Contribution by Giampaolo Provaggi, Founding Partner of GPD and Alfredo Vaccarisi, Senior Associate of GPD, published in Ipsoa Quotidiano.

The Code of Business Crisis provides for incentive measures in favor of all entrepreneurs, both commercial and agricultural, who activate the negotiated composition procedure of the crisis while being “in conditions of patrimonial or economic-financial imbalance that make crisis or insolvency probable and the recovery of the enterprise is reasonably achievable”. Enterprises that fall below the bankruptcy threshold are also still eligible to benefit from the incentive measures. However, the regulation is not linear in its application, which proves to be non-uniform with respect to the instruments provided by the same Code of Crisis and Insolvency. In which cases?
The Code of Business Crisis and Insolvency (hereinafter CCII), pursuant to Legislative Decree No. 14/2019, as amended by Legislative Decree No. 83/2022 (hereinafter also the “Decree”), has reached its final form.
As regards the matter of interest, namely the “Incentive Measures”, Article 6, Legislative Decree No. 83/2022, which replaced Part One, Title II, of Legislative Decree No. 14/2019, has provided for their classification within Article 25-bis of the CCII text.
The previous provisions of Articles 24 and 25, Legislative Decree No. 14/2019 have thus been modified and the provisions of Article 14, Decree-Law No. 118/2021 (defined within the negotiated composition process) have been repealed.
Article 25-bis of the amended Legislative Decree No. 14/2019, in accordance with the provision of the repealed Article 14 of Decree-Law No. 118, provides for incentive measures in favor of all entrepreneurs, both commercial and agricultural, who activate the negotiated composition procedure of the crisis while being “in conditions of patrimonial or economic-financial imbalance that make crisis or insolvency probable and the recovery of the enterprise is reasonably achievable” (Article 12, paragraph 1, CCII). Similarly, enterprises that fall below the bankruptcy threshold are still eligible to benefit from the aforementioned incentive measures, as provided by Article 25-quater, paragraph 5.
In detail, the regulation in question is not linear in its application, which proves to be non-uniform with respect to the instruments referred to in Article 23, CCII.

Interest on Tax Debts: Application of the Legal Measure
Paragraph 1 of Article 25-bis provides for the reduction of interest, at the legal rate, on tax debts for the period “From the acceptance of the assignment by the expert (note: which must occur within 2 days of receipt of the appointment pursuant to Article 17, paragraph 4, of the CCII) and until the conclusion of negotiations with one of the solutions provided for by Article 23, paragraphs 1 and 2, letter b) (…)”.
The reference to Article 23, paragraphs 1 and 2, letter b), suggests that the incentive measure in question applies exclusively in the case of successful conclusion of the process. The provision of paragraph 6 of Article 25-bis addresses the case in which the instrument used at the conclusion of the negotiated composition does not perform, with the loss of the aforementioned benefits in the event of subsequent opening of the judicial liquidation procedure or controlled liquidation or in the event of ascertainment of the state of insolvency.

Tax Penalties: Reduction to the Minimum Measure
Paragraph 2 concerns the reduction to the minimum measure of “tax penalties for which a reduced measure is provided in the event of payment within a specified period from the notice issued by the office imposing them”, if the payment deadline expires after the submission of the application referred to in Article 17.
As regards the scope within which the rule of paragraph 2 of Article 25-bis could apply, it is believed that the same may concern, for example, procedures of acquiescence to tax assessments, pursuant to Article 15 of Legislative Decree No. 218/1997, or procedures for the settlement of penalties only, pursuant to Article 17 of Legislative Decree No. 472/1997. In these cases, the indicated reduction to one-third of the penalty to the minimum statutory measure provided for by Article 25-bis should consequently be applicable, even without payment having occurred.
For this case too, the provision of the aforementioned paragraph 6 of the regulation in question applies, and therefore the loss of the incentive measure only in the situations provided therein. Doubt remains regarding the applicability of the provision in question in the event that the expert has deemed, pursuant to Article 17, paragraph 5, of the CCII, that there are no concrete recovery prospects, with consequent filing of the negotiated composition application or, in the case of exit from the process before having used the measure.

Penalties and Interest on Tax Debts: Reduction by Half
Paragraph 3 of Article 25-bis provides for a fifty percent reduction for penalties and interest “on tax debts arising before the filing of the application referred to in Article 17 and subject to the negotiated composition” for the cases provided for by Article 23, paragraph 2. It is observed in this regard that, since no instrument is provided to regulate negotiations with the Tax Office in the context of negotiated composition, as stated above, the negative conclusion of the same could prove advantageous to favor access to the cases referred to in paragraph 2 of Article 23 (in this case the reference is to the entire provision and not only to the homologation of a debt restructuring agreement). This is also in consideration of the fact that, as stated, the benefits of paragraphs 1 and 2 of Article 25-bis should be maintained, where applicable.

Payment Plan with the Revenue Agency
The measure provided for in paragraph 4 of the regulation concerns the granting by the Revenue Agency of a payment plan, up to a maximum of seventy-two monthly installments, for the payment “of sums due and not paid as income taxes, withholding taxes withheld in the capacity of substitute taxpayer, value added tax and regional tax on productive activities not yet registered in the roll and related accessories”.
The conditions for activating the automatic mechanism are:

• – the conclusion of the contract referred to in letter a) or of an agreement referred to in letter c), of Article 23, paragraph 1, and its publication in the business register;

• – the signing of the payment plan application also by the expert who, as the regulation indicates, “constitutes proof of the existence of the temporary situation of objective difficulty”.

