SAO tax inspection
In October 2008, the Revenue Agency notified the company with two notices of assessment which reassessed, inter alia, the tax reports for the tax years 2003 and 2004 with regard to the IRES tax. The alleged irregularities arise from the application of Article 14, paragraph 4-bis of Law n. 537 of 24 December 1993.
The appeals filed by the Company were merged by the Tax Commission of Terni which, in the month of May 2009, upheld the application for suspension filed by SAO and in November 2009 stayed the proceedings by raising the issue of the constitutionality of Article 14, paragraph 4 bis of Law n. 537 of 24 December 1993, upon which the tax assessment was based.
By decision of March 2011 the Constitutional Court dismissed the constitutionality issue and remanded the proceedings to the Tax Commission of Terni. In January 2013, the Commission upheld the appeals filed by SAO and ordered the Revenue Agency to pay 50% of the legal costs incurred by the Company.
By sentence 419/04/14 issued on 24 February 14, and deposited in July 2014, the Umbria Regional Tax Commission rejected the appeal submitted by the Revenue Agency ordering it to pay the expenses.
In addition to the above, in November 2008, the Revenue Agency notified the company, and the former Parent Company EnerTAD S.p.A., with a notice of assessment that reassessed the IRES tax due for the 2004 tax period, establishing an additional tax charge of 2.3 million euros for taxes, net of penalties, where applicable. The alleged irregularities arise from the application of Article 14, paragraph 4-bis of Law n. 537 of 24 December 1993.
SAO defense arguments were upheld by both the Provincial and the Regional Tax Commission. In February 2013, the Revenue Agency appealed to the Supreme Court and the company filed its appearance.
It is believed that the actions of the tax authorities mentioned above are illegitimate, and that the risk of having to pay the full amount is remote, which previous shareholder Enertad, now Erg Renew, will be obliged to pay on the basis of the guarantees issued as part of the purchase/sale agreement regarding the shares of the direct parent company A.R.I.A. S.r.l., formerly Tad Energia Ambiente S.p.A., reaffirmed by the recent award of the Board of Arbitrators.
For the sake of completeness, we also mention that in January 2009, the company challenged the decision ref. no. 2008/27753 of 27 November 2008 by which the Revenue Agency suspended the payment of a VAT refund claimed by the Company for the 2003 tax year. This refund amounting to 1.3 million euros, was recognized by the tax authorities, but it was suspended as a precautionary measure due to the above mentioned tax assessments. The Tax Commission, with Ruling issued following the hearing held in March 2010, upheld the appeal lodged by the company, thus cancelling the cited measure against the aforementioned ruling. The Revenue Agency submitted an appeal in September 2010. The proceedings are in progress. It should be noted that the receivable concerning the above VAT refund was sold for valuable consideration in July 2010. The buyer lodged an appeal, simultaneously requesting discussion at a public hearing for the cancellation of measure 73747/2011 by which the Terni Provincial Department of the Revenue Agency declared the sale of said VAT credit from SAO to said assignee to be unacceptable. By sentence no. 52/04/12 issued on 3 October 2011 and filed on 26 March 2012, the Perugia Regional Tax Commission rejected the appeal filed by the Tax Authorities, with reimbursement of costs. The Revenue Agency appealed to the Supreme Court and the company filed its appearance.
ARSE tax inspection
On 14 June 2012, a Report on Findings from the Italian Financial Police - Rome Tax Police Department was delivered to the Company, following the inspection to check the correct use of the tax suspension provisions under the VAT tax warehouse system pursuant to article 50-bis of Law Decree no. 331 of 30 August 1993 (“VAT Warehouses”), relating to certain assets imported by the company in 2009, 2010 and 2011.
Based on the alleged abusive use of the aforementioned system by the company, the inspectors charged the company with failure to pay VAT on imports - for 2009, 2010 and 2011 - amounting to 16,198,714.87 euros.
On 6 August 2012 the company submitted a defence brief pursuant to art. 12, paragraph 7, of Law n. 212 of 27 July 2000 concerning the findings contained in the aforementioned Report on Findings.
The issue relating to the concepts of simulated warehouses and the introduction of goods to the country is particularly well-known and debated, and has been the subject of numerous papers on practices issued by the Customs Authority and several cases of legal intervention.
The company considers that all the factual and legal conditions envisaged in the regulation on the use of VAT Warehouses, as interpreted by the relevant administrative bodies, were fully satisfied and therefore the aforementioned Report on Findings is without grounds.
