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The implementation in Italy of EU Council Directive 2017/1852 on tax dispute resolution

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Raul-Angelo Papotti, Paolo Giacometti and Andrea Alcara of Chiomenti explain how the innovative landscape designed by the directive and domestic policies have provided new effective tools to taxpayers affected by international double taxation issues.

Resolving tax controversies across the EU

Directive 2017/1852 lays down innovative resolution mechanisms with the goal of tackling international double taxation issues between EU member states. The brand-new procedures are aimed at overcoming the critical issues that have arisen so far from the application of the mutual agreement procedures (MAPs) for the resolution of international disputes grounded on double tax treaties and/or the EU Arbitration Convention (90/436/EEC).

Under the new framework, the competent authorities are required to reach an agreement to solve the question in dispute through an ad-hoc ‘arbitration phase’ in case, during the MAP started by the affected person under Directive 2017/1852, the tax authorities do not find a consensus within two years on how to settle the tax controversy.

The said two years’ timeline starts from the last notification of a decision of one of the involved member states on the acceptance of the complaint to initiate the MAP under Directive 2017/1852. The period may be extended by up to one year at the request of a competent authority of a member state.

Before the introduction of Directive 2017/1852, the obligation to achieve a result was only provided by certain double tax treaties concluded by Italy – such as those with Croatia and Slovenia – and by the EU Arbitration Convention, whose scope of application is limited only to transfer pricing (TP) issues.

Indeed, the scope of the procedures set forth by Directive 2017/1852 is no longer limited to just TP and allocation of profit matters only, but it rather extends to any dispute that leads to double taxation. For example, this would include the assessment of hidden permanent establishments, the beneficial ownership status in connection to dividends, interest and royalty payments, and the qualification of the tax residence.

Directive 2017/1852 has been implemented in Italy through Legislative Decree No. 49 of June 10 2020 (the Decree) which provides for the domestic rules to apply the new procedures. The provisions of the Decree entered into force on June 25 2020 and apply to complaints submitted starting from July 1 2019 on questions in dispute relating to tax periods commencing on or after January 1 2018.

Further, the Italian Revenue Agency (IRA) published the Act No. 381176 dated December 16 2020 setting forth the operational rules to start, conduct and settle the international disputes governed by the Decree.

New procedures implemented in Italy

The procedures set forth by the Decree can be started by the person affected by a question in dispute that may trigger additional taxation, thus resulting in an international double taxation.

The affected person should file a request to initiate a MAP with both the IRA and the competent authority of the other involved member state(s) within three years starting from the date in which a formal assessment is served, or from the date of adoption of a measure that triggers or may trigger the question in dispute. The complaint to start the MAP should include the information reported in Article 3(9) of the Decree. The annexes of Act No. 381176 of December 16 2020 published by the IRA provide for the facsimile applications to be arranged by the affected person.

If the question in dispute is triggered by the notification of a tax audit report (processo verbale di constatazione) issued by the Italian tax authorities, the said three-year period starts running from the notification of the relevant notice of assessment (avviso di accertamento).

The filing of the request for initiating a MAP does not preclude the recourse to legal remedies provided under domestic law; should the affected person file an appeal before the competent tax court, the judicial proceeding may be suspended pursuant to Italian law. Conversely, the request to start a MAP cannot be filed where a decision on the question in dispute has already been issued by a tax court, even if still appealable, or in case the taxpayer and the IRA have executed a judicial settlement (conciliazione giudiziale).

One of the most relevant aspects detailed by the Decree concerns the chance to start a MAP also in case the taxpayer has omitted to file an appeal against the administrative act triggering the question in dispute or has settled the question in dispute with the IRA under a pre-litigation (out-of-court) tax settlement procedure (e.g. accertamento con adesione). This is a ground-breaking aspect as it overcomes the previous position maintained by the IRA with Circular No. 21 dated June 5 2012, according to which even out-of-court tax settlement procedures would preclude the possibility for the taxpayer to resolve international double taxation through a MAP under a double taxation convention and/or the EU Arbitration Convention.

