Commentary on Order No. 9633 of 04/10/2024: IRAP and Public Contributions

The recent Order No. 9633 issued by the Court of Cassation on April 10, 2024, provides important clarifications regarding IRAP and public contributions disbursed for seismic events. In particular, the decision focuses on the determination of the taxable base and the timing of contribution accounting, with a particular emphasis on the provisions of Law No. 219 of 1981.

Context of the Ruling

The dispute arises from the question of whether public contributions disbursed under Articles 21 and 32 of Law No. 219 of 1981, relating to damages caused by the earthquakes of 1980 and 1981, should be accounted for in the year of their approval or their actual payment. The Court ruled that, for the purpose of determining the IRAP taxable base, such contributions are immediately acquired by the beneficiary, becoming an integral part of their assets.

TAXES POST-1972 REFORM - Generally IRAP - Determination of taxable base - Contributions disbursed pursuant to Articles 21 and 32 of Law No. 219 of 1981 for seismic events of 1980 and 1981 - Forfeiture of benefits for failure to complete works - Immediate acquisition of beneficiary's assets upon approval or irrevocability - Accrual principle - Necessity. Regarding IRAP, for the annual determination of the taxable base, public contributions disbursed, pursuant to Article 21 of Law No. 219 of 1981, due to the seismic events of 1980 and 1981 – for which Article 32 of the same law provides for forfeiture in case of failure to complete at least ninety percent of the work within the deadline indicated in the admission applications – are immediately acquired by the beneficiary, thus becoming part of their assets; therefore, in accordance with the accrual principle, they must be accounted for in the year they were approved, and not when they were actually disbursed, or when, after checks are completed, they are no longer subject to possible revocation.

Implications of the Decision

The Court of Cassation's decision has several significant implications:

• Immediate Acquisition: Public contributions become part of the beneficiary's assets as soon as they are approved, implying that companies must be prepared to manage these funds promptly.
• Accrual Principle: The Court emphasizes the importance of accounting for contributions in the year they are approved, thus respecting the accrual accounting principle, rather than waiting for actual payment.
• Forfeiture of Benefits: It is crucial for beneficiaries to adhere to deadlines for work completion, as the law provides for forfeiture of benefits in case of failure to achieve ninety percent of the work.

Conclusions

In summary, Order No. 9633 of 2024 represents a significant step forward in regulatory clarity regarding the accounting of public contributions in the context of IRAP. Businesses and professionals in the sector must pay close attention to these guidelines to avoid future tax issues. This ruling not only clarifies the application of Law No. 219 of 1981 but also establishes a significant precedent for similar future cases.