With regard to VAT warehouses, please also note that, as concerns the particular case of the provision of services for the assets held at the VAT warehouses (case set forth in letter h) of art. 50-bis of Law Decree no. 331/1993), art. 34, paragraph 44 of Law Decree no. 179 of 18 October 2012 recently amended art. 16, paragraph 5-bis of Law Decree no. 185 of 29 November 2008 (on the authoritative interpretation of letter h) of art. 50-bis noted above) establishing, for that case, that VAT must be deemed definitively paid if, when the merchandise is taken from the VAT warehouse for marketing within the country, the regulations set forth in paragraph 6 of art. 50-bis of Law Decree 331/93 are correctly implemented, or the reverse charge procedures pursuant to art. 17, paragraph 2, of Presidential Decree no. 633 of 26 October 1972 are correctly applied.
This approach appears to be supported by Circular n. 16/D of 20 October 2014 issued by the Customs Agency following the decision of the Court of Justice of 17 July 2014 n. C-272/13.
GORI tax inspection
In 2011, the Revenue Agency carried out an inspection for the year 2008. At the end of the inspection, the inspectors charged the company with higher taxes payable for approximately 1 million euros (plus penalties and interest).
As a direct consequence of the tax inspection reported above, the company received: (i) a notice of findings in December 2012 relative to 2007 with which higher IRES corporate income taxes were charged for 3,902 thousand euros, IRAP regional tax for 2,816 thousand euros and VAT for 97 thousand euros. On 13 February 2013, the company submitted a request for tax settlement which was finalized in May involving payment of 1,249 thousand euros; (ii) a notice of assessment in the month of August 2013 for the year 2008, with which higher IRES and IRAP taxes were charged for 2,569 thousand euros and higher VAT for 570 thousand euros. The Company requested and obtained the payment by instalment of the sums assessed which amounted to 1,393 thousand euros; (iii) on 28 January 2014, an internal order of the Campania Regional Revenue Department announcing the opening of a general audit for the year 2010 and a targeted audit for the years 2011 and 2012.
The Company has requested implementation of the inspection report and payment by instalment of the sums assessed, totalling 2,970 thousand euros inclusive of fines and interest.
ARIA (formerly EALL) tax inspection
On 17 February 2012, the Terni Tax Police Department of the Guardia di Finanza launched a general inspection (IRES, IRAP and VAT) against EALL for the years 2010/2011 until its merger into ARIA. A request for the 2009 inspection to be extended to VAT was submitted during the course of the inspection.
On 26 April 2012, ARIA S.r.l., as incorporating company of EALL, was served a notice of findings report containing the following findings:
- deductions pursuant to Tremonti ter;
- undue deduction of VAT on the disposal of ash and waste.
- difetto di competenza su alcuni costi di manutenzione.
Regarding the first of these findings, the inspectors pointed out the incorrect calculation for 2009 of a negative income component, but at the same time recognised the amount due for 2010.
In March 2014, the Terni Revenue Agency notified tax assessment n. T3O0E0300073/2014 to the Company and the Parent Company ACEA for IRES amounting to 3,061 thousand euros (plus fines and interest) for the lack of time correspondence of the “Tremonti ter” deduction of the incorporated company EALL. In September 2014 the agreement to this assessment was signed and at the same time 448 thousand euros inclusive of the interest was paid.
Regarding the second finding, the inspectors charged the company with unlawful deduction in 2009, 2010 and 2011 of part of the VAT on services received for the disposal of ash and waste. In practice the company had received invoices indicating the standard VAT rate rather than the subsidised rate. Following the notification, which took place during the years 2012 and 2013, of the notices of assessment for VAT for the years 2009, 2010 and 2011, in 2013 the company paid the additional tax assessed and the related penalties, assessed on a reduced basis, for a total amount of 844 thousand euros.
With regard to the third finding, on 15 October 2014 the Terni Revenue Agency notified a tax assessment to the Company and the Parent Company for the amount of 54 thousand euros inclusive of fines. The Company paid the amount due within the required time.
ACEA Distribuzione tax inspection
Following the general inspection undertaken on 19 December 2012, the tax authority served ACEA Distribuzione with a Report on Findings on 23 May 2013 The findings concern corporate income taxes (IRES), regional tax (IRAP) and VAT for a total of about 1.5 million euros. The same Report on Findings also identified irregularities for the years 2008-2012 concerning the tax treatment of certain items already identified as irregular and having a multi-year impact on the accounts.
On the basis of the report in the assessment, the Lazio Regional Revenue Department – Large Taxpayers' Office requested clarifications on the taxation treatment of these items for the fiscal years 2008 and 2009.
With reference al 2008 ACEA Distribuzione paid the sum of 56 thousand euros (plus fines and interest) in adherence to the assessment.
