Reform of Tax Penalties – Updates from Legislative Decree No. 87 of June 14, 2024
With the publication of Legislative Decree No. 87 of June 14, 2024, in the Official Gazette on June 28, 2024 (No. 150), the revision of the tax penalty system, as outlined in Article 20 of Tax Reform Law No. 111/2023, has been completed. The reform also addresses some criminal tax penalties and introduces connections between tax procedures and criminal proceedings.
As per Article 5 of Legislative Decree No. 87 of June 14, 2024, the new provisions contained in Articles 2, 3, and 4 apply to violations committed from September 1, 2024, onwards. Therefore, the reform has no impact on pending legal cases, both in general and with respect to the penalties themselves.
Below, we outline the key updates.
1 General Provisions
Several criteria for determining penalties have been updated, as well as various principles governed by Legislative Decree No. 472/1997 concerning the general aspects of tax penalties. Specifically, changes have been made to aspects such as voluntary disclosures (“ravvedimento operoso”), the combination of penalties, continuation of violations, the reduction of penalties to one-third, and the definition of purely formal violations.
1.1 Penalty Adjustment
When provided by law, penalties can be imposed by tax authorities within a range between the minimum and maximum limits (“limite edittale”). Any penalty imposed above the minimum must be adequately justified.
In this regard, the following adjustments are introduced:
- The penalty may be reduced to one-quarter of the minimum (previously, it was up to one-half of the minimum) if circumstances make the penalty disproportionate to the violation.
- In cases of particularly serious circumstances, the penalty may be increased by up to one-half.
These provisions apply to both fixed and proportional penalties.
1.2 Application of Recidivism
The penalty may be increased by up to double for taxpayers who commit a similar violation within three years following the final judgment confirming the violation or the finality of the act (e.g., repeated failure to file tax returns over multiple years).
Under the new rules, the increase is no longer “by half” but “up to double,” and recidivism applies only when the violation has been definitively confirmed. However, recidivism does not apply to violations that have been corrected through voluntary disclosures or agreements with tax authorities.
1.3 Late Filings within 30 Days
If a tax return or statement is filed within 30 days of the deadline, the penalty is reduced to one-third (previously, the reduction was to one-half under the previous system).
This reduction applies only where late filing penalties are not otherwise regulated, such as for income tax, VAT, and withholding tax returns, which are subject to specific rules, or inheritance tax declarations. The reduction, however, does apply to IMU declarations. For example, if an omitted IMU declaration is filed within 30 days, the penalty is reduced from 100%-200% of the tax to 33.33%-66.67%.
1.4 Purely Formal Violations
Purely formal violations, which must be evaluated on a case-by-case basis, do not result in penalties. These are violations that do not cause concrete harm to the tax authorities’ ability to conduct audits and do not affect the determination of the taxable base, the tax owed, or the payment of taxes.
1.5 Legitimate Trust
A new ground for non-punishment is introduced for taxpayers who follow administrative guidance by filing an amended return within 60 days of the publication of the guidance and paying the tax due. However, the violation must have arisen from objective uncertainty.
This provision seems to cover cases where a guidance document addresses an uncertain issue (likely described as such in the document itself) and indicates that the taxpayer’s previous conduct was incorrect.
1.6 Combination of Penalties and Continuation of Violations
When a taxpayer commits multiple violations of tax law, even over several years, the penalties are generally not cumulative. Instead, a single penalty is applied according to the criteria in Article 12 of Legislative Decree No. 472/1997.
As a result, taxpayers are often subject to a penalty significantly lower than what would be applied if each violation were penalized individually.
1.6.1 Multiple Violations from Separate Actions
If a taxpayer commits multiple violations of the same or different provisions, or multiple violations of the same provision through separate actions, the penalty for the most serious violation is applied and increased by one-quarter to double.
For violations committed from September 1, 2024, onward, any violation falling under these terms will be subject to this combination rule.
1.6.2 Violations over Multiple Tax Years
In cases of progressive violations, where a taxpayer commits multiple violations that affect the taxable base or the calculation of the tax over several tax years, the penalty for the most serious violation is applied and increased by one-quarter to double.
