Commentary on Judgment No. 8714 of 2024: Pro Soluto Assignment and Deductibility of Credit Losses

The recent judgment No. 8714 of April 3, 2024, issued by the Court of Cassation, offers an important reflection on the pro soluto assignment of uncollectible credits and their deductibility from business income. In an ever-evolving economic context, understanding these dynamics is crucial for companies and for professionals in the legal and tax sectors.

Regulatory Context

The judgment falls within the scope of Italian legislation, specifically Article 101, paragraph 5, of the Consolidated Text of Income Taxes (TUIR), in force before the amendments introduced by Law Decree No. 83 of 2012. This provision establishes that the pro soluto assignment of a credit deemed uncollectible can generate a deductible loss only if the taxpayer provides certain and documented proof of the circumstances that led to such an operation.

The Ruling's Principle

Business Income - "Pro Soluto" Assignment of Uncollectible Credit - Nature - Credit Loss - Deductibility - Conditions - Certainty and Precision - Burden of Proof - Unjustified Significant Difference Between the Assignment Consideration and the Nominal Value of the Assigned Credit - Consequences. In terms of determining business income, pursuant to Article 101, paragraph 5, of the TUIR (in the wording prior to the amendments introduced by Law Decree No. 83 of 2012, applicable ratione temporis), the pro soluto assignment of a credit deemed uncollectible produces a loss deductible from taxable income only if the taxpayer attaches and documents certain and precise elements that are not exhausted by the agreement of a consideration lower than the nominal value of the assigned credit and the loss emerging from the assignment itself, but also include the elements that led to the operation and the consequent only partial recovery of the nominal value of the credit; it follows that an unjustified significant difference between the assignment consideration and the nominal value of the assigned credit, which denotes the blatant uneconomical nature of the operation, may constitute an indicator of its grant-like nature, rather than productive, and therefore of the non-relevance of the negative component.

Practical Implications

This judgment emphasizes several crucial aspects:

• The need for detailed documentation justifying the credit assignment and the associated loss.
• The risk of considering the assignment as not relevant to the business activity in case of an unjustified difference between the consideration and the nominal value of the assigned credit.
• The role of the burden of proof, which falls on the taxpayer, in demonstrating the validity of the loss deduction.

In summary, judgment No. 8714 of 2024 reminds us of the importance of proper management of company credits and losses, emphasizing that economic choices must be supported by concrete evidence to ensure their tax deductibility.

Conclusions

In light of the judgment under review, it is essential for businesses to carefully evaluate credit assignment operations and ensure they have proper documentation to support their decisions. Only then can they avoid issues related to the deductibility of losses and ensure efficient tax management.