For the year 2009, the Lazio Regional Revenue Department notified assessment reports for excessive IRES and IRAP deductions for a taxable amount of 219 thousand euros and an excess VAT deduction of 163 thousand euros. On 19 February 2015 the Lazio Regional Revenue Department ordered the total annulment of the assessment for the IRES and IRAP items and the partial annulment of the VAT assessment.
On 20 February 2015 the Company presented an application of agreement to the VAT assessments still outstanding.
Customs inspection of Voghera Energia Vendita in Liquidation
On 20 August 2013, the Pavia Customs Office notified a report on findings to Voghera Energia Vendita which reported the missed declaration, and consequently, failure to pay excise duties and surcharges on electricity for the period 2008 - 2011 for a total amount of 12,532 thousand euros. The same report on findings also reported the failure to account for VAT on excise duty for an amount of 2,524 thousand euros.
On 4 October 2013, pursuant to art. 12 of Law 212/2000, the company filed its defense briefs, detailing the transactions carried out in the audited years and filing copious supporting documentation.
Despite the accurate reconstruction of billing operations provided in the brief, on 14 February 2014 the Customs Office served a notice of payment for non-payment of excise duties and surcharges on electricity for the periods ranging from 2008 to 2011 for a total of 10,931 thousand euros plus interest of 941 thousand euros and an order for the payment of administrative penalties (a total of approximately 25 million euros). These acts were annulled in as far as almost all sums are concerned as a consequence of the submission of a request for tax settlement which resulted in the payment of 124 thousand euros for 2008 on 16 April 2014.
On 9 September 2014 the Pavia Customs Office notified to Voghera Energia Vendita the start-up of assessment on the consumption declarations for the years 2009-2013, completed at the end of November 2014, calculating for the entire period examined a total amount of unpaid excise duties and surcharge of approximately 130 thousand euros, plus fines and interest of approximately 305 thousand euros which would be reduced to 134 thousand euros in the case of payment within 60 days from the issue of the fines.
Kyklos tax inspection
On 20 March 2014 the Latina Tax Police Department of the Guardia di Finanza launched a general inspection (IRES, IRAP and VAT) against Kyklos for 2012 which concluded with the notification on 6 May 2014 of a Report on the following main findings:
- lack of the principle of time correspondence for the deduction of Directors' fees;
- non-deduction of leasing instalments;
- non-deduction of vehicle maintenance costs.
The total taxable amount subject to tax is 78 thousand euros for IRES; 38 thousand euros for IRAP; 5 thousand euros for VAT.
Gesesa tax inspection
Following the tax inspection regarding the year 2009, the Checking Office of the Revenue Agency – Benevento Provincial Directorate notified two separate assessments:
- the assessment notified to Gesesa on 25 September 2014 for IRAP and VAT tax for an overall amount of 19 thousand euros;
- the assessment notified on 1 October 2014 both to Gesesa (as Group company) and to the Parent Company ACEA (as Parent Company) for the consolidated IRES for an overall amount of 117 thousand euros.
With regard to these assessments the companies presented applications for further checking with agreement, and the procedure closed with the signature of an agreement involving the payment of 30 thousand euros inclusive of fines and interest.
ACEA tax inspection
On 17 September 2014 the Revenue Agency – Lazio Regional Directorate – opened proceedings against ACEA with a general inspection (IRES, IRAP and VAT) for the year 2011, which ended on 23 December 2014 with the notification of an assessment containing a single claim regarding IRAP for a higher taxable amount of 207 thousand euros. On 19 January the Company communicated its agreement to the assessment.
Claims/fiscal disputes related to ARSE
In the month of January 2015, 13 notices for adjustment and liquidation were notified to ARSE and Apollo – the company to which the photovoltaic plants built by ARSE were conferred, and sold to RTR Capital at the end of 2012. These notices regarded the assessment of a higher value, for purpose of register, mortgage and property registration taxes, compared to the amount declared at the time the right of superficies was established for some portions of land where the plant was constructed.
The acts signed substantially involve the extinguishing of the previous land rental contracts and at the same time the establishing of the right of superficies on the same portions of land. The Revenue Agency challenged the value declared in the acts, claiming that the object of these acts was the transfer not only of the real rights to the land, but also of the ownership of the area of the photovoltaic plants. It is pointed out that this plant was constructed by ARSE, and therefore, at the time the right of superficies was established, it already owned the plant, which was later conferred upon Apollo.
The higher tax assessment on ARSE and Apollo, including fines and interest, totals around 9,500 thousand euros.
It is believed that there are well founded reasons, supported by authoritative opinions, to challenge the demands by the tax authorities both in the assumptions and, on a subordinate level, in the amounts.