Background
The EU Commission brought an action against Italy in respect of two types of VAT amnesty that were provided for by Law No. 289 of 27 December 2002.
The effect of these provisions, which were identified as the “supplementary VAT return” (Art. 8) and the “automatic settlement” (Art. 9), were to eliminate or reduce the risks of VAT assessments and related penalties, in exchange for the payment of an amount calculated on the basis of the amnesty provisions (the “Amnesty Fee”).. Originally, the years covered by the amnesty were those from 1997 to 2001 (included). Subsequently, the amnesty was extended also to year 2002 by the Law n. 350/2003.
On 17 July 2008, the ECJ ruled that these provisions were in violation of EU law as there effect was to distort the principle of neutrality inherent in the VAT system and undermine the responsibility incumbent on Italy to ensure the correct levying and collection of the tax.
Consequences
The effect of the ECJ decision is to invalidate the amnesty provisions (in Arts. 8 and 9 of Law 289/2002) with retroactive effect. This should imply that:
- Taxpayers who paid the Amnesty Fee, and do not wish to claim a refund of it may still benefit from the amnesty effects, pursuant to the principle of “legitimate expectation”;
- Taxpayers who paid the Amnesty Fee, and now wish to claim for its refund (see below for the statute of limitation rules) will have the amnesty effects cancelled; in particular this will mean that the Tax Authority could raise assessments for tax years which are not yet statute barred. However, under the Italian statute of limitation rules, any tax assessment must be notified by 31 December of the fourth year following the year during which the tax return was filed (or the fifth year in the case of omission to file the relevant tax return). Therefore, all years from 1998 to 2001 should be closed, and the tax year 2002 (for which a separate case is before the ECJ) should be statute barred on 31 December 2008. However, it is not clear whether the ECJ decision also applies to these tax amnesty provisions, as they are not included in Arts. 8 and 9; the original amnesty periods were subsequently extended by two years. Therefore, the tax year 2001 might be subject to assessment up to 31 December 2008 and the tax year 2002 might be subject to assessment up to 31 December 2009.
- Taxpayers who have paid only the first instalment of the Amnesty Fee (which was payable in 3 instalments) obtained the benefit of the amnesty law irrespective of the payment of the subsequent instalments. They may request reimbursement with the consequences mentioned above (see below for the statute of limitation rules). Should the Tax Authority request payment of unpaid instalments the legitimacy of the request could be challenged by referring to the decision of the ECJ.
Statute of limitation: rules for a refund
As already mentioned, taxpayers are entitled to claim a refund of the Amnesty Fee subject to the applicable time limits in the statute of limitation rules.
The statute of limitation rules will be materially different depending on whether the Amnesty Fee is a tax or not. The general limitation period is 10 years whereas for tax refunds the limitation period is only 48 months from the date of payment.
On the basis of the decision of the ECJ, the Amnesty Fee should be regarded as a payment that is not a tax and therefore the 10 years limitation period should apply. The period should start to run from the date that the right to the refund arose, which should be the date of the decision of the ECJ (17 July 2008).
