LEGAL INTEREST RATE
With the Ministerial Decree of December 11, 2015 , published in the Official Journal no. 291/2014, the legal interest rate referred to in Article 1284 of the Civil Code was reduced from 0.5% to 0.2% per annum. The new legal interest rate applies from January 1, 2016. The change in the legal interest rate also affects tax and social security provisions, directly influencing the calculation of financial charges in the balance sheet and voluntary adjustments. For the correct recording of these components in the annual report, discover our accounting and financial reporting service . You can consult the historical series of changes in the legal rate directly on the official portal of the Revenue Agency .
Active repentance
The reduction in the legal interest rate reduces the amounts due in the event of effective voluntary disclosure pursuant to Article 13 of Legislative Decree 472/1997. To regularize omitted, insufficient, or late tax payments through effective voluntary disclosure, in addition to the applicable reduced penalty, default interest must also be paid, calculated at the legal rate, accruing daily from the day following the due date until the date of payment. The legal rate to be applied is the one in effect for each period, based on a pro-rata temporis basis , and is therefore equal to:
- at 0.5%, until December 31, 2015;
- at 0.2%, from 1 January 2016 up to and including the date of payment.
| Example | legal interest rate |
| The Alfa company must correct the failure to pay the second IRES advance payment due on 30 November 2015, which will be made on 15 February 2016, resulting in the application of the legal rate: 0.5% for the period 1 December 2015 – 31 December 2015 and 0.2% for the period 1 January 2016 – 15 February 2016. | |
Payment by instalments of sums due following adherence to litigation-deflationary institutions
The reduction to 0.2% of the legal interest rate is also relevant in the event of an option to pay the sums due in installments as a result of the following litigation-deflationary measures:
- adherence to invitations to a hearing , pursuant to Article 5 of Legislative Decree 218/1997 (on installments subsequent to the first, legal interest is calculated from the day following payment of the first installment);
- compliance with the tax assessment reports , pursuant to Article 5- bis , Legislative Decree 218/1997 (on installments subsequent to the first, legal interest is calculated from the day following the date of notification of the partial assessment definition);
- settlement by agreement , pursuant to Article 8 of Legislative Decree 218/1997 (on installments subsequent to the first, legal interest is calculated from the date of completion of the agreement deed);
- acquiescence to the assessment , pursuant to Article 15, Legislative Decree 218/1997 (on the installments following the first, legal interest is calculated from the day following the day of the conciliation report or the day of communication of the decree of extinction of the judgment).
| NB | It should be noted that with the introduction of new provisions regarding voluntary disclosure by Law 190/2014 (2015 Stability Law), the provisions regarding participation in the tax return, compliance with the terms of the invitation to a hearing, and “enhanced” compliance will be repealed starting January 1, 2016. However, for 2015 only, Law 190/2014 provides two options for taxpayers wishing to benefit from litigation-deflation mechanisms, granting them the option to use either instrument at their convenience, provided the documents (invitations and tax return) are served by December 31, 2015. |
| Regarding tax settlement by agreement, Revenue Agency Circular No. 28/2011 (§ 2.16) clarified that the legal rate must be determined with reference to the year in which the agreement is finalized, remaining constant even if the installment payments extend into subsequent years. Therefore, for example, in the case of an agreement finalized in 2015 and paid in installments, the legal rate of 0.5% in effect in 2015 continues to apply to installments subsequent to the first, even for installments due in subsequent years, regardless of subsequent changes in the legal rate. This principle must also be considered applicable to the other dispute-deflationary provisions mentioned above. |
Legal interest rate measurement not computed in writing
The 0.2% legal interest rate is also relevant for calculating interest, not determined in writing, in relation to capital given as a loan (Article 45, paragraph 2, Tuir) and to interest that contributes to the formation of business income (Article 89, paragraph 5, Tuir).
Payment by installments of the substitute tax due for the revaluation of unlisted shareholdings and land
The reduction in the legal rate to 0.2% is not relevant to the installment payment of the substitute tax due for the redetermination of the purchase price or value of unlisted shareholdings and land , pursuant to Articles 5 and 7, respectively, of Law 448/2001 (2002 Finance Law) and subsequent amendments and additions. In this case, the interest due for the installment payment remains at 3%, as this rate is not linked to the legal rate.
Adjustment of usufruct and income coefficients for indirect tax purposes
A subsequent Ministerial Decree will also adjust the coefficients for determining the value for the purposes of registration, mortgage, land registry, inheritance, and gift taxes to the new legal interest rate:
- perpetual or indefinite-term annuities ;
- fixed-term annuities or pensions ;
- of annuities and life pensions ;
- of lifelong usufruct rights .
The change in the legal interest rate also has an effect on the civil penalties provided for the failure or delay in paying social security and welfare contributions, pursuant to Article 116 of Law 388/2000 (Financial Law 2001).
In the event of failure or delay in paying contributions, civil penalties may be reduced to the legal interest rate, i.e. 0.2% from 1 January 2016, in the event of:
- objective uncertainties due to conflicting jurisprudential orientations or administrative decisions on the existence of the contribution obligation;
- malicious act by third parties , reported to the judicial authorities;
- crisis , reconversion or corporate restructuring of particular social and economic relevance in relation to the local employment situation and the production situation in the sector;
- agricultural companies affected by exceptional events ;
- companies undergoing bankruptcy proceedings ; non-profit organizations and non-profit organizations, foundations, and associations.