Exclusion from procurement procedures: relevant criteria for non-definitive tax violations have been set

On October 12th 2022, the Ministry of economy and finance published Ministerial Decree of 28 September 2022, which was enacted together with the Ministry of sustainable infrastructures and mobility.

Pursuing to the provisions of Article 80, paragraph 4, of Legislative Decree No. 50/2016 (“Italian Code of public procurement" - "Codice dei contratti pubblici") – the Decree sets out the grounds for exclusion from public procurement procedures of bidders who have committed serious tax violations which have not been definitively ascertained.

Article 80, paragraph 4, of Legislative Decree No. 50/2016 provides that the exclusion of a bidder from a public procurement procedure is mandatory in the event of serious anddefinitively ascertained tax (or social security contribution) violations, while it is discretionalwhen the same violations are serious but not definitively ascertained.

As from July 17th 2020, in addition to the provision setting a mandatory exclusion in the event of serious tax violations definitively ascertained - which are defined as violations entailing the non-payment of taxes and duties for more than 5.000 euros ascertained by a court ruling or by an administrative deed which can no longer be appealed - the Legislator has further provided, in compliance with EU law, the possibility for contracting authorities to exclude bidders also in the event of serious tax violations that have not been definitively ascertained (except for the case in which the bidder either fully complies with the obligation to pay the sums due or undertakes to pay the amounts due by the closing date for submission of the tender application)[1].

The Ministerial Decree published on 28 September 2022 further outlines the limits and conditions under which contractingauthorities may exclude bidders from public procurement procedures.

Article 2 provides that, for the purposes of discretionary exclusions, a “violation” shall be defined as a breach of the obligation to pay arising, alternatively, from the notification of: 

1. tax assessment resulting from offices' inspection activities;
2. tax assessment resulting from offices' liquidation activities;
3. request of payment which refer to irregularities following automated or formal inspections of income tax returns, pursuant to Articles 36-bis and 36-ter of Presidential Decree no. 600/1973, and of VAT returns, pursuant to Article 54-bis of Presidential Decree no. 633/1972.

This provision encompasses, within the scope of the discretionary exclusion granted to the contracting authorities, not only the violations resulting from the non-payment of declared taxes (sub. 3) but also those resulting from the non-payment of taxes and duties required by a tax assessment, either issued as a result of the activity of liquidation of the tax due in relation to facts and deeds that are subject to taxation (such as those subject to stamp duty) (sub 2) or as a result of inspection activity concerning the compliance with tax provisions (such as, for example, with those that rule the deductibility of costs for the purposes of corporate income tax) (sub 1).

By referring generically to inspection and liquidation activities carried out by 'offices', the provision seems to encompass all tax administration units, including, for example, the Customs Agency.

The provision does not refer to violations which result exclusively from tax audit reports.

Article 3 sets forth the thresholds of seriousness of the violations that allow the discretionary exclusion. This provision, which also confirms what already is provided for by law (i.e. that the amount of the violation must in any case amount to at least 35.000 euro), requires for a connection between the value of the tender and the value of the violation, clarifying that the violation should be inteded as the "failure to comply with an obligation to pay taxes or duties for an amount that, excluding penalties and interests, is equal to or greater than 10% of the value of the tender".

This threshold is related: 

• to the value of the lot or lots for which the economic operator is tendering, if the contract is divided into lots;
• to the value of each economic operator's contractual obligation in the event of subcontracting or participation in temporary groups or consortia.

Article 4 further provides that a serious violation is deemed not to have been definitively ascertained - and, as such, allows the contracting authorities to exclude bidders - when the deadline for complying with the payment obligation has expired to no avail (i.e., generally, 60 days from the notification of the tax deeds) and the tax notice or the payment notice has been timely appealed (given that, in the absence of a timely appeal, the violation is deemed definitive).

The second paragraph of the same article further provides that the discretionary exclusion shall not operate when: 

• there has been a ruling in favour of the bidder which is not yet definitive (until its overcome or the definitively ascertained of infringements), or
• a judicial or administrative deed has been issued suspending the effects of the tax assessment or request of payment.

Therefore, if the taxpayer achieves a first or second instance ruling in its favour, the invalidated tax deed cannot allow the exclusion from the procurement procedure, thus enhancing the relevance of the judgments of Tax Courts for the possible exclusion of the economic operator from the procurement procedures.

Finally, in the coordinating and interim provisions of the Ministerial Decree, it is provided that the Tax Revenue Agency shall issue, for taxes under its administration, the certification referred to in the Order of the Director of the Tax Revenue Agency of 25 June 2001, whose findings can be assessed by the contracting authorities for the purposes of the discretionary exclusion of the economic operator from the procedure in compliance with the criteria set out in the above-mentioned provisions.
  

[1] It should be noted that the submission of a request for installment payment constitutes the undertaking by the debtor to pay the tax obligation and entitles the bidder to participate in the tender, and therefore does not represent a ground for exclusion under paragraph 4 of art. 80 of the Public Procurement Code, as long as the relevant request was approved prior to the deadline for the submission of tenders (Consiglio di Stato, Ad. plen., 5 June 2013, no. 15)