Tax Observatory › Assessment, collection and litigation › Objectively non-existent transactions: a party-appointed expert report must be weighed, and for IRAP the time limits are not doubled

Objectively non-existent transactions: a party-appointed expert report must be weighed, and for IRAP the time limits are not doubled

The Italian Court of Cassation (Corte di cassazione) set aside the appeal judgment that had dismissed the accounting expert report as “a party’s document” (atto di parte) and had ignored the statements of the hauliers who carried the goods and of other customers of the suppliers, gathered by the Italian tax and financial police (Guardia di Finanza) itself. As regards time limits, the doubling for 2007 stands for income taxes and VAT, but not for IRAP.

The Italian Court of Cassation (Corte di cassazione) set aside the appeal judgment upholding the tax assessment notices (avvisi di accertamento) for objectively non-existent transactions (operazioni oggettivamente inesistenti) and referred the case back to the lower court. The appeal court’s reasoning on the party-appointed expert report (perizia di parte) existed in appearance only, and the statements of the hauliers who carried the goods and of other customers of the suppliers, obtained during the audit, had not been examined. For 2007 the time limits are doubled (raddoppio dei termini), except for IRAP. The judgment does not state a principle of law (principio di diritto).

The decision and the case

Corte di cassazione, Fifth Civil Division, judgment No. 26866 of 14 October 2026 (public hearing of 16 September 2026, presiding judge Napolitano, reporting judge Lenoci), ECLI:IT:CASS:2026:26866CIV. Following a tax audit, the tax authorities had challenged invoices received by a limited liability company (srl) that purchased scrap metal, on the ground that they related to objectively non-existent transactions, for the tax periods from 2007 to 2011. The tax office disallowed the related costs for the purposes of IRES (corporate income tax) and IRAP (regional tax on productive activities), together with the input VAT deducted under the reverse charge mechanism (Article 74(7) and (8) of Presidential Decree No. 633/1972). The notices were annulled at first instance, but the appeal court upheld them.

The Court’s reasoning

The Court upheld the first ground of the appeal on points of law only in part: on the non-existence or inadequacy of the suppliers’ business structures, the appeal court’s reasoning, although brief, met the minimum standard of reasoning required by the Constitution. According to the Court, the tax office’s indicia focused exclusively on the suppliers’ lack of any organisational structure, a circumstance that the accounting expert report filed by the company had not even considered. Dismissing the report as “a party’s document” that cannot prevail over the tax inspectors’ findings, and so denying it any value as circumstantial evidence from the outset, does not make the appeal court’s line of reasoning discernible and amounts to merely apparent reasoning (motivazione apparente; point 4 of Article 36(2) of Legislative Decree No. 546/1992). The statements of the hauliers and of the suppliers’ customers are decisive facts that had been discussed between the parties but were not examined (point 5 of Article 360(1) of the Code of Civil Procedure).

The Court dismissed the ground concerning the time limits for 2007: the case predates Legislative Decree No. 128/2015, and the doubling under Article 43(3) of Presidential Decree No. 600/1973, in the wording then in force, applies regardless of the date of the report of the offence to the public prosecutor (denuncia). In our view, the statutory basis is the saving clause in Article 2(3) of that Decree for notices served on or before 2 September 2015, the date on which it entered into force. For IRAP, by contrast, the doubling does not apply, because IRAP violations are not subject to criminal penalties (the Court cites judgments Nos 600/2025, 24576/2022 and 10483/2018). The court to which the case is referred back will have to determine whether the assessment was out of time (decadenza) under the ordinary time limit, which, for a 2007 financial year coinciding with the calendar year and a return filed in 2008, expired on 31 December 2012.

What changes for businesses

In proceedings brought by an initial appeal served on or after 16 September 2022, the tax authorities must prove the alleged violations in court (Article 7(5-bis) of Legislative Decree No. 546/1992; Article 8(3) of Law No. 130/2022); the rule did not apply in this case. Where objectively non-existent transactions are alleged, the tax authorities may also rely on presumptive evidence: only once the tax office has provided serious, precise and consistent indicia does it fall to the business to prove that the transactions actually took place, and the formal regularity of invoices and payments is not enough. A party-appointed expert report must be assessed, but it carries weight only if it engages with the specific indicia set out in the notice. Favourable statements by third parties are often already contained in the tax audit report (processo verbale di constatazione): they should be identified, quoted in the written pleadings at every stage of the proceedings and linked to the point in dispute.