If the taxpayer commits similar violations over multiple tax periods (e.g., repeated failure to file returns), the penalty for the most serious violation is increased by half to triple. In such cases, the increase by half to triple is applied first, followed by the increase by one-quarter to double.
1.6.3 Violations Relating to Multiple Taxes
A taxpayer may commit violations that affect both the taxable base and the calculation of the tax. A common example is the failure to issue an invoice, leading to a failure to report the transaction in the VAT return.
In this case, the penalty for the most serious violation is increased by one-quarter to double. Additionally, if the violation affects multiple taxes (such as both VAT and income tax), the penalty is further increased by one-fifth. If the violation is repeated over multiple years, there is another increase from half to triple.
1.7 Reduction of Penalties to One-Third
Except for penalties related to tax payments, any tax penalty can be reduced to one-third if paid within the timeframe for filing an appeal. By doing so, the taxpayer pays the penalty at a reduced rate and reserves the right to dispute the tax liability in court.
In cases where the dispute concerns only penalties, the reduction to one-third is effectively a waiver of the right to appeal.
1.7.1 Payment in Installments
For violations committed from September 1, 2024, the option to pay the one-third reduced penalty in installments is available:
- Up to 8 quarterly installments of equal amounts;
- Up to 16 quarterly installments if the total exceeds €50,000.
No guarantees are required, and the first installment must be paid within the appeal deadline.
1.7.2 One-Third Reduction after Litigation Has Begun
The so-called “procedural acquiescence” is reintroduced, allowing taxpayers to benefit from a one-third reduction in penalties if a partial annulment of the tax assessment is obtained during the litigation process. This provision, which had been repealed in January 2024, is reinstated with minor changes for violations committed from September 1, 2024.
If a taxpayer files an appeal against an assessment, a notice of tax credit recovery, or a penalty notice, and the tax authority partially annuls the act after the appeal, the taxpayer may, by waiving the appeal, pay the remaining tax, interest, and one-third of the penalty.
The penalty reduction applies only if the taxpayer drops the entire appeal. Payment can be made in 8 quarterly installments, or 16 if the total exceeds €50,000, without requiring any guarantees.
1.8 Legal Entities and Companies
The reform reiterates an existing principle in the tax system: sanctions against legal entities (such as partnerships, corporations, associations, and foundations) are imposed solely on the legal entity itself. Therefore, no sanctions can be imposed on shareholders, directors, or individuals acting on behalf of the entity.
However, the following principles, already established in the legal framework, are reaffirmed:
- The “exclusive” liability of the legal entity does not apply if it is proven that the entity was artificially created for the purpose of committing offenses.
- Joint, subsidiary, and unlimited liability remains in place for partners of general partnerships and general partners of limited partnerships for violations committed by the company.
2 Voluntary Disclosure (Ravvedimento Operoso)
The reform introduces several changes to the rules on voluntary disclosure, including the possibility of applying the *juridical cumulation* of violations, albeit under certain conditions. These changes, like others in the reform, apply only to violations committed from September 1, 2024, onward.
For declaration-related violations (e.g., omitted or incorrect declarations), the reform will affect the 2024 tax returns for income tax (REDDITI), regional tax on productive activities (IRAP), and the annual wage tax return (770), which relate to fiscal year 2023.
2.1 Reduction of Sanctions
The reform has modified the framework for sanction reductions in cases of voluntary disclosure, particularly in regard to the reduction to 1/7 of the minimum penalty. For violations committed after September 1, 2024, if the voluntary disclosure is made:
- Within 90 days of the violation or the filing deadline, the penalty is reduced to 1/9 of the minimum (Art. 13, co. 1, lett. a-bis of Legislative Decree 472/97).
- Within the filing deadline of the year in which the error occurred or within one year of the violation, the penalty is reduced to 1/8 of the minimum (Art. 13, co. 1, lett. b).
- After the filing deadline of the year in which the error occurred or more than one year after the violation, the penalty is reduced to 1/7 of the minimum (Art. 13, co. 1, lett. b-bis).
These reductions apply to all violations (including payments, invoicing, declarations, and communications) and to all tax authorities.
Other provisions remain unchanged, such as:
- Article 13, co. 1, lett. a) of Legislative Decree 472/97, which allows for a reduction to 1/10 of the minimum for violations regarding payments if the voluntary disclosure is made within 30 days of the violation.
