ECJ C-308/25 (Isolanti Group) – AG Opinion – EU VAT Rules Preclude Italian Tax Dispute Resolution

On June 11, 2026, the ECJ issued the AG Opinion in the case C-308/25 (Isolanti Group).

Context: Reference for a preliminary ruling – Article 4(3) TEU – Obligation to ensure effective collection of the European Union’s own resources – Common system of value added tax (VAT) – Directive 2006/112/EC – Articles 2 and 273 – Principle of tax neutrality – National legislation permitting the simplified resolution of tax disputes

Summary

Italian Tax Amnesty Undermines VAT Collection: The Advocate General (AG) argues that the Italian simplified tax dispute resolution mechanism (Law No 197/2022) inherently undermines the obligation to collect Value Added Tax (VAT) in full, as it allows taxpayers to extinguish their tax debt by paying only a percentage of the amount due, along with exemption from penalties and late payment interest.
Broad Scope and Lack of Discretion: The AG highlights the broad application of the Italian legislation to all pending tax disputes, regardless of their duration, the amounts involved, or the nature of the infringement. Crucially, neither the tax authority nor the courts have the discretion to refuse these simplified resolutions on substantive grounds, effectively preventing full recovery of VAT and further judicial review.
Violation of Fiscal Neutrality: The AG asserts that the mechanism creates significant and discriminatory differences in the treatment of taxpayers. Those who utilize the simplified resolution benefit from reduced payments and waived penalties, placing them in a more favorable position than compliant taxpayers who have paid their VAT in full and on time.
Encourages Evasion and Discriminates Against Import VAT: The AG agrees with the referring court that such a system risks encouraging tax evasion by creating an expectation of future amnesties. Furthermore, the exclusion of import VAT from the simplified resolution mechanism violates the principle of “external” fiscal neutrality by treating domestic and intra-Community transactions more favorably than imports.
Justification Rejected and No Temporal Limitation: The AG dismisses Italy’s justification that the measure aims to reduce court backlogs and ensure reasonable processing times, arguing that the measure’s broad scope and application to short-duration disputes do not align with this objective. Consequently, the AG recommends against limiting the temporal effects of the Court’s judgment, as Italy failed to demonstrate good faith or objective uncertainty regarding EU law.

Articles of the EU VAT Directive

Article 2(1) of Directive 2006/112/EC: This article defines the transactions that are subject to VAT, including the supply of goods and services for consideration within a Member State and the importation of goods. It establishes the fundamental scope of VAT.
Article 250(1) of Directive 2006/112/EC: This article outlines the obligation for every taxable person to submit a VAT return. This return must contain all the necessary information to calculate the tax chargeable and deductions to be made. The AG notes that while this article concerns the obligation to submit a VAT return, it is not necessary to interpret it in the present case because the simplified resolution takes place after the VAT return has been submitted and verified.
Article 273 of Directive 2006/112/EC: This article grants Member States the power to impose other obligations they deem necessary to ensure the correct collection of VAT and to prevent evasion. However, this power is subject to the requirement of equal treatment between domestic and intra-Community transactions and must not create frontier formalities in trade between Member States. This article is central to the AG’s argument that the Italian legislation undermines the effective collection of VAT and encourages evasion.

Questions

Do Article 4(3) TEU and Articles 250 and 273 of Directive 2006/112/EC (or the analogous Articles 2 and 22 of Directive 77/388/EEC) preclude the national legislation laid down in Article 1(193)(a) of legge 197 del 2022 (Law No 197/2022), in so far as it excludes from the mechanism of simplified resolution only disputes concerning [even] only partially the VAT levied on imports and not also those concerning even only partially [EU] VAT or VAT provided for by EU law, for which the simplified resolution of disputes is instead permitted?
Do the principle of fiscal neutrality and the proper functioning of the common system of value added tax preclude the national legislation laid down in Article 1(193)(a) of Law No 197/2022 in so far as it – illogically or otherwise in a discriminatory manner – excludes from the mechanism of simplified resolution only disputes concerning the VAT levied on imports and not also those concerning even only partially [EU] VAT or VAT provided for by EU law, for which the simplified resolution of disputes is instead permitted, taking into account also the principle referred to in Article 4(3) TEU with which national rules and practices must comply?
Is the mechanism of simplified resolution laid down in the abovementioned national legislation, even if considered compatible with EU law, contrary to the general principle of proportionality, in so far as it could result in a benefit for the private taxpayer of up to 95% of the unpaid tax and, consequently, an economic loss for the State budget, which is also significant from the point of view of EU law?

