural and substantive requirements for filing a tax dispute?

The procedural tax rules set out a list of deeds by the tax authorities that can be appealed before the tax courts of first instance. This list has been broadly interpreted, considering that acts of the tax authorities generally affect the liability of the taxpayer.

The deed of appeal must be served first on the administrative (tax) body that has issued the deed of assessment. To commence litigation properly, the taxpayer must file the appeal with the competent tax court within 30 days of the date on which the deed of appeal was served on the counterparty. The taxpayer must also file with the tax court:

• any documents or evidence; and
• proof that the deed has been properly served on the administrative body.

In the second-instance trial, new evidence and new documents are not admitted, unless:

• the tax court deems them indispensable to the case; and/or
• the party can prove that it was unable to produce them in the first-instance trial for reasons not attributable to it.

5.4 Is there any possibility for collective proceedings (eg, involving several taxpayers or multiple tax assessments)?

Tax litigation is generally initiated by the person that is liable to the disputed tax. Certain exceptions exist, including the following:

• Corporate income tax consolidation: Where a company participates in a corporate tax consolidation scheme, the assessment relating to an alleged tax violation of a consolidated company is also served on the consolidating company and both parties must appeal the assessment. In this case, both parties may stand together before the tax court.
• Similar matters: Where the deeds of assessment served on two or more taxpayers have certain links or common elements, they can be appealed together by the relevant taxpayers. Otherwise, the judicial proceedings can be united later by the tax court, either ex officio or upon the request of the parties.

5.5 Must the sum in contention be paid into court before a tax dispute is filed?

If an appeal by the taxpayer is filed, so-called 'provisional payments' are due as follows:

• one-third of the higher taxes assessed and interest pending in tax litigation before the tax court of first instance;
• up to two-thirds of the higher taxes, interest and penalties assessed in case of an unfavourable decision of the tax court of first instance; and
• 100% of the amount assessed in case of an unfavourable decision of the tax court of second instance.

If certain conditions are met, the taxpayer – either during the appeal or during the first-instance proceedings – may request the tax court to suspend the enforceability of the challenged deed of assessment.

Similarly, decisions of the tax court of first instance are immediately enforceable (within the limit of two-thirds of the sums assessed), but the taxpayer may request the tax court of second instance to suspend their effectiveness in case of an appeal.

The same request may be filed with a different judge of the court of second instance in case of an appeal of a second-instance decision to the Supreme Court.

5.6 Has the filing of a tax dispute any effect on the payment of tax or the collection possibilities for the authorities?

See question 5.5.

5.7 If the tax dispute is decided in favour of the authorities, is late interest due if the tax has not been settled? If the tax dispute is decided in favour of the taxpayer and the tax had already been settled, is interest due by the state?

In the Italian tax system, if a tax dispute is decided in favour of the tax authorities and the taxpayer has not settled the tax, late interest is due. The interest is calculated from the original due date of the tax payment until the date of actual payment. The rate of interest is currently 4% per year and is applied to the outstanding tax amount.

Conversely, if the tax dispute is decided in favour of the taxpayer and the tax had already been paid, the state treasury must pay interest on the overpaid amount. This interest is calculated from the date on which the tax was paid until the date of refund, with the exclusion of the first semester. The rate of interest for refunds is currently 1% for each semester completed.

6 Disclosure and privilege

6.1 What rules apply to disclosure in your jurisdiction? Do any exceptions apply?

Taxpayers must provide all necessary documentation and information to the tax authorities upon request. These include:

• financial statements;
• invoices;
• contracts; and
• any other relevant documents that can substantiate the taxpayer's financial activities and tax liabilities.

Certain professionals, such as lawyers and accountants, are bound by professional secrecy and may be exempt from disclosing information that is protected under this privilege (see question 6.3).

Taxpayers have the right not to disclose information that could incriminate themselves, in line with constitutional protections against self-incrimination. For example, there is no obligation to provide correspondence between a criminal lawyer and his or her client.

6.2 What rules on third-party disclosure apply in your jurisdiction?

Third-party disclosure rules in Italy require that third parties such as banks, financial institutions and other entities provide information to the tax authorities upon request. This is often used to:

• verify the accuracy of a taxpayer's declarations; and
• detect potential tax evasion or fraud.

6.3 What rules on privilege apply in your jurisdiction?

In Italy, legal privilege is recognised and protects certain communications from being disclosed. This privilege primarily applies to communications between clients and their criminal lawyers.