- Article 13, co. 1, lett. c) of Legislative Decree 472/97, which allows for a reduction to 1/10 of the minimum for omitted declarations if voluntary disclosure is made within 90 days of the deadline.
2.2 Voluntary Disclosure During Tax Audits
For taxes administered by the Italian Revenue Agency (Agenzia delle Entrate), as well as customs and excise duties, the rule remains that voluntary disclosure is not precluded by tax audits, such as the notification of a questionnaire or an invitation to attend an interview. However, disclosure is blocked by the notification of a tax assessment or the “comunicazione bonaria” (a preliminary notice of assessment).
For violations committed after September 1, 2024, the reduction of penalties in case of voluntary disclosure will be:
- 1/6 of the minimum if disclosure occurs after a preliminary act not preceded by a formal notice and without a request for settlement (Art. 13, co. 1, lett. b-ter).
- 1/5 of the minimum if disclosure occurs after a formal notice but before any subsequent tax-related act (Art. 13, co. 1, lett. b-quater).
- 1/4 of the minimum if disclosure occurs after a preliminary act preceded by a formal notice and without a request for settlement (Art. 13, co. 1, lett. b-quinquies).
Voluntary disclosure is thus blocked by any request for settlement or formal agreement based on a tax audit report.
For violations committed before August 31, 2024, the reduction remains at 1/5 of the minimum if disclosure occurs after a tax audit report, regardless of whether any subsequent tax-related act has been issued.
2.3 JuridicAl Cumulation and Continuation
In the case of multiple violations, the law generally provides that penalties are not added together but are juridically cumulated, meaning the most severe penalty is increased by one-quarter to double the initial amount. For violations committed from September 1, 2024, juridical cumulation can also be applied in cases of voluntary disclosure, but only for a single year and a single tax (significantly narrowing its scope).
Additionally:
- The cumulative increase must be applied at the minimum rate, which is one-quarter.
- The penalty reduction from voluntary disclosure is determined based on the most serious violation.
3 Violations Related to Tax Declarations
Penalties for violations related to tax declarations (primarily omitted and incorrect declarations) have been reduced. These changes will apply to violations committed after September 1, 2024, affecting the 2024 income tax returns (REDDITI, IRAP, and 770), which refer to the 2023 fiscal year. However, they do not apply to the VAT return for 2024, as the filing deadline has already passed.
The following penalties remain unchanged:
- Omitted or incorrect completion of the RW form, which is penalized at a rate of 3% to 15% of the undeclared amounts (doubled if assets are held in tax havens).
- “Inaccurate” declarations, which include errors that do not affect the tax calculation but impact compliance checks, are penalized with fines ranging from €250 to €2,000.
- Omitted or late submission of declarations by authorized intermediaries, penalized at amounts between €516 and €5,146.
3.1 Omitted declaration
The omitted declaration is penalized at 120% of the taxes due, with a minimum of 250.00 euros.
The penalty for a missed declaration where no taxes are due remains unchanged: between 250.00 and 1,000.00 euros for income and IRAP declarations, and between 250.00 and 2,000.00 euros for VAT and withholding agent declarations.
It is also confirmed that the declaration is considered omitted if it is submitted more than 90 days late.
3.1.1 Declaration submitted within the assessment period in the absence of controls
If the declaration is submitted after the 90 days but before the assessment period ends and before any tax control (e.g., before receiving a questionnaire), the penalty is 75% of the taxes due, rather than 120%.
In the previous system, if the declaration was submitted after the 90 days but before the deadline for the following tax period’s declaration, the penalty was halved, ranging from 60% to 120% of the taxes due.
On the criminal side, the exemption from punishment for the crime of omitted declaration (which applies if the tax exceeds 50,000.00 euros) remains unchanged if, before a tax or criminal investigation, the declaration is submitted by the deadline for the following tax period’s declaration, and taxes, penalties, and interest are fully paid.
3.1.2 Declaration submitted within 90 days
There is no specific provision for the penalty for a declaration submitted with a delay of no more than 90 days.