AG Opinion

Article 4(3) TEU and Articles 2 and 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and the principle of fiscal neutrality

must be interpreted as precluding national legislation under which disputes relating to value added tax, with the exception of those concerning the value added tax on imports, may be resolved at the request of the taxable person, in exchange for the payment of a certain percentage of the tax due, which varies depending on the level of proceedings and the outcome of the preceding procedural stages, without the taxable person having to pay penalties or late payment interest and without the tax authorities being able to object to the request on grounds other than formal grounds.

Source

Curia

Other ECJ Cases referred to

The Advocate General’s opinion makes extensive reference to previous judgments and orders of the European Court of Justice (ECJ) to support its argumentation regarding the incompatibility of the Italian simplified tax dispute resolution mechanism with EU law. These cases establish the Court’s consistent stance on Member States’ obligations concerning VAT collection and the principle of fiscal neutrality.

Here are the key ECJ cases referenced:

Commission v Italy (C-132/06): This judgment, delivered on July 17, 2008, is a landmark ruling concerning Italian tax amnesty schemes. The ECJ held that a general and indiscriminate waiver of verification of taxable transactions infringed the Sixth VAT Directive (the predecessor to Directive 2006/112/EC) and the principle of sincere cooperation (now Article 4(3) TEU). The AG uses this case to highlight that the considerable imbalance between amounts due and amounts paid in such amnesties is tantamount to a tax exemption and distorts fiscal neutrality.
Commission v Italy (C-174/07): Another judgment from December 11, 2008, which similarly found an Italian tax amnesty scheme to be in breach of EU law for granting broad immunity from assessment or investigation for undeclared VAT.
Nuova Invincibile (C-82/14): An order from July 15, 2015, where the Court ruled that Italian law allowing a 90% reduction of VAT due following an earthquake was contrary to the obligations to collect all VAT and the principle of fiscal neutrality. The AG cites this to show that measures allowing taxable persons to keep or recover sums paid by the final consumer and payable to tax authorities are problematic.
Giocevi (C-37/23): A more recent order from March 18, 2024, which reiterated the findings of Nuova Invincibile, holding that a 60% reduction in VAT due was incompatible with EU law. The AG uses this to reinforce the argument against significant reductions in VAT.
Belvedere Costruzioni (C-500/10): This judgment from March 29, 2012, is crucial as it represents an instance where the ECJ found a national provision compatible with EU law. The provision allowed for the automatic termination of tax proceedings pending before a higher court if they originated more than 10 years prior and the tax authorities had been unsuccessful at first and second instance. The AG distinguishes the current Italian legislation from Belvedere Costruzioni, emphasizing the latter’s “exceptional and limited nature” and its objective of remedying breaches of the reasonable time requirement.
Degano Trasporti (C-546/14): In this judgment from April 7, 2016, the Court found that the admission of partial payment of a VAT claim by an insolvent trader within a creditors’ arrangement procedure was not contrary to EU law. The AG again highlights the “specific and limited character” of this measure, which was subject to strict conditions and justified by the insolvency of the trader, contrasting it with the broad scope of the current Italian legislation.
Åkerberg Fransson (C-617/10): This judgment from February 26, 2013, is cited for the principle that Member States are under an obligation to ensure effective collection of the European Union’s own resources, which include VAT revenue.
Cezam (C-418/22): A judgment from May 17, 2023, concerning penalties for non-compliance with VAT conditions. The AG refers to this case to underscore that Member States must establish effective and dissuasive penalties to counter infringements of harmonized VAT rules and protect the EU’s financial interests.
Legafact (C-122/23): A judgment from April 11, 2024, cited for the principle that late payment interest is intended to counter infringements of harmonized VAT rules and protect the financial interests of the European Union.
Véleclair (C-414/10): A judgment from March 29, 2012, which held that Directive 2006/112 cannot be interpreted as allowing a Member State to make the right to deduct VAT on importation conditional upon the actual prior payment of that tax. The AG uses this to support the argument on “external” fiscal neutrality.