After the receipt of the complaint filed by the taxpayer to start a MAP, the IRA may decide to resolve the question in dispute unilaterally without initiating the procedure. Otherwise, the IRA is required to accept the request within six months of its receipt or – as an alternative – reject it. In case of rejection of the complaint, the affected person may file an appeal before the competent tax court against the rejection issued by the IRA.

If the request is accepted, the IRA and the competent authority of the other concerned member state shall endeavour (i.e. are not bound) to settle the question in dispute within two years from the date of the last notification of the decision accepting the request by one of the member states. The two-year period could be extended by one year subject to a written justification from the IRA or the competent authority of the other member state concerned.

In case (i) a proceeding for one of the criminal conducts referred to in Title II of Legislative Decree No. 74 of March 10 2000 has been initiated in relation to the same matters covered by the MAP (e.g. unfaithful or omitted tax return, omitted VAT payments, fraudulent tax evasion); and (ii) the criminal investigations are carried out simultaneously with the dispute resolution procedure, the IRA may suspend the procedure from the date of acceptance of the complaint filed by the affected person up to the date of the outcome of the criminal proceedings.

However, the IRA is entitled to deny the access to the dispute resolution procedures if the question in dispute does not involve double taxation or if criminal penalties have been imposed under the provisions set forth by Title II of Legislative Decree No. 74 of March 10 2000.

Double taxation means the imposition by two or more member states of taxes covered by a double tax treaty and/or the Arbitration Convention, in respect of the same taxable income or capital when it gives rise to either (i) an additional tax charge; (ii) an increase in tax liabilities; or (iii) the cancellation or reduction of losses that could be used to offset taxable profits. As clarified by the explanatory notes to the Decree, the double taxation refers to the case where the income is taxed several times both on the same person (i.e. legal double taxation) or on different persons (i.e. economic double taxation).

In any case, a MAP is terminated if a final judgment (sentenza passata in giudicato) on the question in dispute intervenes or when the taxpayer and the IRA have executed a judicial settlement (conciliazione giudiziale).

For the purposes of resolving the question in dispute, the taxpayer may request the establishment of an advisory commission when, inter alia, the competent authorities have not reached a mutual agreement within two years (or three years in case of extension) and starts the arbitration phase, at the end of which the competent authorities are required to settle the question in dispute.

The advisory commission can be established where (a) the complaint to start a MAP has been rejected by at least one, but not all, of the competent authorities of the other concerned member state(s); or (b) the complaint to start a MAP has been rejected by all the competent authorities of the concerned member states and a judgment has been issued in favour of the affected person, following an appeal filed by that person before the competent court of one of a concerned member state against the rejection decision of the competent authority of that member state.

In the first place, the advisory commission gives an independent opinion on how to resolve the question in dispute within six months (with the possibility of extension for further three months) from the date of its establishment. The outcome of the arbitration phase is not binding for the IRA and the competent authority of the other concerned member state. Indeed, the competent authorities may agree upon a different solution of the question in dispute within six months from the notification of the opinion of the advisory commission. However, if the IRA and the competent authority of the other member state concerned do not reach an agreement on any possible solution of the question in dispute, they are bound to the opinion of the advisory commission.

In alternative to the establishment of the advisory commission, the competent authorities of the member states can agree to set up an alternative dispute resolution commission, also in the form of a standing committee, to express an opinion on how to resolve the question in dispute. In this latter case, the competent authorities may provide alternative dispute resolution procedures or techniques to resolve the question in dispute in a binding way, including the arbitration procedure with ‘final offer’.

The ongoing dispute resolution procedure is terminated without solving the question in dispute if a final judgment (sentenza passata in giudicato) on the question in dispute intervenes or when the taxpayer and the IRA have executed a judicial settlement (conciliazione giudiziale).

Execution of the decisions taken by the competent authorities

Article 19 of the Decree sets forth the rules applicable to enforce the decisions adopted by the competent authorities under the MAP or the arbitration phase.

