The spontaneous repayment of the 2019-2022 R&D tax credit improperly used

The so -called Tax Decree (article 5, paragraphs 7 -12 of Legislative Decree 146/2021) provides for a procedure for the spontaneous reversal of the 2019-2022 R&D tax credit (referred to in article 3 of the decree-law of 23 December 2019, no. . 145, converted, with amendments, by law 21 February 2020, n. 9) improperly used on 22 October 2021 ( date of entry into force of the Decree),  without the application of penalties and interest .

As illustrated in the technical report illustrating the tax decree, the institute aims to " deflate litigation hypotheses related to the measure in question and favor the spontaneous recovery of concessions benefited from excusable errors by the taxpayer, deriving from the complex framework of regulations and practices that characterized the facilitation ".


From 13 to 25 May a public consultation was opened by the Revenue Agency   on the draft provision that establishes the methods of access to the spontaneous transfer procedure, including the model and instructions. In fact, subjects who intend to make use of the spontaneous reversal of the tax credit must send a specific request to the Revenue Agency by 30 September 2022., specifying the tax period or periods of accrual of the tax credit for which the request is submitted, the amounts of the credit subject to spontaneous repayment and all other data and elements required in relation to the eligible activities and expenses. The content and methods of transmission of the communication model for the request for application of the procedure are defined by a provision of the director of the Revenue Agency to be adopted by 31 May 2022 .


HYPOTHESIS OF ACCESS TO THE PROCEDURE

The procedure is reserved for subjects who intend to pay the credit accrued in one or more tax periods starting from the one following the one in progress at 31 December 2014 and up to the one in progress at 31 December 2019, which are in at least one of the following conditions:

  • expenses incurred that do not qualify as R&D activities;
  • eligible expenses not compliant with paragraph 1-bis of article 3 of decree-law no. 145 of 2013;
  • errors in the quantification or identification of eligible expenses in violation of the principles of relevance and congruity ;
  • errors in determining the historical average of reference.

Access to the incentive is provided, first of all, for companies that have "actually carried out, supporting the related expenses, activities in whole or in part that cannot be qualified as research or development activities eligible in the meaning relevant for the purposes of the tax " .


On this point, in the opinion of the writer, it would be correct for there to be an express recognition of an ongoing interpretative change as regards the determination of the "relevant meaning for the purposes of the tax credit", as is emerging more and more frequently in the jurisprudential; the companies that have applied the incentive rule in accordance with the incentive framework existing at the time of incurring costs and use, should not make any repayments.


As illustrated in the parliamentary documentation preparatory to the conversion of the tax decree into law, it is necessary to “ take note of the technical difficulties and uncertainties that have characterized the subsidy regulations in question. In fact, the extreme technicality that characterizes the subject has required repeated interventions of practice by the Revenue Agency and the Ministry of Economic Development which, in some cases, took place in the period following its use.of the benefit from businesses. In this regard, the clarifications dictated by the Revenue Agency and the Ministry of Economic Development have taken on particular importance in several recent interventions of practice (see, for the practice of the Revenue Agency, resolution no. 46 of 2018, resolution 40 of 2019 and Circular 8 of 2019), as well as the regulatory interventions that have taken place over the last few years . "


Furthermore, the transfer is possible for companies which, in relation to the tax period subsequent to the one in progress at 31 December 2016, have applied paragraph 1-bis of article 3 of Legislative Decree 145/2013 in a manner that does not comply with the dictated by the provision of authentic interpretation contained in Article 1, paragraph 72, of the 2019 Budget Law (Law No. 145 of 30 December 2018). In particular, with regard to the recognition of the tax credit for R&D expenses of resident commission agents who carry out activities on behalf of foreign client companies , according to the interpretation provided by the 2019 Budget Law, for the purposes of calculating the credit. attributable tax only the eligible expenses relating to the  R&D activities carried out directly and in laboratories or structures located in the territory of the Italian State .


As part of sections I and II of the draft model released last May 13 by the Revenue Agency for the request for access to the procedure for transferring the tax credit, relating to the 2015 and 2016 tax periods, among the "Data relevant for the determination of the tax credit ", it appears misleading to allow the compilation of the field" Research commissioned by foreign parties "among the" Supported expenses incurred "and, above all, among the" Redetermined eligible expenses ". 

In the opinion of the writer, the elimination of the aforementioned field is desirable, in order to avoid the misleading of companies. On closer inspection, also in the section "Accrual of the tax credit for the tax period in progress in 2015" and in the section "Accrual of the tax credit for the tax period in progress in 2015" should be eliminated, as cases for which the request is sent, the words “Eligible expenses not compliant with paragraph 1-bis of article 3 of decree-law no. 145 of 2013 ", referring to the application of paragraph 1-bis of article 3 of the decree applicable only from 2017.

EXCLUSION FROM THE PROCEDURE 

Access to the procedure is in any case excluded in cases where the tax credit used in compensation is the result of   fraudulent conduct , of objectively or subjectively simulated cases, of false representations of reality based on the use of false documents or invoices documenting non-existent transactions, as well as in the event that " there is no suitable documentation to prove that the expenses eligible for the tax credit have been incurred " .


In the opinion of the writer, this formulation, without a precise characterization of the concept of "suitability" of the documentation , increases the uncertainty linked to the outcome of the regularization procedure.


The procedure cannot be used for the repayment of credits whose use in compensation has already been ascertained with a  credit recovery act, or with other tax measures,   which became definitive on 22 October 2021. 