In case of a tax audit conducted against a client at the office of its tax auditor or an audit against the tax auditor itself, tax and accounting documents will not be included within the documentation over which privilege may be invoked (as these constitute evidence which is the subject of the tax audit). Conversely, it will be legitimate to invoke privilege in connection to documents that are unrelated to such audit.

7 Evidence

7.1 What types of evidence are permissible in tax disputes in your jurisdiction? Is expert evidence accepted?

In tax cases at any level, only documentary evidence can be submitted. Nonetheless, Law 130/2022 provides that judges can admit witness evidence in written form if they deem this necessary for the decision, even without the agreement of the parties. Witness evidence can only be used to prove facts that differ from those attested by public officers (eg, the facts attested by tax police officers in a tax audit report).

Expert evidence can be submitted as documentary evidence by each party or can be requested ex officio by the tax courts. In this case, a specific sub-proceeding guarantees that the parties may be assisted by an expert of their choice, who can make observations on the conclusions of the expert appointed by the tax court.

7.2 What is the applicable standard of proof?

The standard of proof is a crucial element that determines the outcome of disputes between taxpayers and the tax authorities. The 'standard of proof' refers to the level of evidence required to establish a fact or a claim in legal proceedings.

In general, the standard of proof in Italian tax litigation is a 'preponderance of the evidence'. This means that the party bearing the burden of proof must demonstrate that its claims are more likely than not to be true. This standard is less stringent than 'beyond reasonable doubt', which is used in criminal cases.

7.3 On whom does the burden of proof rest?

The burden of proof typically rests with the tax authorities where they:

• issue a deed of assessment; or
• claim that a taxpayer has underreported income or engaged in tax evasion.

The tax authorities must provide sufficient evidence to support their claims.

Conversely, if a taxpayer challenges an assessment or seeks a refund, it bears the burden of proving that:

• the assessment is incorrect; or
• it is entitled to the refund.

This involves providing documentation and other evidence to substantiate its claims.

Evidence in tax litigation can include the following:

• Documents: These include:
• • financial records;
  • invoices;
  • contracts; and
  • other written materials.
• Testimonies: These include statements from witnesses, including expert witnesses (see question 7.1).
• Presumptions: Legal presumptions can also play a role, whereby certain facts are assumed to be true unless proven otherwise.

In cases involving transfer pricing, in which transactions between related entities are scrutinised, the standard of proof can be more complex. Taxpayers must demonstrate that their pricing is consistent with the arm's-length principle, which often requires detailed documentation and economic analysis.

When dealing with anti-avoidance rules, such as those targeting arrangements designed to avoid taxes, the tax authorities must prove that the primary purpose of the arrangement was to obtain a tax advantage.

The tax courts will review the evidence presented by both parties and make a determination based on a preponderance of the evidence. They have discretion in evaluating the credibility and weight of the evidence.

8 Proceedings

8.1 Are tax proceedings in your jurisdiction public or private? If the former, are any options available to the parties to keep the proceedings or related information confidential?

In Italy, tax proceedings are generally public. This means that hearings are accessible to the public and the decisions of the tax courts are published. The principle of transparency is a cornerstone of the Italian legal system, ensuring that judicial processes are open and accessible. Other information concerning the appeal (not included in the decision) can be accessed by third parties only if they have a legitimate interest in doing so.

8.2 How do the proceedings unfold in your jurisdiction?

Before each tax court, generally only one hearing is scheduled to discuss the merits of the case. There can be two hearings if the taxpayer requests the court to suspend the collection relating to a tax deed which is under appeal. In this case, a hearing to discuss the suspension and a hearing to discuss the merits will take place.

Law 130/2022 provides that the hearing to discuss the suspension must take place within 30 days of filing of the request. This hearing must be separate from the hearing to discuss the merits of the case.

Upon the discretion of the judge, the decision on the merits may be anticipated at the end of the hearing to discuss the suspension in cases where the appeal is:

• manifestly well founded;
• inadmissible; or
• ungrounded.

This rule was introduced by Legislative Decree 220/2023 and applies to appeals before the first and second-instance tax courts filed after 4 January 2024.

8.3 What is the typical timeframe for proceedings?

No timeframe is specified by law; this will depend on:

• the stage of the proceedings; and
• the specific forum in which they are being heard.

Based on the most recent statistics provided by the Ministry of Finance and the Supreme Court, it takes eight years on average to obtain, as follows:

• one and a half years for the first-instance judgement;
• two and a half years for the second-instance judgment; and
• four years for the Supreme Court judgment.

