Assessment notice for revision of cadastral income of urban real estate: lawful or unlawful?

Starting from the last months of the past year, Italian taxpayers, from those resident in smaller towns to the ones located in the cities of Rome and Milan, have been notified new assessment notices by the Italian Revenue Agency for the revision of cadastral income of real estates.

The revision of the buildings’ cadastral income does not represent an unusual phenomenon, rather it is a recurring event over the years and the reason descends from the very function of the institution: in fact, given the purpose of the Land Register, specifically tax oriented, it is clear and obvious the need of continuous and periodic updates of parameters used for the attribution of a specific class and category to each real estate unit, in order to ensure a proper assessment of the taxable income, in accordance with the principle of contribution capability expressed in article 53 of Italian Constitution.

The cadastral income regulation is governed by Law 1249/1939, largely amended and revised over the years. It is to be noted that the need for adjustment has increased following the latest financial crisis. Indeed, the search of the Government for additional taxable income and the policies aimed at the abatement of tax avoidance and tax evasion have caused increasingly frequent amendments and revaluations of the criteria ruling the cadastral classification, often entailing a burden increase for taxpayers.

The process of "automatic" revision by the Revenue Agency is focused on the correction and adjustment of the real estate values to the social and economic changes which have differently characterized the state of the property and/or of the territorial zone (census area) wherein it is located. In a nutshell, the main purpose is to update the Land Register to the current market values, taking into account the changes occurred in the real estate unit and in the site where it stands.

The procedures for the updating of the Land Register are governed by the Law 311/2004, better known as the 2005 Budget Law, specifically in article 1 paragraphs 335 and 336. In particular, the revision contained in the above mentioned law does not directly affect the current cadastral classes and incomes, but it concerns a new allocation of land and buildings in different cadastral categories and therefore the setting of a new taxable base in order to achieve a better fiscal equity.

However, the above mentioned paragraphs of the law foresee two different procedures: one is related to the event of re-evaluation as consequence of modifications occurred in a specific municipal area; the other one deals with the hypothesis of re-evaluation as a result of changes affecting the property itself. While in the latter case the fairness of the revision may appear less problematic and thorny, the same cannot be said for the revaluation interesting all buildings in a specified area. Since the revaluation of an area involves the consequent revaluation of the urban real estate contained therein, a discriminatory, uneven increase may occur in cadastral incomes of buildings located in a specific micro-area as compared to those located in micro-areas exempted from the revaluation process. The municipal territory has been divided into micro-areas as introduced by the Presidential Decree 138/1998 and the cadastral revision of the micro-areas is regulated by paragraph 335 of the Law 311/2004 as follows: the City Government gives notice to the competent tax office of the Revenue Agency about the micro-areas in which significant deviations have occurred between the market value and the municipal property tax (Imposta Comunale sugli Immobili) value, as compared to the ratio existing in the whole municipal area; subsequently the Revenue Agency provides to notify the taxpayer of the new cadastral income, to be applied starting from the same year in which the notification has been effected. In addition to the aforementioned criticism about the uneven treatment among micro-areas within the same municipality, it could be added that the use of a "spontaneous" or "automatic" updating mechanism not directly involving the taxpayer may cause inappropriate cadastral registrations and classifications, also due to the recourse to rigid parameters and sometimes to statistical models.

As said above, a new wave of assessment notices bearing the automatic review of the cadastral incomes has affected taxpayers in the last months and, as the matter heavily impacts the taxable basis of more than one tax (e.g. ICI-municipal property tax, IMU- overall municipal tax) the issue is not irrelevant. It is important to detect whether an assessment notice and the consequent AUTOMATIC cadastral re-evaluation are valid or not, in order to avoid unfair inequalities and undue increases in tax burden.

Should the taxpayer notice irregularities in the proceedings and in the allocation of the micro-area and the new cadastral class, he/she may apply to the Provincial Tax Commissions. An appeal against the cadastral reclassification may be made by means of a deed of recourse within the essential time-limit of 60 days after the reception of the assessment notice by the Tax Administration.

Over the years, the jurisprudence has been engaged in identifying and clarifying the elements allowing to control the lawfulness on the notices of revaluation of the cadastral income. By the judgement n. 9629/2012, the Italian Supreme Court, appointed to rule in the specific matter, stated the duty for the Tax administration to thoroughly and expressly include in the assessment notice, the grounds upon which the change of the cadastral income of the property was based.

Particularly, in the case provided in paragraph 335, the Tax Agency must indicate and verify the variation incurred in the value of the property in question; while in the case described in paragraph 336, with reference to revaluations incurred as a result of changes directly  affecting the building, "the notice must contain an indication of the specific events" which caused the updating of the cadastral income. In conclusion, the notice from the Revenue Agency cannot be limited to simply enunciating the decision.

In this direction, the Supreme Court (Italian Civil Supreme Court - February 3, 2014, n. 2357) has recently annulled and declared illegal a notice of assessment for cadastral re-evaluation addressed to a taxpayer in Naples for lack of adequate motivation. In light of the above, one could assert that the automaticity of the revision process does not exclude the need for motivation, which represents an unequivocal element to guarantee the validity of the notice and the only suitable means to make the reasons at the basis of the re-evaluation understood by the taxpayers involved.

Therefore, in the absence of adequate motivations provided by the Tax Administration, the taxpayer will be required, in its own interest and in order to self-protect from unfair tax burdens, to contact a lawyer to file a proceeding at the competent Tax Commission, considering the very limited time available to bring an action (60 days from receipt of the notification).

Avv. Mario Benedetti

Giulia Laddaga

 

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