The practice of the Revenue Agency should remain unchanged, allowing a delayed declaration within 90 days to be rectified by paying a fine of 25.00 euros (in addition to taxes, legal interest, and late payments if applicable).
3.2 False declaration
A declaration is considered “false” when it is submitted indicating a lower tax than what is actually due, such as deducting irrelevant costs or failing to declare income/fees.
The penalty for a false declaration is 70% of the taxes due, with a minimum of 150.00 euros. Previously, the penalty ranged from 90% to 180% of the taxes due.
Additionally:
- If the falsehood is due to fraudulent or simulated actions, the penalty ranges from 105% to 140% of the taxes due, down from the previous 135% to 270% (for VAT, this increase applies only if the buyer/client is proven to be involved in the fraud);
- The one-third reduction of the penalty remains when the additional tax or reduced credit identified is less than 3% of the declared tax/credit and is also below 30,000.00 euros;
- The penalty is doubled for undeclared rental income subject to flat tax. This can be penalized either as an omitted declaration (if no rent is declared) or as a false declaration (if only part of the rent is declared);
- The one-third increase for undeclared foreign income has been removed.
3.2.1 Supplementary declaration submitted within the assessment period in the absence of controls
If a supplementary declaration is submitted within the assessment period but before any tax control (e.g., before receiving a questionnaire), the penalty is reduced to 50% of the taxes due (with a minimum of 150.00 euros).
This was not regulated under the previous system.
3.2.2 Declaration corrected within 90 days
There is no provision for the penalty for a false declaration corrected within 90 days after the submission deadline.
The Revenue Agency’s practice should remain unchanged, allowing correction within 90 days by paying a fine of 27.78 euros (in addition to taxes, legal interest, and any late payments).
3.2.3 Errors in fiscal timing
The specific penalty rules for false declarations caused by errors in income recognition periods or violations of the “cash” principle remain.
In general, when there is a violation of fiscal timing or the cash principle, the penalty is reduced by one-third, to 46.67% of the taxes due.
If there has been no harm to the tax authorities (e.g., income declared early, resulting in the “early” collection of taxes), the penalty is fixed at 250.00 euros.
4 Vat-Related violations
Penalties for VAT-related violations have been made less severe overall.
All the new measures apply to violations committed from 1 September 2024, such as omitted invoices starting from those that should have been issued from September 2024.
4.1 Invoicing of operations
Omitted, false, or incorrect invoicing is penalized at 70% of the taxes due. Previously, the penalty ranged from 90% to 180% of the taxes due.
Additionally:
- The minimum penalty for each operation has been reduced from 500.00 euros to 300.00 euros (this minimum must be considered when applying voluntary correction);
- The penalty of 250.00 to 2,000.00 euros remains if the invoicing violation did not affect the periodic tax return;
- For exempt, non-taxable, or excluded transactions, false statements regarding the amount or omitted invoicing are no longer penalized at 5% to 10% of the amount if the violation affected direct taxes, but are instead penalized at 5% (the penalty of 250.00 to 2,000.00 euros remains if the violation did not affect income determination).
There has been no clarification regarding the relationship between invoicing violations, late/missed VAT payments during periodic settlements, and false declarations.
Current guidelines remain, which specify that:
- Invoicing or receipt transmission violations, if not reported in the declaration or corrected before the annual declaration, also result in a missed periodic VAT payment penalty of 25% or 12.5% (if the delay is within 90 days);
- Invoicing violations, if reported in the declaration, are not absorbed by the false declaration but are “unified” for legal cumulation purposes (offices apply the penalty for the most serious violation, increased by one-quarter to double).
4.1.1 Telematic receipts
Omitted, false, or incorrect transmission of telematic receipts (mainly used by retail traders) is penalized at 70% of the taxes due (previously, the penalty was 90%). Additionally:
- The minimum penalty per operation has been reduced from 500.00 euros to 300.00 euros (this minimum must be considered for voluntary correction);
- The fixed penalty of 100.00 euros per transmission remains if the violation did not affect VAT settlement (with a new maximum limit of 1,000.00 euros per quarter);
- The ancillary penalty of closing commercial premises for 3 to 30 days remains if four separate violations regarding receipt transmission/storage are detected within five years, on different days.
