Supreme Court: abuse of rights also in tax matters.

In order to fully understand the dictate, it is first necessary to understand the concept of abuse of rights, being careful to apply a clear distinction between tax evasion and abuse and avoidance.

Unlike other European countries, such as, for example, Germany, Greece, Switzerland and Portugal, Italy has not transposed the principle of abuse of rights as a rule of law. However, at civil law level, doctrine and jurisprudence have developed this widely. An excellent definition was given by the Supreme Court, which provided that "abuse of rights occurs when the holder of a subjective right, even in the absence of formal prohibitions, exercises it in a manner that is unnecessary and disrespectful of the duty of fairness and good faith, causing a disproportionate and unjustified sacrifice of the other contracting party, and in order to achieve results that are different and additional to those for which those powers or faculties were granted"(Cass. Civ. 2009/20106).

In the tax field, the figure of abuse was introduced, Indeed, in its judgment No. 10981 of 13 May 2009, the Court of Cassation, Civil Tax Section, stated that "the prohibition of abuse of rights translates into a general anti-avoidance principle, which precludes the taxpayer from obtaining tax advantages obtained through the distorted use, even if not in conflict with any specific provision, of legal instruments capable of obtaining a tax benefit or saving, in the absence of economically appreciable reasons justifying the transaction, other than the mere expectation of those benefits."

In essence, the concept of abuse of tax law has been a de facto broadening of the concept of avoidance,limited (erroneously) to case studies (Article 37-bis of Presidential Decree 600/1973).

The recent judgments under review, have reaffirmed the applicability of the institution of abuse also in the tax field. Specifically, they ruled that when a taxpayer, exercising a right expressly recognised to him, does not in reality pursue an end worthy of protection by the system, but, on the contrary, achieves an objective that is contrary to it, no judicial protection can be granted to him. In fact, the person abuses the freedom to adopt a certain treatment for his own benefit by exploiting the variety of legal forms that the legal system makes available to him.

Therefore, as opposed to evasion, which occurs when there is a concealment of taxable wealth i.e. the alteration of an economic fact (such as simulation, fictitious interposition), abuse and avoidance, on the contrary, occur when the taxpayer's tax advantage is undue, since it is obtained by exceeding (or abusing) the advantage expressly recognised by a rule, by pursuing an advantage disapproved by the system.