Small business owner in debt, tax demands subject to immediate appeal

A small business owner who is over-indebted may immediately challenge the tax assessment and payment notices which they claim were served on them outside the permitted time limits and in a manner not permitted by law. This was confirmed by the Constitutional Court in Judgment No. 160, filed yesterday, in which the issues raised by the Justice of the Peace in Milan were deemed unfounded: the decisive factor was the consideration that the matter falls within the scope of the procedures provided for by the Corporate Crisis Code in favour of small business owners, even at the time the out-of-court phase is initiated before the crisis resolution body.

These procedures – which consist of a ‘concordato minore’ (a form of voluntary arrangement) and the controlled liquidation of an over-indebted individual – involve, in fact, a preparatory phase, conducted out of court, which is initiated before the application is filed with the competent court.

Thus, the taxpayer — ‘without having to expose themselves to the feared risks of bringing a legal claim “in the dark” — is fully entitled to immediately challenge the tax assessment and payment notice on the grounds that they were not validly served, by demonstrating to the court that they have initiated the out-of-court procedure (which also serves an advisory function for the debtor) before the Occ and, at the same time, providing evidence of their standing to challenge the assessment by demonstrating their state of over-indebtedness and the detrimental impact that the ‘burden’ of the debt arising from the tax assessment and payment notices would have on the successful completion of the proceedings they intend to initiate’.

The Court further emphasises that, from a systematic perspective, this also applies to other situations where a direct challenge to the assessment and the payment notice is permitted (Article 12, paragraph 4-bis, of Presidential Decree No. 602 of 1973), the legislator has used particularly broad formulations, such as: ‘for the loss of a benefit’ in dealings with the public administration; ‘in relation to’ financing transactions by authorised entities; ‘in the context of’ the transfer of the business.

‘This is correct,’ concludes the judgement, rejecting the claim of prejudice against the taxpayer, ‘because the various scenarios expressly provided for are characterised by different contexts and situations: what matters, rather, is proof of actual prejudice, the burden of which, in relation to the various scenarios envisaged, lies with the taxpayer and the assessment of which is left to the appeal court.”