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Tax debts and over-indebtedness procedures in Italy: what Circular 9/E tells tax offices

In Circular No. 9/E of 21 October 2026, the Italian Revenue Agency (Agenzia delle Entrate) tells its offices how to act when the debts of an over-indebted household, professional or small business owner include unpaid taxes. The fact that most of the debt is owed to the tax authorities does not, on its own, prove gross negligence on the part of the debtor.

With Circular No. 9/E of 21 October 2026, the Agenzia delle Entrate published the second part of its guidance on the Business Crisis and Insolvency Code (Codice della crisi d’impresa e dell’insolvenza, Legislative Decree No. 14 of 12 January 2019), devoted to over-indebtedness procedures (sovraindebitamento) and discharge (esdebitazione). In brief:

• in the Agency’s view, gross negligence cannot be inferred automatically from the fact that most of the debt is owed to the tax authorities, nor from the length of time over which payments were missed;
• a long repayment plan is acceptable if it is justified by being more advantageous than the liquidation alternative certified by the crisis settlement body;
• discharge makes tax debts, and the penalties ancillary to them, unenforceable, but it does not release co-obligors or guarantors.

A document addressed to tax offices

The 144-page circular follows Circular No. 5/E of 16 July 2026, which dealt, among other things, with the negotiated crisis settlement procedure (composizione negoziata della crisi), the simplified composition with creditors (concordato semplificato) and the restructuring plan subject to court approval (piano di ristrutturazione soggetto a omologazione). A draft of this second part was put to public consultation from 26 June to 24 July 2026 and, as the Agency states, the final text incorporates the comments received. Under the plan announced in Circular 5/E, two further parts will follow: the third on debt restructuring agreements and the preventive composition with creditors (concordato preventivo), the fourth on judicial liquidation (liquidazione giudiziale) and the remaining procedures.

The circular comments on the provisions that the Code devotes to over-indebtedness: the general provisions (Articles 65 and 66), consumer debt restructuring (ristrutturazione dei debiti del consumatore, Articles 67 to 73), the minor composition with creditors (concordato minore, Articles 74 to 83), supervised liquidation (liquidazione controllata, Articles 268 to 277) and discharge (Articles 278 to 283). It gives operational instructions that the Agency’s offices must follow; it is not a source of law and binds neither the taxpayer nor the courts. Its practical value lies in showing in advance the position the Agency will take before the crisis settlement body (organismo di composizione della crisi, OCC) and in court.

Who is affected

Over-indebtedness procedures are reserved for debtors in a state of crisis or insolvency who cannot be made subject to judicial liquidation (which replaced bankruptcy), to compulsory administrative liquidation (liquidazione coatta amministrativa) or to other liquidation procedures provided for by the Civil Code or by special legislation. They include consumers, professionals, minor entrepreneurs below the statutory thresholds (imprenditori minori), farmers, innovative start-ups and any other debtor in the same position (Article 2, paragraph 1, point (c), of the Code). Their debts often include unpaid taxes, in many cases already entrusted to the tax collection agent (agente della riscossione).

On the concept of consumer, the circular follows the objective test introduced by the 2024 amending decree (Legislative Decree No. 136 of 13 September 2024): what matters is the nature of the obligations and the basis on which they arose. Where the person also carries on a business or a profession, the origin of each debt must be traced to establish which procedure is available; where the debts are mixed, the minor composition with creditors remains an option if its conditions are met.

A tax debt is not, in itself, evidence of fault

This is the most significant clarification for anyone who has run up tax arrears. Gross negligence bars access to consumer debt restructuring (Article 69) and prevents discharge, both in supervised liquidation (Article 282, paragraph 2) and for a debtor with no means (debitore incapiente, Article 283, paragraph 7). The circular acknowledges that the courts are divided: some treat the systematic failure to pay taxes as gross negligence in itself; others grant discharge even where tax debts predominate, provided there is no fraudulent or grossly imprudent conduct.