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1. Executive Summary

Advocate General (AG) Spielmann has delivered an opinion concluding that the Italian “simplified resolution mechanism” for tax disputes, established by Law No 197/2022, is incompatible with EU law. The mechanism allows taxpayers to extinguish VAT debts by paying a reduced amount (ranging from 5% to 90% of the tax due) and exempts them from interest and penalties. The AG argues this measure breaches the fundamental EU principles of effective VAT collection and fiscal neutrality, primarily due to its broad scope, creation of unequal treatment, potential to encourage tax evasion, and discriminatory exclusion of VAT on imports. The AG rejects the Italian Government’s justification based on reducing court backlogs and ensuring reasonable processing times, and further advises against limiting the temporal effects of the Court’s anticipated judgment.

2. Core Issue and National Legislation (Law No 197/2022)

The case revolves around a preliminary ruling request from an Italian tax court concerning national legislation that permits the “simplified resolution” of tax disputes. This mechanism allows taxable persons who have failed to meet certain VAT requirements to extinguish their tax debt on favourable terms, by way of derogation from ordinary rules.

Key Provisions of Law No 197/2022:

Applies to disputes pending at any stage or level of proceedings on the law’s entry into force.
Allows resolution by paying a percentage of the tax due, excluding interest and penalties.
Savings: Range from 10% to 95% of the tax debt, depending on the level of proceedings and prior outcomes:
90% of value if action pending at first instance.
40% if tax authority unsuccessful at first instance.
15% if tax authority unsuccessful at second instance.
5% if tax authority unsuccessful at all previous levels before the Supreme Court of Cassation.
Exclusions: Disputes concerning traditional own resources and VAT levied on imports are explicitly excluded.
Procedure: Request and payment by 30 September 2023. Acceptance leads to automatic discontinuation of proceedings. Neither the tax authority nor the court has discretion to refuse the resolution, except on formal grounds.

The specific dispute involves Isolanti Group Srl, which was assessed for unduly deducted VAT, interest, and penalties totaling EUR 95,787.42. Isolanti Group requested a stay of proceedings based on this simplified resolution mechanism.

3. Relevant EU Legal Framework

The referring court sought interpretation of:

Article 4(3) TEU: The principle of sincere cooperation, obliging Member States to assist the Union and take measures to fulfil Treaty obligations and refrain from jeopardizing Union objectives.
Directive 2006/112/EC (Common system of VAT):Article 2: Defines transactions subject to VAT.
Article 250: Obligation to submit VAT returns (AG Spielmann deems this not necessary to interpret in this case).
Article 273: Allows Member States to impose obligations necessary to ensure correct VAT collection and prevent evasion, subject to equal treatment and avoidance of border formalities.
Principle of Fiscal Neutrality: Inherent in the common system of VAT, ensuring economic operators carrying out the same transactions are not treated differently.
Obligation to ensure effective collection of the European Union’s own resources: VAT revenue forms part of these resources, establishing a direct link between national VAT collection and the EU budget.

4. Advocate General’s Analysis and Key Findings

The AG’s analysis focuses on whether the Italian mechanism constitutes an acceptable waiver of VAT collection in light of Member States’ discretion. AG Spielmann concludes it does not, for four primary reasons:

4.1. General Principles and Prior Case-Law on Tax Amnesties

Member States’ Obligation: Member States must take all appropriate measures to ensure collection of all VAT due and prevent evasion (Article 273 Directive 2006/112 read with Article 4(3) TEU).
Limited Latitude: While Member States have some latitude, it is limited by:

The obligation to ensure effective collection of EU’s own resources.
The obligation not to create significant differences in treatment of taxable persons (Principle of Fiscal Neutrality).

Previous Judgments (Incompatible): The CJEU has previously found Italian ‘tax amnesty’ schemes incompatible where they involved:
“general and indiscriminate waiver of verification of taxable transactions” (e.g., Commission v Italy judgments).
Significant reductions (e.g., 90% or 60%) in VAT due, amounting to a “considerable imbalance between the amounts actually due and the amounts paid,” thereby distorting fiscal neutrality (e.g., Nuova Invincibile, Giocevi orders).
Previous Judgments (Compatible – Exceptional Circumstances): By contrast, schemes were deemed compatible when they were “exceptional, specific and limited”:
Belvedere Costruzioni: Applied only to very old proceedings (over 10 years) at the third instance, aiming to remedy reasonable time breaches.
Degano Trasporti: Involved partial payment of VAT by an insolvent trader under strict, court-supervised arrangement conditions.
Conclusion on Case-Law: The AG clarifies that these compatible cases did not “shatter the ‘dogma’ of the impossibility of adopting VAT amnesties,” but rather confirmed that such measures are only permissible under highly specific and limited circumstances.