8.4 Are settlements possible between the taxpayer and the tax authorities once judicial proceedings have been opened?

It is still possible to settle a case while it is under litigation. Law 130/2022 introduced the possibility for the judge to present a judicial settlement proposal to the parties. The judicial settlement – as opposed to a settlement reached before the litigation starts – can be partial (ie, it may not necessarily cover the whole fiscal year under audit and can focus on one or more of the items under litigation). Where a settlement is reached during the first-tier proceedings, the penalties are reduced to 40% of the minimum on the settled amount. Where a settlement is reached during the second-tier proceedings, the penalties are reduced to 50% of the minimum on the settled amount. Where a settlement is reached during Supreme Court proceedings, penalties are reduced to 60 per cent of the minimum on the settled amount. The latter rule applies to cases commenced before the Supreme Court after 4 January 2024, as per Law 220/2023.

8.5 Do the courts in your jurisdiction have full power to review facts and legal questions?

In Italy, the lower tax courts have comprehensive authority to review both factual and legal questions in tax litigation.

Tax litigation begins with the taxpayer filing an appeal with the tax court of first instance challenging the assessment made by the tax authorities. The court will then:

• review all relevant documentation;
• hear arguments from both parties; and
• make a decision based on its findings.

If either party is dissatisfied with the decision, it can appeal to the tax court of second instance, which will conduct a de novo review, meaning that it will re-examine both the facts and the legal issues afresh.

The judgments of the second-instance tax courts can be appealed before the Tax Chamber of the Supreme Court in limited cases, such as where:

• the substantive or procedural law was wrongly applied; or
• the motivation on the key facts of the matter was omitted.

9 Remedies

9.1 What remedies are available in tax disputes in your jurisdiction?

See questions 8.4, 8.5 and 10. In connection to tax disputes involving international transactions, see also question 12.

9.2 What factors will the court consider in deciding on the appropriate remedies?

See question 8.5.

10 Appeals

10.1 Can the decision of the court be appealed? If so, on what grounds and what is the process?

The decisions of the tax courts can be appealed. The deadline to appeal a decision of a tax court of first instance before the tax court of second instance is six months from the date on which the judgment is published. However, if one party duly serves the decision on the opposing party, the period during which the opponent may bring an appeal is shortened to 60 days from notification of the decision. The first-instance decision can be challenged by the losing party for reasons regarding both the interpretation of the applicable law and the factual representation embraced by the first-tier judges, within the limit of the reasons and the facts already submitted to the court of first instance.

Judgments of the second-instance tax courts can be brought before the Tax Chamber of the Supreme Court in limited cases, such as where:

• the substantive or procedural law was wrongly applied; or
• the motivation on the key facts of the matter was omitted from the judgment.

11 Costs, fees and funding

11.1 What costs and fees are incurred in tax disputes in your jurisdiction? Can the winning party recover its costs?

The Italian law governing tax litigation provides that:

• the losing party must bear the costs of the litigation; and
• the costs of the winning party are declared by the court on the basis of the costs incurred.

Courts can rule that each party must bear, in whole or in part, its own costs where:

• both litigants are partial losers; or
• there are exceptional and serious reasons that are explained in the judgment.

Law 130/2022 introduced a rule that provides for a 50% increase of the costs for a party that unduly refuses a judicial settlement proposal by the other party or by the judge.

Legislative Decree 220/2023 introduced a rule providing that each party will bear its own costs if the winning party succeeded on the basis of decisive documents that were provided only during the trial and not before in the pre-litigation proceeding.

11.2 Are contingency fees and similar arrangements permitted in your jurisdiction?

In Italy, the use of contingency fees – also known as 'quota lite' agreements – is a topic of considerable debate and regulation within the legal profession, particularly in the context of tax litigation. Contingency fees are arrangements where a lawyer's fee is contingent upon the successful outcome of a case, typically calculated as a percentage of the amount recovered or saved for the client.

The Italian legal system traditionally adheres to the principle that legal fees should be based on the work performed and not on the outcome of the case. This principle is rooted in the ethical standards set by the Italian Bar Association, which has historically viewed contingency fees with scepticism due to concerns about:

• potential conflicts of interest between lawyers and clients; and
• the risk of encouraging frivolous litigation.

11.3 Is third-party funding permitted in your jurisdiction?

In Italy, third-party funding is not explicitly regulated under the existing legislation. However, it is not expressly prohibited either. Thus, while there is no specific legal framework governing third-party funding, it can still be utilised as long as it adheres to general legal principles and ethical standards.