METHOD OF PAYMENT

The amount of the credit used in compensation indicated in the communication sent to the Revenue Agency must be paid by December 16, 2022 . The payment can be made in  three equal installments , the first to be paid by December 16, 2022 and the subsequent ones by December 16, 2023 and December 16, 2024. In case of payment in installments, they are due, starting from December 17 2022, interest calculated at the legal rate. The repayment of the amounts due is made without making use of the compensation referred to in Article 17 of Legislative Decree 9 July 1997, n. 241.


By virtue of article 5, paragraph 12 of the Tax Decree, only for the " case in which the use of the tax credit has already been ascertained with an investigative deed , or ascertained with a credit recovery act, or with a provision tax, which have not yet become definitive at the date of entry into force of this decree " (October 22), it is specified that" the repayment must necessarily concern the entire amount of the credit subject to recovery, assessment or verification, without the application of sanctions and interest and without the possibility of applying the installments referred to in paragraph 10 ".


According to what was recently clarified by the Revenue Agency in the draft of the communication, in the case of tax measures notified after 22 October 2021 and up to the date of submission of the application , recourse to payment by installments is allowed . by virtue of the mere wording of the aforementioned provision, in the event of investigations established after 22 October 2021 it would seem that the faculty of partial repayment of the amount of the credit subject to recovery, assessment or verification could be recognized.


On the other hand, the instructions to the model, as part of the section “Presence of a credit recovery act or other tax measure”, would generally seem to allude to the mandatory nature of a full payment. It would be useful to clarify the possible recognition of the right to partially, rather than fully pay back the amount of the credit subject to recovery, assessment or verification.


EXCLUSION OF PUNIBILITY

The procedure is completed with the full payment of the amount due. As a result of the correct completion of the transfer procedure,  the punishment for the crime referred to in article 10-quater of the legislative decree n. 10 March 2000 is excluded. 74.


As emerges in the draft of the provision of the Revenue Agency " the Offices will communicate to the Judicial Authority, with reference to notifications of crime already transmitted by them, the adherence to the procedure referred to in point 1, or, in the cases referred to in points sub 9.3 and sub 9.4, the ineffectiveness of the regularization . "


FAILURE TO COMPLETE THE PROCEDURE

In the event of failure to complete the procedure or absence of the requisites (par.9.3), the request has no effect and the office proceeds with the ordinary preliminary investigation or verification activities to recover the amounts due, interest and related penalties, calculated on the entire amount of the wrongly used credit.


In the event of repayment by installments, failure to pay one of the installments by the deadline (par.9.4) entails the failure to complete the procedure and the registration of the residual amounts due, as well as the application of a penalty equal to 30% of the same and of the interests to the extent provided for by article 20 of the decree of the President of the Republic of 29 September 1973, n. 602, with effect from the date of December 17, 2022.


DETERMINATION OF THE AMOUNT OF THE TRANSFER AGAINST SUMS ALREADY PAID

Pursuant to Article 8.1 of the draft of the Provision of the Revenue Agency concerning the spontaneous transfer procedure in question, the amount to be paid " the sums already paid are deducted , both definitively and not definitively , without taking into account penalties and interests. However , the transfer procedure does not give rise to the restitution of the sums already paid, even if they are in excess of the amount due ".


In the opinion of the writer, the fact that the penalties and interest already paid on a non-definitive basis as well as the excess sums already paid are not relevant, is excessively penalizing and deserves a rethink.


CALCULATION OF THE AMOUNT OF THE CREDIT TO BE PAID

It could happen that the tax credit used improperly in compensation may have been used even after 22 October 2021 . In the model for the request for access to the procedure for reversing the tax credit for investments in R&D activities, it will therefore emerge that for these amounts there is an improperly used tax credit not subject to spontaneous reversal. For these amounts, in the opinion of the writer, the faculty of active repentance should be peacefully admitted , with the application of penalties for tax credit not due .


ANALYTICAL DECLARATION - For each tax period, a specific Section of the model "Accrual of the tax credit for the tax period in progress at ..." has been prepared, in which the compilation of the "Analytical declaration" is required which "Consists of a free editable page" in which the taxpayer must substantially illustrate in an extensive manner the causes that determined the repayment of the credit, already summarized : " Therefore, all the information must be provided in detail in the aforementioned editable fields and the elements in relation to the specific activities and eligible expenses,for the purpose of matching the data in the "Redetermined subsidized expenses" box, or any other information useful for managing the application and completing the spontaneous transfer procedure ".


Formulated in this way, the indications given on how to compile them appear too general.


Such uncertainty would seem to expose the taxpayer to a double risk: on the one hand, of being denied access to the procedure, due to an insufficient description of the causes determining the reversal; on the other hand, to submit for the judgment of the Inland Revenue also any part of the tax credit not subject to spontaneous repayment ("Restated tax credit").


Given these premises, always in the opinion of the writer, in order to reduce the risk that the taxpayer may be denied access to the procedure due to poorly defined and circumscribed circumstances, it would be appropriate to delete the "Analytical declaration" field.


Having said all this, numerous critical issues have emerged from various quarters related to the application of the spontaneous reversal procedure in question. In particular, the application of the procedure could expose the taxpayer to a series of risks, with the consequence of transforming the request into a sort of "self-report". Furthermore, at present, the procedure does not appear very convenient for the taxpayer, especially in light of the recent jurisprudential orientation aimed at disavowing the arguments of the Revenue Agency used in the disputes regarding the R&D tax credit.