For the tax period in progress at 31 December 2016 and subsequent periods, the notice must be served by 31 December of the fifth year following that in which the return was filed, or of the seventh year where no return was filed or the return is null (Article 43(1) and (2) of Presidential Decree No. 600/1973; Article 57(1) and (2) of Presidential Decree No. 633/1972), with no doubling. For earlier periods, Law No. 208/2015 (Article 1(132)) keeps the doubling in place, but it does not apply if the report of the offence is filed after the ordinary time limit has expired. The question now mainly concerns pending proceedings, but it remains relevant until 31 December 2026 for the 2015 tax period where no return was filed, if the report of the offence was filed within the ordinary time limit of 31 December 2021.

In practice

• On receipt of the draft notice (schema di atto), the business has at least 60 days to submit observations in reply, file documents and request copies of the case file, including third-party statements (Article 6-bis(3) of Law No. 212/2000).
• Whether the assessment is out of time must be checked tax by tax: for IRAP, the time limit under Article 43(1) or (2) of Presidential Decree No. 600/1973, as referred to in Article 25 of Legislative Decree No. 446/1997, applies and is never doubled. Special rules are unaffected, as is the extension under Article 6-bis(3) of Law No. 212/2000: if the time limit for the contraddittorio (prior discussion with the taxpayer) expires after the assessment time limit, or less than 120 days before it, the assessment time limit is extended to the 120th day after the expiry of the time limit for observations in reply.
• The initial appeal must be brought within 60 days of service of the notice (Article 21(1) of Legislative Decree No. 546/1992); the expert report must be filed at first instance and must address each of the indicia.
• Businesses should keep transport documents, waste identification forms, weighbridge records, payment trails and evidence of resale to end customers.

Frequently asked questions

Can a party-appointed expert report be disregarded because it comes from the taxpayer?

No. In this case, denying it any value as circumstantial evidence from the outset, solely because of its source, made the reasoning merely apparent. However, it remains no more than circumstantial evidence: the court weighs it together with the other evidence, and the report carries weight to the extent that it engages with the indicia on which the notice rests.

Does the doubling of the time limits also apply to IRAP?

No. According to the Court, the doubling under Article 43 of Presidential Decree No. 600/1973 does not apply to IRAP, because IRAP violations are not criminal offences; IRAP remains subject to the ordinary time limit even where the doubling applies to income taxes and VAT for the same year.

Are the time limits still doubled for recent years?

No. For the tax period in progress at 31 December 2016 and subsequent periods, the time limits are five years, or seven where no return was filed or the return is null, with no doubling for tax offences. The doubling survives only for earlier periods, subject to the condition that the report of the offence is filed within the ordinary time limit; that condition does not apply to notices served on or before 2 September 2015, such as those in this case (Article 2(3) of Legislative Decree No. 128/2015).

Sources

Corte di cassazione, Fifth Civil Division, judgment No. 26866 of 14 October 2026, public hearing of 16 September 2026, presiding judge Napolitano, reporting judge Lenoci, general register No. 20360/2018, ECLI:IT:CASS:2026:26866CIV.

Corte di cassazione No. 600 of 10 January 2025; Corte di cassazione No. 24576 of 9 August 2022; Corte di cassazione No. 10483 of 3 May 2018 (cited by the Court).

Article 43(1), (2) and, in the wording previously in force, (3) of Presidential Decree No. 600 of 29 September 1973; Article 57(1) and (2) of Presidential Decree No. 633 of 26 October 1972; Article 74(7) and (8) of Presidential Decree No. 633/1972.

Article 1(130), (131) and (132) of Law No. 208 of 28 December 2015.

Article 2(1), (2) and (3) of Legislative Decree No. 128 of 5 August 2015 (in force from 2 September 2015).

Article 25(1) of Legislative Decree No. 446 of 15 December 1997.

Article 7(5-bis), Article 21(1) and point 4 of Article 36(2) of Legislative Decree No. 546 of 31 December 1992, in force until 31 December 2026 (replaced from 1 January 2027 by the Consolidated Act on tax justice, Legislative Decree No. 175 of 14 November 2024); Article 8(3) of Law No. 130 of 31 August 2022; point 5 of Article 360(1) of the Code of Civil Procedure.

Article 6-bis(3) of Law No. 212 of 27 July 2000, inserted by Legislative Decree No. 219 of 30 December 2023.

Legislative Decree No. 141 of 5 August 2026 (Consolidated Act on tax compliance and assessment), applicable from 1 January 2027.