Biennial composition with creditors: opportunity?

The new compliance institute aimed at encouraging the spontaneous fulfillment of declaration obligations

The biennial composition with creditors is the tool that allows smaller businesses and professionals to agree in advance on the business or self-employment income to be declared in the tax period covered by the composition on which the taxes will be paid, regardless of the income actually earned.

The objective of this tool is to generate greater taxpayer participation in the tax assessment mechanism, with the aim of identifying the tax to be paid.

Interested parties

The Legislative Decree no. 13/2024 introduces the biennial preventive agreement (CPB) which can be accessed for the two-year period 2024 - 2025 by holders of business income and self-employment who carry out activities in Italy with revenues and compensations not exceeding €5,164,569:

• who apply ISAs, i.e. who carry out an activity for which ISAs are foreseen and have no causes for exclusion from them (in 2023);
• in a flat-rate regime;
• in the absence of tax/contribution debts or repayment of the same amounts ≥ €5,000 by

on October 15, 2024.

Instead, in addition to those for whom there is a cause for exclusion from the ISA, all those for whom one of the following causes for exclusion exists cannot access the CPB:

• failure to submit the tax return in one of the three years preceding the years of application of the agreement;
• conviction for crimes relating to income taxes and VAT, false corporate communications, laundering/use of money, goods or utilities of illicit origin/self-laundering, committed in the three years preceding those of application of the agreement;
• beginning of business in the tax period preceding the one to which the agreement refers proposal.

Proposal from the tax authorities and acceptance by the taxpayer

The Tax Office's proposal is based on a calculation methodology that takes into account the information present in the databases as well as the data relating to the period prior to the agreed one present in the ISA model and more generally in the tax return.

By 15 June 2024 the Revenue Agency will formulate an income proposal through a specific IT procedure which the taxpayer is free to accept or not by ticking a specific box on the tax return by 15 October 2024.

The agreement has no effect for VAT purposes, the formal obligations as well as payment of the tax remain those ordinarily required and instead has effect for social security purposes, without prejudice to the possibility of paying contributions on actual income.

In the tax periods covered by the agreement, the ordinary tax obligations continue to exist and therefore the interested parties are required to comply with the ordinary accounting and declaration obligations and to communicate the data by submitting the forms. ISA.

After the two years covered by the agreement, if the aforementioned requirements are met and in the absence of causes for exclusion, the Revenue Agency formulates a new proposal for an agreement relating to the following two years.

Advantages and critical issues

The two-year preventive agreement has multiple advantages:

• ensures greater fiscal stability for the taxpayer and reduces the risks of possible disputes to a minimum;
• aims to simplyficate the lives of taxpayers by offering greater predictability;
• protects from additional taxes on any higher incomes than those agreed upon;
• excludes the possibility of assessments on the basis of simple presumptions;
• exempts from compliance visa for compensations and refunds up to 50,000 euros in VAT and up to 20,000 in taxes direct.

The main critical issue is found in the case of actual incomes lower than the agreed one. Only where the actual income is lower than the agreed one by more than 50% due to exceptional causes can the agreement cease to produce effects, thus allowing the revision of the taxes due based on the actual incomes.

In conclusion, taxpayers who have regularly declared all the income earned will predictably have little interest in the CPB, since, to obtain advantages, they would have to bet on an increase in their future income; on the other hand, taxpayers who have failed to declare part of their income could evaluate the new tool with greater interest, as data that do not reflect the taxpayer's real earning capacity would be taken as a reference.