Tax Administration: worth the cash basis for income from self-employment

According to the provisions of Article 54 of the Tax Code, the determination of the income of lavoroautonomo must be made exclusively on the basis of the so-called cash basis (compared to undertakings which are subject, however, to the principle of competence), with the result that, unless exceptions specifications, the same shall be the difference between the amount of compensation in cash or in kind received during the tax year, even in the form of profit sharing, and that the costs incurred in the same period during the art or profession .

This is the principle laid down by the Supreme Court in the judgment of 15 April 8626, to say the least curious because, if on the one hand reiterates a principle quite clear and widely known to those dealing with tax issues, on the other hand are notable for their interesting clarification concerning the duty of fairness and good faith which must inspire the activities of the Financial Administration.

The facts of the case

A professional holding a notice of assessment with which the competent tax office it alleged the non-declaration of income from self-employment for the year 1993.

On appeal, the taxpayer shall attach the statements of the years 1992 and 1993, with receipts of presentation, explaining that he had applied the principle of competence and thus have anticipated, in the declaration of 1992, as well as fees for services provided in 1993, although they are not perceived.

The Court of First Instance upholds the claim, while the subsequent appeal filed by the tax authorities is accepted by the court of appeal in the consideration that the income from self-employment, but subject to withholding tax, shall be declared in accordance with the principle of cash and not accrued.

The practitioner then appealed to the Supreme Court proposes and argues, inter alia, the illegality of the judgment under appeal, as it took a statement omitted when, in fact, the same was made, though in a wrong way (with the principle of competence in place than in cash).

He complains, then the violation and misapplication of Article 67 of Presidential Decree 600/1973, to have the appellate court erroneously entitled to double taxation on the same income made by an office he already knew (or that was in no condition to know, in the comparison of the two annual statements), and that the tax on professional services had already been paid through profit the previous year.

Finally, the practitioner relies on infringement and misapplication of Article 10 of Law 212/2000, to have the appellate court erroneously granted the appeal of the Financial Administration in obvious contradiction with the principle of fairness and good faith which must base the legal relationship between the taxpayer and the IRS.

The decision of the Supreme Court

The Supreme Court considers all complaints not worthy of acceptance: first, recalls that Article 54 of the Tax Code states categorically method of taxation of income from self-employment, by providing, in paragraph 1, that "the income arising from the exercise of arts and professions is the difference between the amount of compensation in cash or in kind received during the tax year, even in the form of profit sharing, and that the costs incurred in the same period during the art or profession, unless as set out in the following paragraphs ... ".

This provision, according to the judges of legitimacy, "... it is clear and does not admit of different interpretations by one according to which the remuneration shall be subjected to taxation in relation to the year in which they were received."

That said, it appears to be correct on appeal - that such income must be declared in accordance with the principle of cash and not of competence - because there is no legal provision on which to base the different interpretation put forward by the applicant.

Nor can it be taken into consideration, to this end, Article 67 of Presidential Decree 600/1973, which introduced the principle of the prohibition of double taxation.

The present case, in fact, does not constitute - as interpreted by the Supreme Court - a case of double taxation, but just a mistake by the taxpayer who in 1992 declared all income from self-employment products (both those actually received those who perceive themselves).

According to the judges of Piazza Cavour, the increased taxation resulting from that misrepresentation by the taxpayer can not be corrected either by applying another principle, that of competence, that the law does not provide for this type of profitability, nor, much less, calling the ban under the double taxation which can not be attracted to the present case (but only via a simple application for refund).

Not to forget, then, that the tax treatment has progressive nature and not fixed, with the result that the tax rate may vary, from one year to another, by virtue of the total amount subject to taxation and that therefore can not be considered irrelevant in terms of the tax consequences, the application of the principle of competence in lieu of the cash.

Finally, the judges do not consider either of legitimacy applicable to the present case, the principle of fairness and good faith laid down in Article 10 of the Statute of the rights of the taxpayer.

In this regard, in fact, the Supreme Court noted that the Financial Administration "... only if correctly compulsata, that is configured for this purpose with the ordinary institutions can and must be aware of the existence (not a double taxation, non-existent, as stated above , in the present case), plus a tax achieved an incorrect statement of the taxpayer ... ", as it is part of" ... the ordinary proper performance of the agency to ascertain a wrong statement because it contains an income from self-employment calculated incorrectly. "

Final Thoughts

As mentioned, the judgment in question expresses a principle now established in the tax law about the ordinary determination of the self-employment income, according to which the fees and costs are significant when they are, respectively, perceived and supported (on a cash basis ).

The time recognition of compensation, however, may create problems in order to identify the exact moment in which the price received by means of the professional, especially when it uses a number of payment instruments.

In this regard, the circular 38/2010, it was clarified that the fees paid by check must be considered earned when the credit instrument enters the availability of professional (it is made with the delivery of the title from the receiver to the customer) , while in the case of fees paid by bank transfer, this time must be identified by one in which the practitioner is credited to your account.

Finally, with regard to the ratio of the provisions referred to in Article 10 of the Statute of the taxpayer - that the relationship between taxpayers and tax authorities must be based on the principle of cooperation and good faith - this, must be considered in the right of the citizen-taxpayer to have news from the beginning of the audit / investigation, the clear motivation about the cognitive interest of the Treasury to examine his tax situation.

If one accepts, however, the thesis of today's applicant, would ultimately attributed to the financial role of a "tax consultant" who not only is not in line with the spirit and purpose of the Statute of the taxpayer, but that is the responsibility institutions for which it was established.

02/05/2011

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Translated via software

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Source:

Italian version of ReteArchitetti.it