The Agency states that gross negligence cannot be inferred automatically from the predominance of tax debt or from the length of the default. Tax offices must consider as a whole the causes of the debt, the resources available and how they were used, and any knowing aggravation of the position, distinguishing grossly imprudent conduct from a genuine inability to pay due to objective and documented circumstances. Among the factors that may be relevant, if documented and causally linked to the default, the circular lists VAT charged on invoices but never collected, the insolvency of customers, late payment or non-payment by clients, and a sharp fall in income or business activity. These circumstances do not in themselves rule out gross negligence: they must be weighed together with how unforeseeable they were, how long the liquidity crisis lasted and what steps were taken to contain the debt.

Consumer debt restructuring

In this procedure creditors, including the tax authorities, do not vote: they may submit observations and object to the proposal before the court on the ground that it is not advantageous; the court approves the plan if the objecting creditor’s claim can be satisfied to an extent no lower than in supervised liquidation (Article 70, paragraph 7). The circular focuses on the length of the plan and on deferred payments.

• Length. The Code sets no maximum duration, and case law has accepted plans running beyond five or seven years. Tax offices must check that proposals with payments spread over several years are reasoned and justified by being economically more advantageous than the liquidation alternative certified by the OCC, that is, than what creditors would obtain from the liquidation of the debtor’s assets. Where several workable solutions are all more advantageous than liquidation, tax offices consider the one that ensures ‘more effective protection of the Treasury’s interests, including as regards the timing of payments’.
• Deferred payments. The plan may provide for a moratorium of up to two years from court approval on the payment of claims secured by a statutory preference, pledge or mortgage; statutory interest is due (Article 67, paragraph 4). Citing Court of Cassation (Corte di cassazione) order No. 11676 of 29 April 2026, the circular treats the moratorium as a deferral of the date on which the claims fall due (sospensione dell’esigibilità): payments may start later, but statutory interest continues to accrue on preferential claims throughout the moratorium, and tax offices will check that the plan provides for its payment.
• Partial payment of preferential claims. Under Article 67, paragraph 4, claims secured by a statutory preference, pledge or mortgage need not be paid in full, provided that they receive at least what they would obtain, given their rank, from the liquidation of the assets or rights to which the preference or security attaches, as certified by the OCC.

Minor composition with creditors: who decides for the tax authorities

In the minor composition with creditors, creditors vote. For taxes administered by the Agency, the vote is cast by the competent Provincial Directorate (Direzione provinciale) for all its claims; the tax collection agent votes only on the collection charges due to it. Tax offices must examine proposals as promptly as possible, always state their position to the OCC within the time limits set and, if they do not agree, give specific reasons.

The circular takes note of Court of Cassation judgment No. 14555 of 16 May 2026: court approval of a minor composition with creditors without the consent of the tax authorities does not require a tax settlement proposal (transazione fiscale) under Article 88 of the Code, because the minor composition has its own, simpler procedure. The tax office therefore need not obtain the binding opinion of the Regional Directorate (Direzione regionale). In the Agency’s view, the substantive principles of Article 88 still apply, starting with the rule that tax and social security claims must not be treated less favourably than other claims.

Article 80, paragraph 3, of the Code continues to apply. Under it, the court approves the minor composition with creditors even without the consent of the tax authorities where that consent is decisive for reaching the required percentage and, taking into account, among other things, the OCC’s report, the proposal for the tax authorities’ claims is more advantageous than supervised liquidation.

Supervised liquidation and discharge

In supervised liquidation the liquidator sells the debtor’s assets, apart from those excluded by law (Article 268, paragraph 4), to pay the creditors. The tax authorities take part in the proceedings: the tax collection agent lodges the proof of debt for amounts already entered on the tax roll, while the tax offices quantify and claim the rest.

