The two-year advance settlement agreement (CPB) provided for by Legislative Decree 113/2024 consists of a proposal formulated by the Revenue Agency for the definition, for two years, of the income derived from the exercise of business activity or the practice of arts and professions for the purposes of direct taxes and the value of net production for IRAP purposes. However, adherence to the agreement does not have any effect for VAT purposes. In short, it is a risky contract that the taxpayer enters into with the tax authorities, fixing their taxable income for two years: if this income decreases by up to 30%, the taxpayer will still pay tax on the agreed income; if, however, the income increases, it may be taxed at a reduced rate, varying according to the ISA score. The convenience of the CPB is evident only for those who are able to make truly reliable predictions about the stability or growth of their income for the two consecutive years (2024-2025), while it is not convenient for taxpayers with uncertain or decreasing incomes. With the aim of increasing the attractiveness of the new instrument, during the conversion of Legislative Decree 9/08/2024 no. 113, specific provisions were inserted that allow only ISA agreement holders a particular form of settlement for the years 2018 to 2022 (the so-called "2024 amnesty").
PARTIES ELIGIBLE FOR PREVENTIVE ARRANGEMENT
In general, IRES and IRPEF taxpayers subject to ISA, as well as flat-rate taxpayers , can be admitted to the settlement procedure.
Access issues
The main problems that can prevent access to this institution are the following.
1- Existence of tax and social security debts
With reference to the tax period preceding those covered by the proposed settlement agreement (i.e., 2023), the taxpayer:
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must not have outstanding tax debts or social security contributions;
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or must have settled such debts by the deadline for joining the arrangement, and in any case the total amount of the outstanding debt, including interest and penalties, must be less than the threshold of 5,000 euros as of 31/12/23 (unless they are subject to installment payments).
2- Grounds for exclusion
There can be several reasons for exclusion that prevent the application of the two-year pre-bankruptcy agreement:
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Failure to file a tax return (ISA and flat-rate taxpayers) – At least one of the three tax periods preceding those to which the settlement applies.
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Crimes committed in the last three tax periods preceding those covered by the settlement agreement.
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In the exercise of business or arts and professions, obtaining income or portions of income that are wholly or partially exempt, excluded, or not included in the taxable base, exceeding 40% of the income derived from the exercise of business or arts and professions (only ISA taxpayers) – Tax period prior to the one to which the proposal refers.
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Adherence to the flat-rate regime (only ISA entities) – Tax period prior to the one to which the proposal refers – First tax period subject to the settlement agreement
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Mergers, spin-offs, contributions, transfer of a branch of business, or, for the company or association referred to in Article 5 of the TUIR, changes to the company structure (only ISA entities) – First tax period subject to the agreement.
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Conviction for one of the tax offenses referred to in Legislative Decree 74/2000 or for the offenses of false corporate communications, money laundering, self-money laundering, and use of money, goods, or benefits of illicit origin (ISA and flat-rate taxpayers).
3- Approaching deadline: adherence in tax return by 31.10.2024
For both taxpayers in the flat-rate tax regime and those applying the ISA (Indicative Standards of Assessment), access to the new system is achieved by submitting the 2024 REDDITI tax return by October 31, 2024. This deadline is strict, and therefore adherence cannot be expressed with a late declaration . It is therefore very difficult to understand in practice the actual convenience of the system, both due to the uncertainty of current year income and the interpretation of the regulations, which still needs clarification in several aspects. Numerous attempts have been made by trade unions to postpone the deadline, considering that the regulation has been modified several times in recent months and that the latest official clarifications date back to the first ten days of October . A reopening of the deadline is hoped for.
THE SUBSTITUTIVE TAX
For the tax periods covered by the settlement agreement, it is possible to opt for the application of a substitute tax on income, including surtaxes. The taxable base is equal to the difference, if positive, between the agreed self-employment and business income and the corresponding income declared in the period preceding those to which the proposal refers, net of extraordinary items.
Variable rates are applied to this base, depending on the ISA results relating to the tax period preceding the entry into the agreement ( Article 20-bis of Legislative Decree 13/2024).
| ISA Score
(Tax year 2023 – form 2024) |
Tax rate |
| 8-9-10 | 10% |
| 6-7 | 12% |
| 5 or lower | 15% |
The substitute tax on the agreed higher income also applies to flat-rate taxpayers:
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with the 10% rate (instead of 15%),
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with a rate of 3% (instead of 5%) in the case of start-ups ( Article 31-bis of Legislative Decree 13/2024).
EFFECTS OF THE CONCORDAT
Generally speaking, any actual income greater or less than the amount agreed upon with the Revenue Agency is irrelevant for determining income taxes, IRAP (regional property tax), and mandatory social security contributions ( Articles 19 , paragraph 1, and 30, paragraph 1, of Legislative Decree 13/2024). During the two-year period covered by the agreement, taxpayers are in any case required to:
- file income tax and IRAP returns;
- comply with ordinary accounting obligations;
- submit the ISA data using the appropriate forms.
SOCIAL SECURITY CONTRIBUTIONS
The taxpayer may pay social security contributions based on their actual income if it is higher than the agreed income ( Articles 19 , paragraph 1 and 30 , paragraph 1 of Legislative Decree 13/2024).
"Exclusion" from investigations
The tax periods covered by the settlement agreement cannot be subject to the assessments referred to in Article 39 of Presidential Decree 600/73 (i.e., analytical, analytical-inductive, or purely presumptive and inductive assessments for direct taxes), unless, following investigative activities, grounds for forfeiture of the settlement agreement are found. Therefore, the protection from assessments is not absolute . Inspections and verifications are always possible. Consider the possibility that the Agency verifies the correctness of the data provided for the purpose of obtaining ISA scores. Nothing is said regarding VAT, which therefore remains always assessable.
In light of the partial exclusion of the assessment activity, an intensification of the control activity is foreseen against those who forfeit the agreement and those who do not adhere to it.
TERMINATION OF THE CONCORDAT
The agreement loses its validity if:
- during the two-year period covered by the agreement , the activity is modified compared to that carried out in the tax period preceding the two-year period, unless the application of the same ISA is foreseen for the new activity (or the new activity falls within a sector to which the same profitability coefficients apply, in the case of using the flat-rate regime);
- the taxpayer who applied the ISA (Standard Assessment Indicators) in previous tax periods adheres to the flat tax regime ;
- mergers, spin-offs, or contributions are carried out by companies or entities, or changes to the company structure are made by companies or associations referred to in Article 5 of the TUIR;
- during the two-year period covered by the agreement, the taxpayer declares revenues or compensation exceeding €7,746,853.50 (ISA taxpayers) or €150,000.00 (flat-rate taxpayers); in such cases, the taxpayer exits the ISA or flat-rate regime, but not the CPB, which remains effective;
- the activity has ceased.
The termination of the agreement takes effect from the tax period in which the aforementioned events occur.
TERMINATION OF THE CONCORDAT
Exceptional circumstances resulting in actual income or actual net production value that is less than 30% of that stipulated in the agreement will cause the effects of the pre-bankruptcy agreement to cease , starting from the tax period in which such a difference occurs.
DEFAULTOF THE CONCORDAT
The occurrence of a cause for forfeiture affects both tax periods covered by the agreement, regardless of the period in which the violation occurred. However, in the event of forfeiture from the agreement, the taxes and contributions determined taking into account the agreed income and net production value remain due, if greater than those actually achieved. Some causes for forfeiture are not activated if the taxpayer regularizes the violation with voluntary compliance; however, for this purpose, the violations must not have already been ascertained and no access, inspections or verifications of which the taxpayer has had formal knowledge must have been initiated.