Commentary on Ruling Order No. 9899 of 2024: Provisions for Risk Funds and Direct Taxes

The recent Ruling Order No. 9899 of 2024 issued by the Court of Cassation offers important insights for understanding the regulation of provisions for risk funds in the context of direct taxes. In particular, the ruling clarifies how liabilities that are not certain or determinable must be treated according to specific tax rules, helping to define the boundary between taxable income and deductible expenses.

Context of the Ruling

In the case examined, the appellant, T. (LEO LEONARDO), contested the decision of the Regional Tax Commission of Lecce, which had deemed the provisions made for risk funds non-deductible. The Court, with its order, reiterated the importance of Article 109, paragraph 1, of the Consolidated Text of Income Taxes (TUIR), which establishes that income components that are not certain must be considered in the fiscal period in which they arise. This means that a provision for a risk fund can generate a taxable gain when it is reversed or reduced.

In general. Regarding direct taxes, provisions for risk funds – being made in anticipation of liabilities lacking the requirements of certainty and determinability – are subject to the provisions of Article 109, paragraph 1, second part, TUIR, which establishes that income components, whose existence is not yet certain in the fiscal period of accrual or whose amount is not objectively determinable, contribute to forming income in the fiscal period in which these conditions are met. Consequently, the emergence of a taxable gain following the reversal or reduction of the fund itself is determined in the tax year in which such a decision is made.

Tax Implications of Provisions for Risk Funds

The decision of the Court of Cassation has practical relevance for companies operating in contexts where it is necessary to make provisions for future risks, such as legal disputes or potential liabilities. Key aspects to consider include:

• Certainty and Determinability: Provisions must be justified by liabilities that do not possess the requirements of certainty and determinability.
• Taxation of Gains: The reversal or reduction of such funds necessitates the consideration of any taxable gains.
• Adequate Documentation: It is crucial to maintain clear and detailed documentation to justify the provisions and any subsequent reductions.

Conclusions

In conclusion, Ruling Order No. 9899 of 2024 helps to clarify the tax rules concerning provisions for risk funds and their implications for direct taxes. Companies must pay particular attention to the management of these funds, ensuring compliance with the requirements set forth by tax legislation to avoid disputes with the Tax Administration. The ruling therefore represents an important reference point for corporate tax planning, highlighting the need for a well-structured strategy regarding provisions and tax deductions.