4.2. Application to the Legislation in Question: Infringement of Obligation to Collect VAT in Full

The AG argues the Italian mechanism inherently undermines the obligation to collect VAT in full, as it explicitly involves payment of only a part of the VAT due and exempts interest/penalties. This “simplified resolution is based, in essence, on the assumption that the lower the probability that the tax authority will ultimately succeed, the more the VAT collected may be reduced.”

4.3. Four Reasons for Incompatibility

Broad and General Scope:

Applies to all disputes pending before tax courts as of 1 January 2023, regardless of their duration, amount involved, or nature of the infringement (even tax evasion).
Unlike Belvedere Costruzioni, it applies even to disputes ongoing for only a short period (e.g., two years in the main proceedings).
Neither the tax authority nor the court has discretion to refuse the resolution, leading to automatic termination of disputes.
This constitutes a “general waiver of the collection of VAT for a certain period,” not an exceptional measure.

Infringement of Fiscal Neutrality:

Creates significant differences in treatment between:
Taxpayers who pay full VAT, penalties, and interest on time, and those who benefit from reduced payments and exemption from penalties/interest through the amnesty.
This results in a “considerable imbalance” contrary to fiscal neutrality.
Example: In the main proceedings, the amnesty resulted in waiver of approximately 60% of VAT, plus exemption from EUR 6,688.73 in interest and EUR 55,945.69 in penalties.

Encourages Tax Evasion:

The referring court itself noted that the rules “are instead in line with the trend in Italian tax legislation of providing for frequent and general relief measures favouring less scrupulous taxpayers,” thus “creating, in the minds of taxpayers, a kind of undue expectation, causing the system to lose its deterrent effect.” This implicitly refers to Article 325(1) TFEU on countering fraud affecting the EU’s financial interests.

Infringement of ‘External’ Fiscal Neutrality (Exclusion of VAT on Imports):

The mechanism excludes VAT levied on imports, meaning only taxpayers liable for VAT on domestic supplies and intra-Community acquisitions can benefit.
This grants more favourable treatment to operators supplying goods/services within Italy compared to those importing them, which infringes the principle of fiscal neutrality, requiring comparable treatment regardless of origin.

4.4. Rejection of Justification (Reducing Backlog/Reasonable Time)

The Italian Government argued the law aimed to reduce court backlogs and ensure compliance with the “reasonable time” principle (Article 47 Charter of Fundamental Rights). The AG rejects this for several reasons:

Lack of Consensus: There is no clear consensus on the severity of the backlog problem, especially at lower court levels. While significant at the Supreme Court of Cassation, other reforms (Law No 130/2022) were already addressing this structurally and specifically for the Supreme Court.
Dissimilarity to Belvedere Costruzioni: Unlike that case, which concerned disputes over 10 years old and only at the third instance, Law No 197/2022 applies to recent disputes (e.g., the 2-year-old dispute in the main proceedings).
General Measure vs. Exceptional Circumstance: The justification of “unreasonableness of the length of the proceedings” cannot justify a general measure that waives VAT collection and is contrary to fiscal neutrality.

5. Advocate General’s Conclusion and Recommendation

AG Spielmann proposes that the Court of Justice should rule:

Article 4(3) TEU, Articles 2 and 273 of Directive 2006/112/EC, and the principle of fiscal neutrality must be interpreted as precluding national legislation under which disputes relating to value added tax, with the exception of those concerning the value added tax on imports, may be resolved at the request of the taxable person, in exchange for the payment of a certain percentage of the tax due, which varies depending on the level of proceedings and the outcome of the preceding procedural stages, without the taxable person having to pay penalties or late payment interest and without the tax authorities being able to object to the request on grounds other than formal grounds.

6. Request for Limitation of Temporal Effects (Rejected)

The Italian Government requested limiting the temporal effects of the judgment if it were to find the mechanism incompatible, citing the burden of reactivating 40,000 disputes, practical difficulties for undertakings, and nullification of the National Recovery and Resilience Plan.

The AG rejects this request, stating that:

Limitation is exceptional, requiring good faith and risk of serious difficulties.
The Italian Government provided no evidence of acting in good faith (e.g., consulting the Commission).
Given the existing case-law, there was “no ‘objective, significant uncertainty’ regarding the implications of the applicable EU provisions on the obligation to collect VAT in full and to comply with the principle of fiscal neutrality.”
The government’s claims about the scale of repercussions, while substantial, are not sufficient without the “good faith” criterion being met.