4.1.2 Reverse charge
The failure to apply reverse charge (self-billing) is penalized with a fine ranging from 500.00 to 10,000.00 euros (down from 500.00 to 20,000.00 euros).
If the reverse charge was also omitted from the records for income tax purposes, the penalty is 5% of the taxable amount, with a minimum of 1,000.00 euros (previously, 5% to 10% with a minimum of 1,000.00 euros).
The penalty of 250.00 to 10,000.00 euros, with liability shared, depending on the case, by the supplier/service provider or the buyer/client, remains for cases where the reverse charge is not applied (invoice issued with VAT in error) or incorrectly applied (invoice issued without VAT in error).
4.2 Undue deduction
The undue deduction of VAT during periodic settlements is penalized at 70% of the taxes due (previously, the penalty was 90%).
4.2.1 Undue deduction recorded in the declaration
If the undue deduction is recorded in the declaration, it is absorbed by the false declaration, and therefore legal cumulation will no longer apply. Only the false declaration penalty, at 70% of the taxes due (with a minimum of 150.00 euros), will apply.
4.2.2 Application of unnecessary VAT
Sometimes, VAT is mistakenly applied to invoices for transactions that are exempt, non-taxable, or excluded from taxation, or a higher rate of VAT is incorrectly charged (e.g., 22% instead of 10%).
In such cases, the recipient of the invoice cannot deduct the VAT, and if they have already paid it to their supplier, they must request a refund.
If the VAT is deducted regardless, and fraud is not involved:
- The deduction is illegitimate, so the VAT can be recovered by the Revenue Agency along with legal interest (i.e., the deduction will only be recognized for the correct amount);
- The common penalty of 70% for undue deduction does not apply. Instead, a fine ranging from 250.00 to 10,000.00 euros will apply if the VAT has been duly registered and paid to the Treasury by the counterparty;
- The violation for undue deduction, if recorded in the declaration, is absorbed by the false declaration.
4.3 Regularization of purchaser
In cases of omitted invoicing, invoicing with incorrect amounts, or invoicing with the wrong tax rate, the recipient of the invoice, if they are an IVA (Italian VAT) taxpayer (the so-called “purchaser/client”), is obligated to regularize the transaction by reporting it to the tax authorities (Agenzia delle Entrate). If the regularization does not occur, there is a penalty of 70% of the tax due (down from the previous 100%), with a minimum of €250.
4.3.1 Regularization Without Penalties
The procedure for regularizing the purchaser/client’s situation has been significantly simplified, and if followed within the legal deadlines, the purchaser/client will be exempt from any penalties.
In the previous system, penalties could be avoided if the purchaser/client regularized the situation by:
- If they hadn’t received an invoice, submitting a substitute document electronically, and paying the IVA, within 30 days after the 4-month period from the date of the transaction;
- In case of an incorrect invoice, submitting the same substitute document within 30 days after registration, after paying the due tax.
Now, the regularization will be simpler. The purchaser/client will need to report the omission or irregularity to the Agenzia delle Entrate using electronic tools (likely available on the “Fatture e corrispettivi” portal) within 90 days from when the invoice should have been issued or from when an irregular invoice was issued.
4.4 Other violations
Regarding other IVA-related violations, the following should be noted:
- Receiving an unjustified refund (e.g., an annual declaration refund granted without meeting legal requirements) will be penalized at 25%, down from 30%;
- Failing to export goods within 90 days from delivery will result in a penalty of 50% of the IVA, instead of the previous range of 50% to 100% (this applies to sales of goods shipped or transported outside the EU by or on behalf of a non-resident purchaser);
- Issuing an invoice without IVA based on a false declaration of intent, or using the so-called “plafond” beyond allowed limits, will result in a penalty of 70% of the IVA, instead of the previous range of 100% to 200%;
- Failing to verify, by the supplier/provider, that the recipient transmitted the letter of intent to the tax authorities will be penalized at 70% of the IVA, instead of the previous range of 100% to 200%.
5 Violation regarding payments
For violations committed starting from September 1, 2024:
- The penalty has been reduced from 30% to 25%;
- As a result, the penalty for late payments within 90 days is reduced from 15% to 12.5%;
- Similarly, the daily reduction of 1/15th for delays within 14 days will be applied to the 12.5% rate instead of the previous 15%.
