VAT penalties and tax reform: Court of Cassation no. 29886/2025 on the retroactivity of lex mitior

In the landscape of Italian tax law, one of the most debated topics concerns the temporal effectiveness of regulations that introduce lighter penalties for the taxpayer. The recent ruling of the Court of Cassation, Tax Section, no. 29886 of November 12, 2025, intervenes decisively on this aspect, defining the boundaries of the applicability of the reform introduced by Legislative Decree no. 87 of 2024. The central issue concerns the possibility of retroactively applying reduced penalties for violations committed before the entry into force of the new regulations.

The regulatory context and the reduction of penalties

Legislative Decree no. 87 of 2024 introduced significant changes to the tax penalty system, in particular by reforming articles 5 and 6 of Legislative Decree no. 471 of 1997. The main innovation consists of reducing the penalty for VAT violations to 70% of the additional tax due. Previously, penalty rates were significantly more burdensome, fueling the hopes of many taxpayers, including the appellant F. (represented by lawyer G. E.), of being able to benefit from the principle of favor rei, i.e., the application of the more favorable subsequent law.

However, the Supreme Court, confirming the decision of the Regional Tax Commission of Milan, rejected the appeal filed against the A. (State Attorney's Office), establishing a clear temporal boundary. Here are the key points of the decision:

• The new reduced penalties apply only to violations committed from September 1, 2024.
• There is an express legislative derogation from the general principle of retroactivity of the lex mitior.
• Such derogation is considered legitimate and not contrary to constitutional or European principles.

The principle of lex mitior and the legislator's derogation

Generally, in sanctioning law, the principle applies whereby, if the law in force at the time of the violation and the subsequent law are different, the one whose provisions are more favorable to the offender applies. However, the Court of Cassation recalled that this principle is not absolute and may be derogated from by the legislator for justified reasons of public interest or revenue stability.

Regarding VAT, the more favorable subsequent regulation referred to in Art. 2 of Legislative Decree no. 87 of 2024 - which reduced the amount of the penalty established by Art. 5, paragraph 4 and Art. 6, paragraph 1, of Legislative Decree no. 471 of 1997 to 70% of the additional tax - does not apply to violations committed before September 1, 2024, given the express derogation from the principle of retroactivity of the lex mitior provided for by Art. 5 of Legislative Decree no. 87 of 2024, which is compatible with both constitutional principles (Arts. 3 and 117 of the Constitution) and those of European Union law.

The commentary on the ruling highlights how the Court gave prevalence to the specific will of the legislator expressed in Art. 5 of Legislative Decree 87/2024. This provision acts as a barrier, preventing the reduction of penalties from affecting pending proceedings or past violations not yet finalized, thus ensuring an orderly transition between the old and the new sanctioning regime.

Compatibility with the Constitution and EU Law

One of the most interesting aspects of judgment no. 29886/2025 is the analysis of the compatibility of this derogation with Articles 3 and 117 of the Constitution. The Court held that there is no unreasonable disparity of treatment (Art. 3), as the choice of the date of September 1, 2024, falls within the full discretion of the legislator. Furthermore, on the European front, established case law allows for limitations on the principle of retroactivity in tax matters, provided that the principles of proportionality and effectiveness in the collection of the Union's own resources, such as VAT, are not violated.

Conclusions on the scope of the judgment

The decision of the Court of Cassation represents a firm point for professionals and businesses. Although the 2024 tax reform promises a milder tax system, this flexibility is not retroactive for VAT violations prior to the watershed date. Taxpayers who committed errors or omissions before September 2024 therefore remain subject to the previous, significantly harsher penalties. This judgment underscores the importance of proper tax planning and timeliness in adapting to regulations, confirming that the time of the violation remains the key criterion for determining the applicable penalty.