Liquidation alone does not release the debtor from the debts that remain unpaid: discharge is needed for that. In supervised liquidation, discharge takes effect when the procedure is closed or, if the procedure lasts longer, once three years have passed since it was opened, and the court declares it by reasoned decree (Article 282, paragraph 1). It is not available where a bar applies, including having caused the over-indebtedness through gross negligence, bad faith or fraud. The circular points out that the passing of the three-year period does not operate automatically: the court must still establish that the statutory conditions are met.

The effects of discharge on tax debts, as they follow from the law and from the circular, are these:

• debts left unpaid, tax debts included, become unenforceable against the debtor (Article 278, paragraph 1): in the circular’s reading the debt is not extinguished, but creditors can no longer take action against the debtor; from the date of the discharge decision, tax offices suspend the amounts entered on the tax roll and those entrusted to the tax collection agent;
• the administrative tax penalties ancillary to the discharged debts share the same fate, whereas financial penalties that are not ancillary to extinguished debts remain excluded (Article 278, paragraph 7, which uses this wording); tax offices check case by case whether a penalty is linked to the principal debt;
• creditors’ rights against co-obligors and guarantors are preserved (Article 278, paragraph 6): a family member who guaranteed a debt is not released by the discharge of the principal debtor.

Article 278, paragraph 7, also excludes from discharge maintenance and support obligations and debts for damages arising from tort.

Debtors with no means

A deserving individual who cannot offer creditors any benefit, direct or indirect, even in the future, may obtain a discharge only once (Article 283). If, within three years of the decree (four before the 2024 amending decree), further resources become available that allow creditors to be paid to a meaningful extent, the debt becomes enforceable again within the limits set by the provision; during that period the debtor files the annual statement required by the decree and the OCC monitors the position.

The provision also sets an income threshold, linked to the social allowance (assegno sociale) and to the ISEE equivalence scale. For the Agency this is an indicator to be supplemented by an overall assessment: tax offices must check in practice, and not merely formally, whether further resources exist, whether assets or income, including indirect resources or resources only apparently attributable to third parties. On receiving a discharge decree, the tax office checks that there are no fraudulent acts and no wilful or grossly negligent conduct; an appeal against the decree (reclamo) is to be lodged only where there is objective and documented evidence.

What to do in practice

1. Trace how the debts arose. Since the mere fact that most of the debt is owed to the tax authorities is not enough to prove gross negligence, what counts is being able to show why the taxes were not paid: VAT never collected, insolvent customers, a fall in income, how the available resources were used. This should be documented from the outset in the OCC’s report.
2. Have the OCC request the tax debt position at once. Pending the full quantification, tax offices may give the OCC an estimate of the tax debt drawn from the records available to them, stating that it may be updated. For amounts already entrusted to the tax collection agent, it is the agent that notifies the OCC; the tax offices deduct those amounts from their own figures.
3. Prepare the comparison with liquidation carefully. The length of the plan, partial payment of preferential claims and court approval without the tax authorities’ consent all depend on the plan being more advantageous than the liquidation alternative. This comparison, contained in the OCC’s certification, is where the Agency will focus its checks.
4. Consider the position of guarantors. If a family member has given guarantees, the solution must also be worked out for them, because the discharge of the principal debtor does not protect them.

Over-indebtedness procedures require the assistance of an OCC and a careful assessment of each case. The circular does not change the rules, but it makes the conduct of the Agency, often one of the most significant creditors in these procedures, more predictable.

Sources

Agenzia delle Entrate, Circular No. 9/E of 21 October 2026 (Business Crisis and Insolvency Code, Part II: over-indebtedness and discharge) and press release of 21 October 2026

Agenzia delle Entrate, Circular No. 5/E of 16 July 2026 (Part I)

Legislative Decree No. 14 of 12 January 2019, Articles 2, 65, 67, 69, 70, 80, 88, 268, 278, 282 and 283 (text in force on 24 October 2026); Legislative Decree No. 136 of 13 September 2024

Court of Cassation, order No. 11676 of 29 April 2026 and judgment No. 14555 of 16 May 2026, cited in the circular