Deductibility of Costs and Powers of the Tax Administration: Commentary on Order No. 9664 of 2024

The recent order No. 9664 of April 10, 2024, issued by the Court of Cassation, offers important insights into the deductibility of costs in tax matters. In particular, it clarifies the powers of the Tax Administration in assessing the reasonableness of costs and revenues declared by taxpayers. This article aims to analyze the key points of the ruling, highlighting the practical implications for businesses and professionals.

The Regulatory Context and the Ruling

The Court has established that the Tax Administration is not bound by the values indicated by the taxpayer in financial statements and tax returns. This means that, even in the absence of accounting irregularities, the Administration has the power to challenge the deductibility of costs deemed unreasonable or disproportionate to the activity carried out. This principle is part of a regulatory framework defined by Presidential Decree 29/09/1973, No. 600, particularly in Articles 38 and 39, which govern tax assessments.

Deductibility of costs - Powers of the Tax Administration - Assessment of reasonableness - Admissibility - Regularity of accounting - Irrelevance. In the context of cost deductibility during tax assessment, the Tax Administration, not being bound by the values or consideration indicated by the taxpayer in financial statements and tax returns, has the power to assess the reasonableness of the recorded costs and revenues and, consequently, even if no irregularities in bookkeeping or defects in business legal acts occur, it has the option not to recognize the deductibility of a cost deemed non-existent or disproportionate to the activity carried out or accounted for.

Practical Implications for Businesses

This ruling has significant consequences for businesses, as it underscores the importance of reasonableness in cost documentation. It is crucial for taxpayers to be able to demonstrate not only the regularity of their accounting but also the reasonableness of the costs incurred. In this context, companies should pay particular attention to:

• Documenting incurred expenses in detail.
• Justifying the necessity and proportionality of costs in relation to business activities.
• Periodically reviewing spending and deductibility policies.

Conclusions

In conclusion, order No. 9664 of 2024 represents a clear call for careful management of accounting and tax documentation. The Tax Administration has the power to assess the reasonableness of costs, which implies that businesses must be prepared to defend the deductibility of their expenses with adequate evidence. It is therefore advisable to adopt rigorous accounting practices and consult with tax experts to avoid future disputes and problems.