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).