6 Violation regarding tax offsetting
The sanctions for improper tax offsetting vary depending on whether the credits are non-existent or not allowed. Specifically:
- The improper offsetting of non-existent credits will be penalized at 70% of the credit, instead of the previous range of 100% to 200%;
- The 70% penalty will be increased by 50% to double if fraudulent misrepresentations, such as fake documents or simulations, were used to meet the objective and subjective requirements for the credit;
- The improper offsetting of credits that are not allowed will be penalized at 25%, instead of 30%.
It should be noted that the recovery notice for non-existent credits can be issued up until December 31 of the eighth year following the year in which the offsetting occurred. Additionally, non-existent credits can be resolved by paying a third of the penalties, with the process continuing for the tax itself.
6.1 Definition of Non-Existent and Non-Allowed Credits
According to the new provisions, non-existent credits are defined as:
- Credits for which the specific objective or subjective requirements established in the relevant legislation are partially or entirely lacking;
- Credits where these objective and subjective requirements are fraudulently represented, using false documents or simulations.
Non-allowed credits are defined as:
- Credits used in violation of usage requirements or, for any excess, those used beyond the permitted amount;
- Credits based on facts that do not fall under the relevant legislation due to the absence of additional required elements or particular qualities necessary for the recognition of the credit;
- Credits used without completing the necessary formalities required under penalty of forfeiture.
This new system provides a clearer definition of non-existent credits, which previously referred more generically to credits lacking a foundational prerequisite. For non-allowed credits, the distinction that even non-existent credits identified through automated or formal declaration controls could be considered non-allowed is removed.
6.2 Formal Violations Resolved Within a Year Not Subject to Forfeiture
A penalty of €250 will apply if a credit is offset without completing the required formalities (e.g., submitting a prior request for offsetting), provided that:
- The requirement is not imposed under penalty of forfeiture;
- The violation is resolved by the deadline for submitting the tax return for the year in which the violation occurred, or within a year from the violation.
If the requirement is not subject to forfeiture and the violation is not resolved within the specified timeframe, the credit is considered non-allowed.
7 Violation regarding registration tax
Regarding registration tax violations:
- Failing to register will result in a penalty equal to 120% of the tax (reduced from the previous range of 120% to 240%);
- Late registration within 30 days will be penalized at 45% of the tax without a minimum amount (previously, it was 60% to 120% with a minimum of €200);
- An insufficient declaration of value will result in a penalty of 70% of the tax (reduced from the previous range of 100% to 200%);
- Concealing compensation will be penalized at 120% of the tax (reduced from the previous range of 120% to 240%).
8 Violation regarding inheritance tax
For violations related to inheritance tax:
- Failure to file a succession declaration will be penalized at 120% of the tax (reduced from the previous range of 120% to 240%);
- Late filing of a succession declaration within 30 days will be penalized at 45% of the tax (reduced from the previous range of 60% to 120%);
- The penalties remain unchanged for missing or late declarations where no taxes are due (ranging from €250 to €1,000, or from €150 to €500 for delays of no more than 30 days);
- An inaccurate succession declaration will be penalized at 80% of the tax (reduced from the previous range of 100% to 200%);
- Failing to request mandatory recordings or transfers for the purposes of mortgage and cadastral taxes will be penalized at 80% of the tax (reduced from the previous range of 100% to 200%). If the request is filed with a delay of no more than 30 days, the penalty will be 45% of the tax due (instead of the previous 50%).
9 Violation regarding minor taxes
Finally, the following updates regarding minor taxes are noted:
- Failure to pay stamp duty due from the outset will be penalized at 80% (reduced from the previous range of 100% to 500% of the tax);
- Failure to file, or inaccurately filing, a settlement declaration for the so-called “virtual stamp” will be penalized at 80% (reduced from the previous range of 100% to 200% of the tax);
- A settlement declaration filed with a delay of no more than 30 days will be penalized at 45% of the tax (instead of the previous 50%);
- Those conducting activities without having paid the government concession fee will face a penalty of 90%, with a minimum of €100 (instead of the previous range of 100% to 200% of the tax). This applies, for example, to the tax on company books.
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