If the agreement reached in the MAP or in the arbitration phase determines a change in the relevant taxable income or taxes due by the affected person, the IRA provides for the refund or relief of the undue taxes, or the collection of taxes due. This would apply even if the taxpayer has availed himself of domestic legal remedies (e.g. accertamento con adesione) and, thus, the refund, relief or collection would refer to taxes that became final under Italian law.

Any higher taxes due as a result of the recalculation pursuant to the decision taken by the competent authorities shall be subject to (i) domestic penalties, except where the higher taxes due have already been settled in accordance with the provisions of Italian law (e.g. accertamento con adesione); and (ii) interest for late payment from the date in which the decision is taken. In any case, the IRA shall take into account the amounts already paid by the taxpayer.

Where the question in dispute was already settled under a domestic settlement procedure, the refund of the penalties paid in excess by the taxpayer under the settlement procedure compared to the penalties actually applicable under the decision of the competent authorities is allowed upon presentation of a special application by the affected person and only if the original tax claim put forward by the IRA has been fully annulled. Conversely, where the agreement entered between the competent authorities does not lead to a full annulment of the original tax claim/assessment (i.e. the tax claim/assessment is only partially upheld), no refund of the exceeding penalties paid by the taxpayer is allowed.

The decisions taken by the competent authorities pursuant to the procedures provided for by the Decree are implemented if (i) the affected person accepts in writing the final decision agreed by the competent authorities within sixty days from the notification of that decision; and (ii) at the same time waives other legal remedies in relation to the question in dispute covered by the agreement.

Where there is a pending litigation, the affected person must provide proof, within sixty days from the notification of the final decision, of the withdrawal, even partial, of the pending litigation and the waiving of other legal remedies. The decisions taken by the competent authorities and accepted by the affected person enable the IRA to proceed with the collection/refund of any amount due/undue by taxpayer.

As a final remark, until now, the actual implementation and execution in Italy of MAP procedures started under double tax treaties and/or the Arbitration Convention has proven to be quite difficult due to a number of legal and procedural constraints. The new landscape designed by Directive 2017/1852 and by domestic rules shall be positively welcomed, as it broadens the scope of application of MAP procedures and provides additional effective tools to taxpayers affected by international double taxation issues.


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Raul-Angelo Papotti




T: +39 02 7215 7855


Raul-Angelo Papotti is a partner at Chiomenti and the head of the firm’s tax department. He joined the firm in 2007 and became a partner in 2013, while also having spent six years in the London office.

Raul-Angelo advises Italian and international clients on tax law and tax planning, cross-border taxation and TP matters, merger and acquisition (M&A) transactions, private wealth management, trusts and estate planning matters. He routinely advises corporate and private clients in litigation concerning cross-border tax and TP matters. His clients include leading global investment banks, Italian and foreign multinationals, and prominent high-net-worth individuals, families and family offices.

Raul-Angelo holds master’s degrees from Bocconi University, the University of Leiden and the University of Brescia. He is the author of many publications on international tax matters and is frequent speaker at domestic and international congresses. He is also the editor of the book Tax Dispute Resolution – A commentary on the EU Council Directive 2017/1852 published by Kluwer.

Paolo Giacometti




T: +39 02 7215 7651


Paolo Giacometti is a partner at Chiomenti. He joined the firm in 1998 and became a partner in 2016. He has also previously worked at the firm’s New York office for three years.

Paolo advises Italian and international clients on a variety of tax matters, with a focus on extraordinary corporate transactions, M&A, international taxation and TP matters. In addition, he assists individuals and family offices with family wealth restructuring, trusts and estate planning. He routinely assists a number of US multinational companies, private equity funds and financial institutions on matters concerning the tax structuring of their investments in Italy.

Paolo graduated with an economics degree from Bocconi University, and has a further executive education qualification on leadership in law firms from Harvard University.

Andrea Alcara




T: +39 02 7215 7861


Andrea Alcara is an associate at Chiomenti, and joined the firm in June 2016.

Andrea advises Italian and foreign multinational groups on international taxation, TP, tax litigation, and extraordinary business transactions matters.

Andrea attended Bocconi University and has a master’s degree in tax and business law.

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