12 International tax disputes

12.1 What is your jurisdiction's position on the resolution of international tax disputes (eg, advance pricing agreements, mutual agreement procedures, arbitrations)?

Italy has a comprehensive framework for the resolution of international tax disputes, which includes mechanisms such as:

• advance pricing agreements (APAs);
• mutual agreement procedures (MAPs); and
• arbitration.

These mechanisms are designed to provide clarity and resolve conflicts that may arise from cross-border transactions and the application of tax treaties.

APAs are a proactive measure that allows taxpayers to reach an agreement with the Italian tax authorities on:

• the transfer pricing methodology to be applied to their international transactions; or
• the application of specific treaty rules.

This agreement is typically valid for a specified period and provides certainty to taxpayers by preventing future disputes over transfer pricing issues. APAs can be unilateral, bilateral or multilateral, depending on whether they involve one or more tax jurisdictions.

MAPs are another important tool for resolving international tax disputes. MAPs are provided for under:

• double taxation treaties;
• the EU Arbitration Convention; and
• EU Directive 2017/1852 on tax dispute resolution mechanisms in the European Union (transposed into Italian law by Legislative Decree No 49/2020).

They allow competent authorities from the countries involved to negotiate and resolve disputes regarding the interpretation or application of tax treaties. The goals of MAPs are to:

• eliminate double taxation; and
• ensure that taxpayers are not subject to conflicting tax obligations in different jurisdictions.

The process is initiated by the taxpayer, which must submit a request to the competent tax authorities.

One of the main differences between EU Directive 2017/1852 and the EU Arbitration Convention concerns the personal and objective scope of application. While the EU directive applies to any person – including individuals – resident in EU member states, the EU Arbitration Convention applies only to enterprises that are resident in EU member states. Moreover, the objective scope of the EU directive is not limited to transfer pricing rules and the attribution of income to permanent establishments (as per the EU Arbitration Convention); rather, it aims to resolve disputes between member states which arise from the interpretation and application of agreements and conventions that provide for the elimination of double taxation of income. The EU directive applies to any complaint submitted from 1 July 2019 in connection with fiscal year 2018 onwards.

Arbitration is a further step that can be taken if a dispute cannot be resolved through a MAP. Under certain double taxation treaties, the EU Arbitration Convention and the EU Directive 2017/1852, if the competent authorities cannot reach agreement within a specified timeframe, the case can be referred to an independent arbitration panel. The decision of the arbitration panel is binding on the parties involved, providing a definitive resolution to the dispute.

12.2 Has your jurisdiction implemented the Organisation for Economic Co-operation and Development (OECD) minimum standards with respect to international tax dispute resolution or is it a party to other agreements in this respect?

Italy has implemented the OECD minimum standards with respect to international tax dispute resolution. This is part of Italy's commitment to the OECD's Base Erosion and Profit Shifting (BEPS) project, which aims to address tax avoidance strategies that exploit gaps and mismatches in tax regimes to artificially shift profits to low or no-tax locations.

One of the key components of the BEPS project is Action 14, which focuses on making dispute resolution mechanisms more effective. Italy has incorporated these standards into its domestic legislation and practices. This includes ensuring that MAPs are available and effective for resolving tax treaty-related disputes. The Revenue Agency has a dedicated office to handle MAP requests.

Moreover, Italy is a signatory to the Multilateral Instrument (MLI), which modifies existing bilateral tax treaties to implement the tax treaty-related measures developed through the BEPS project. However, the ratification law for the actual implementation of the MLI has not yet been approved. The MLI includes provisions that enhance dispute resolution mechanisms, such as mandatory binding arbitration, which Italy has adopted for certain treaties. This means that, as highlighted in question 12.1, if a tax dispute cannot be resolved through a MAP within a specified timeframe, it will be possible to submit it to arbitration, ensuring a definitive resolution, once the MLI is effectively in force.

12.3 Does your jurisdiction's position differ significantly from Article 25 of the OECD Model Tax Convention (including commentary)? If so, in what respects?

In Italy, the position regarding MAPs as outlined in Article 25 of the OECD Model Tax Convention does not significantly differ from the principles established by the OECD. However, there are certain differences in practice. For instance, while Article 25 of the OECD Model Tax Convention allows for arbitration if the competent authorities cannot reach agreement within two years, Italy has been somewhat cautious in incorporating mandatory arbitration clauses into its bilateral treaties (most of which were based on previous versions of the OECD Model Tax Convention). As mentioned in question 12.3, Italy has signed the MLI, which includes provisions on mandatory binding arbitration.

