Italian Revenue Agency Circular No. 5/E of 16 July 2026, after summarising the legislative process that led to the current Italian Crisis and Insolvency Code (the “CCII”), provides, for the first time, a comprehensive overview of the most recently introduced measures, with particular focus on the proposal for a settlement agreement with the tax authorities.
Timely Submission of the Proposal
The Circular places particular emphasis on the timely submission of a tax settlement proposal within the negotiated composition, as provided for under Article 23(2-bis) of the CCII.
The Circular focuses extensively on the need for the settlement proposal to be submitted to the competent tax office sufficiently in advance of the deadline for the conclusion of the negotiations, which is set by law at 180 days and may be extended for a further 180 days. Indeed, the tax authorities’ decision on the proposal requires a structured review process, which also involves obtaining a mandatory internal opinion.
Accordingly, the submission of a proposal close to the deadline for the conclusion of the negotiations could be regarded as inconsistent with the principles of fairness, good faith and mutual reliance. Furthermore, where the remaining time is insufficient to carry out an adequate review, the tax authorities may notify the expert, the entrepreneur and its advisors by certified email (PEC) that they are unable to enter into negotiations on the proposal.
It is therefore essential to plan the engagement with the Italian Revenue Agency from the initial stages of the negotiated composition.
Competent Tax Offices
The Circular clarifies that, in the absence of an express statutory provision, the settlement proposal must be submitted to the tax office identified on the basis of the debtor’s latest tax domicile, consistently with the rules applicable to tax settlements entered into the context of debt restructuring agreement (article 63 of the CCII).
For groups of companies with different tax domiciles submitting a single application, the criterion established for tax settlement applicable to groups under article 284-bis of the CCII applies by analogy. Accordingly, the competent office is the office competent in respect of the company’s tax domicile that, based on the disclosure requirements under article 2497-bis of the Italian Civil Code, exercises direction and coordination or, failing that, the company which, as at the date of submission of the joint proposal, has the largest amount of outstanding tax liabilities vis-à-vis each of the tax offices that are separately competent under the ordinary rules of law.
Amount of the tax debt covered by the settlement
The tax settlement proposal submitted by the entrepreneur in the context of the negotiated composition may cover tax liabilities arising up to the date of submission of the proposal, by analogy with article 63(1) of the CCII governing debt restructuring agreements.
In order to provide the entrepreneur with an up-to-date picture of its tax position during the negotiations, the tax offices must issue a certificate of outstanding tax liabilities in respect of amounts not yet entered on the tax roll, as well as amounts included in tax rolls that have been approved but not yet transferred to the Italian
Revenue Collection Agency (Agenzia delle Entrate-Riscossione). The certificate must be issued within the non-mandatory 30-day deadline following submission of the proposal, in line with the rules governing tax settlements within debt restructuring agreements under Article 63 of the CCII.
Reduction of VAT claims
Although the law expressly provides that a tax settlement proposal may not cover taxes that constitute the European Union’s own resources, the Circular, consistently with the principle established by the Court of Justice of the European Union in its judgment of 7 April 2016 in Case C-546/14, *Degano Trasporti*, clarifies that a settlement proposal providing for a reduction of a VAT claim may be compatible with EU law, provided that an independent professional certifies that the proposal ensures the best possible satisfaction of the claim compared with a judicial liquidation.
Incentive measures
The Circular also provides useful guidance on the tax reliefs available to entrepreneurs who initiate a negotiated composition under Article 25-bis of the CCII:
- temporary reduction of the interest rate to the statutory rate (paragraph 1): the Circular clarifies that the reduction applies from the expert’s acceptance of the appointment until the negotiations are concluded by one of the solutions provided for under Article 23(1) and Article 23(2)(b) of the CCII. The reduction applies to all tax liabilities arising before that date, including those brought to the debtor’s attention while the negotiated composition is pending;
- reduction of penalties assessed by notices (paragraph 2): the Circular clarifies that the relief applies to penalties for which the payment deadline specified in the notice setting out the outcome of the review of the tax return has not yet expired as of the date of filing the application for the appointment of the expert. Where the negotiated composition is closed due to the absence of concrete prospects for restructuring pursuant to Article 17(5) of the CCII, the incentive measure will not apply and the deadline specified in the notice will start running again once the suspension resulting from the procedure has ceased to have effect;
- payment by instalments of tax debt not yet entered on the tax roll (paragraph 4): the relief may be granted by the Italian Revenue Agency where the negotiated composition concludes with one of the negotiated solutions provided for under Article 23(1)(a) and (c) of the CCII. The Circular clarifies that the situation of difficulty justifying payment by instalments encompasses any critical situation affecting the business and that, in the absence of a specific provision governing interest on deferred payments, such interest is calculated at the statutory rate pursuant to Article 1284 of the Italian Civil Code.
Preliminary considerations
The Italian Crisis and Insolvency Code represents the culmination of an extensive legislative reform process that began in 2005.
In 2024, through the so-called Correttivo-ter, the legislator introduced the possibility, during negotiations conducted as part of the negotiated composition, of entering into a settlement agreement with the tax authorities and the Italian Revenue Collection Agency concerning the payment, including partial or deferred payment, of tax liabilities and related ancillary amounts (Article 23(2-bis) of the CCII).
With Circular No. 5/E, the Italian Revenue Agency provides, for the first time, a comprehensive interpretation of the relationship between the tax authorities and businesses undergoing the negotiated composition. The Circular sets out a framework in which tax liabilities – often a significant component of the overall debt exposure of businesses in financial distress – to be addressed within the same negotiation process, with a degree of flexibility.
However, benefiting from this framework requires rigorous technical preparation. The settlement agreement proposal must be prepared sufficiently in advance and supported by the required professional reports and a credible restructuring plan, as late submission or insufficient supporting documentation may prevent the competent tax offices from considering the proposal. Businesses and their advisors should therefore incorporate tax considerations into the planning of the negotiated composition from its earliest stages, rather than treating them as a secondary matter to be addressed only as the deadline for the negotiations approaches.