VAT Variation Notes – New paragraph 3-bis of art. 26, Presidential Decree n. 633/1972

The Italian Tax Authority Revenue Agency intervenes in the complex issue of  VAT recovery on uncollected credits in insolvency proceedings with its circular no. 20/E/2021 in reference to the amendments made by the “Sostegni bis” decree to art. 26 of Presidential Decree n. 633/1972 (the so-called VAT Decree).

The circular clarifies that, for insolvency proceedings commenced as from 26 May 2021, the issuance of credit notes in the event of non-payment, in whole or in part, of the amount owed by the debtor subject to insolvency proceedings may take place from the date of the relevant proceedings’ opening, i.e., from the date:

  • of the judgment declaring bankruptcy;
  • of the provision ordering compulsory administrative liquidation;
  • of the decree of admission to the composition with creditors;
  • of the decree ordering the special administration procedure for large enterprises in distress.

Nothing has changed in the case of certified recovery plans and debt restructuring agreements, which require the creditor to wait for the certified plan’s publication date or the homologation decree’s publishing date.

Furthermore, there is no change for individual enforcement processes (such as attachment or expropriation), for which the creditor must still wait for the following events to happen:

  • the attachment protocol showing that there are no assets/credits to be attached to the third-party (in the case of third-party attachment);
  • the attachment protocol showing that there are no assets to be attached or that it is impossible to gain access to the debtor’s domicile or that the debtor is untraceable (in the case of attachment of movable property);
  • the enforcement procedure’s termination due to high costs after the linked property failed three times during auction for the sale.

The deadline for issuing the credit notes is the deadline for submitting the yearly VAT return for the year in which the procedure was commenced. It is no longer possible to file a supplementary declaration in the taxpayer’s favour or a request to the Italian Tax Authority to recover the tax after this deadline has passed.

On the other hand, the date by which the right to deduct may be exercised is the date of the periodic VAT settlement for the month or quarter in which the variation note is issued or, at the latest, the VAT return for the year in which the credit note is issued, regardless of whether or not the creditor has formally claimed his credit back to the insolvency proceedings/procedure.

From an operational point of view, it follows that if the decrease’s condition occurs in the year 2021, the variation note can be issued at the latest by the deadline for submitting the VAT return for the year 2021, i.e. by 30 April 2022. On the contrary, if the variation note is issued in the period between 1 January and 30 April 2022, the deduction can be made in the periodic settlements of the first months of 2022 or, at the latest, by the deadline for submitting the VAT return for 2022, i.e. by 30 April 2023.