12.4 How do domestic and international tax dispute resolution mechanisms interplay in your jurisdiction?

The interplay between domestic and international mechanisms is crucial to facilitate the comprehensive and fair resolution of tax disputes. When a taxpayer initiates a MAP, domestic proceedings may be suspended to allow for the international process to take place. This suspension:

• helps to prevent conflicting decisions; and
• ensures that the international resolution can be effectively implemented.

13 Trends and predictions

13.1 How would you describe the current tax dispute landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The use of pre-litigation settlement instruments has increased over time, as these tools provide room for re-discussion of the claim and can result in a significant reduction in tax penalties, which in Italy can be more than twice the amount of the assessed tax (although, for violations committed on or after 1 September 2024, the penalties have been significantly reduced).

Moreover, pre-litigation settlements avoid the uncertainties associated with:

• the very lengthy timeframes involved in tax litigation (on average, a tax dispute lasts about eight years if litigated up to the Supreme Court); and
• potentially controversial evaluations by judges.

Pre-litigation settlements are most successful in cases involving evaluation aspects, such as regarding corporate income tax (eg, transfer pricing, anti-abuse).

That said, tax litigation in Italy remains considerable: the most recent statistics issued by the Ministry of Economy – published in June 2024 and relating to the situation as of 31 December 2023 – revealed that:

• 158,468 cases were pending before the tax courts of first instance; and
• 95,144 cases were pending before the tax courts of second instance.

Over the past two years, the Italian legislature has introduced several provisions aimed at:

• improving the quality of tax judgments;
• reducing the duration of the proceedings before the tax courts and
• the number of appeals against tax judgements.

Law 130/2022 – issued in response to works undertaken by the interministerial commission established by the Ministry of the Economy and the Ministry of Justice to fulfil one of the objectives of the recovery and resilience plan for Italy filed with the European Commission – introduced further significant innovations to the Italian tax litigation system. The most significant change was the introduction of professional and specialist tax judges, appointed at the end of a public contest reserved for graduates in law and economics. Once these public contests, held annually, have been completed, the new judges will gradually replace the existing ones, who are not professionals and specialists.

Under Law 111/2023, the government comprehensively reformed the Italian tax law system. A significant number of decrees have been issued to implement the law, while others are still in the pipeline. Among them, Legislative Decrees 219/2023, 220/2023 and 13/2024 introduced important changes that modified several rules relating to tax assessment procedures and tax litigation.

In particular, Legislative Decree 219/2023 introduced a requirement for a mandatory preliminary administrative discussion with the Italian tax authorities before issuing a deed of assessment (see question 2.11).

14 Tips and traps

14.1 What would be your recommendations to parties facing a tax dispute in your jurisdiction and what potential pitfalls would you highlight?

When facing a tax dispute in Italy, it is crucial to approach the situation with a well-informed and strategic mindset. The Italian tax system is complex and navigating it requires a thorough understanding of both the substantive and procedural aspects of tax law (eg, the prohibition on producing new evidence or new documents during the second-instance trial).

First, it is essential to maintain comprehensive and accurate records of all financial transactions, tax returns and all other documents that could have an impact on your tax position. This documentation will be invaluable in preventing disputes or substantiating your case during a dispute. Additionally, it is advisable to seek the assistance of a tax professional or legal expert who specialises in Italian tax law. He or she can provide critical insights and guidance throughout the dispute prevention and resolution process.

Another key recommendation is to engage in proactive communication with the tax authorities. Often, disputes can be resolved through negotiation and settlement before escalating to formal litigation. Demonstrating a willingness to cooperate and providing clear, well-documented evidence to support your claims can facilitate a more favourable outcome.

A potential pitfall to avoid is underestimating the importance of timely responses. The Italian tax authorities are known for their strict adherence to deadlines and formalism in procedure, and failure to respond promptly to notices or requests for information can result in unfavourable presumptions or penalties. Additionally, taxpayers should be cautious about making any admissions or concessions without fully understanding the implications, as these can be used against them in subsequent proceedings.

Another trap to be mindful of is the potential for interest to accrue on disputed amounts. Even if the taxpayer believes that the tax assessment is incorrect, it is strongly advisable to evaluate the financial convenience to pay the disputed amount under claim to stop the accumulation of interest.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.