The same paragraph specifies that:

a) the provisions of Article 19 of Presidential Decree No. 602/1973 (subject to amendments by Decree-Law No. 50/2022 converted by Law No. 91/2022) apply insofar as compatible. Considering the objectives of the instruments to which the payment plan is linked, it does not appear possible to apply paragraph 1-bis of the same regulation, which provides, in case of proven deterioration of the situation, the extension of the installment obtained; and this without forfeiture having occurred. On the contrary, the provision of paragraph 1-quinquies appears applicable, and therefore the increase of the payment plan up to one hundred twenty monthly installments, in the event that the debtor finds itself, for reasons beyond its responsibility, in a proven and serious situation of difficulty linked to economic conditions;
b) automatic forfeiture of the benefit is provided “(…) also in the event of subsequent filing of an appeal pursuant to Article 40 or in the event of opening of the judicial liquidation procedure or controlled liquidation or ascertainment of the state of insolvency or in the event of non-payment of even a single installment at its due date.”. This situation could occur in the event of negative outcome of the negotiations.
The mechanism introduced by the aforementioned regulation allows for the inclusion in the Plan (or draft thereof), before the application pursuant to Article 17, of the provision of a possible payment plan. On this point, the Explanatory Report to the draft Legislative Decree No. 83/2022 clarifies that the provision contained in paragraph 4 is intended to promote the installment payment of tax debts, before the collection phase begins”, to avoid obstacles to the negotiation of the crisis and the drafting of plans normally connected to the need to await the registration in the roll of amounts due by the entrepreneur to the State”.
From an application standpoint, the lack of regulations concerning the methods for interaction with the Revenue Agency for the recognition of accrued benefits is noted.

Reduced Taxability of Positive Contingencies and Deductibility of Credit Losses
With regard to the impacts for direct tax purposes, Article 25-bis, paragraph 5, of the CCII provides that “From the publication in the business register of the contract and agreement referred to in Article 23, paragraph 1, letters a) and c), or of the agreements referred to in Article 23, paragraph 2, letter b), Articles 88, paragraph 4-ter, and 101, paragraph 5, of the consolidated text on income taxes, pursuant to Presidential Decree of December 22, 1986, No. 917 apply”. Therefore: the publication in the business register of the aforementioned transactions is a condition for the exclusion, on the debtor side, from taxability (partial, considering the consumption of any tax losses, excess interest expenses or excess ACE) of positive contingencies that may arise from the contract or agreements, but also, on the creditor side, for the deductibility of any credit losses. The legislator has thus “covered” with the provision in question the new procedures, including debt restructuring agreements with extended effectiveness (referred to in Article 61 of the CCII, formerly Article 182-septies of the Bankruptcy Law) and those with facilitated procedures (referred to in Article 60 of the CCII, formerly 182-novies of the Bankruptcy Law). The exclusion from the benefit of the recovery plan, as well as of the simplified concordat, etc., in accordance with the rules of Article 14 of Decree-Law No. 118/2021, does not appear, however, to prevent the application of Article 88, paragraph 4-ter TUIR, based on this latter provision.
Naturally, Article 88, paragraph 4-bis, TUIR operates autonomously and, in the case in question, considering the reference made by Article 88, paragraph 4-ter TUIR, in combination with this latter provision.
The rule in question also does not extend to the new instruments the provision of Article 14, paragraph 5-bis, Legislative Decree No. 472/1997, which excludes the application of joint and several liability in the matter of business transfer. In this regard, such effects could be achieved through interpretation, following the indications provided by the Revenue Agency with Legal Opinion No. 21 of 2019, with the difficulty of extending the benefit to “instruments” that do not constitute insolvency procedures, despite the presence of an independent third-party expert and the authorization procedure of the Court for the transfer (Article 22, paragraph 1, letter d), CCII).
The regulation in question does not pronounce itself either on VAT and the applicability of Article 26, paragraph 3-bis, Presidential Decree No. 633/1972. Since negotiated composition is not an insolvency procedure, if the Revenue Agency does not operate a full assimilation between the Bankruptcy Law and the Code of Business Crisis and Insolvency, the new instruments referred to in Article 23, paragraph 1, letters a) and c) may not find application in the VAT provision (in this regard, consider Circular No. 31/E of December 31, 2014, relating to the amendments to Article 26 VAT, introduced by Legislative Decree No. 175/2014, which at point 22 had the opportunity to clarify that “Before the amendments, in consideration of the substantially contractual content of the procedures in question (note: Debt Restructuring Agreements Article 182-bis of the Bankruptcy Law, Certified Plan Article 67 of the Bankruptcy Law), the variation note could not be issued beyond one year from the date of the transaction, given the provision of Article 26, third paragraph, of Presidential Decree No. 633 of 1972”).
In that case, it may be assessed whether the same can be considered as subsequent agreements between the parties, with application of paragraph 2 of Article 26; naturally within the time limit of one year (pursuant to the subsequent paragraph 3, Presidential Decree No. 633/1972). For the new types of debt restructuring agreements (Articles 60 and 61 CCII), one could operate in extension of the “new” Article 57 of the CCII. Finally, it is not clear why, for direct taxes, the legislator has made explicit the application of the specific rules as seen above, while it has not done the same regarding VAT; thus insinuating in the reader the doubt that it does not wish to allow the creditor to recover/reduce the uncollected tax (or deriving from the different obligation resulting from the negotiations), contrary to what has been established by the most recent Community and national case law, including, among all, Court of Justice of the EU, judgment of June 11, 2020, case C-146/19 and judgment of February 22, 2018, case C-396/16 and Cass., November 16, 2020, No. 25896.