"Force majeure" and "first home benefits"

The very topical theme of "force majeure": the recent decision of the United Sections with reference to "first home benefits"

By the recent case no. 8094 of April 23^rd, 2020, the United Sections of Supreme Court of Cassation ruled on a particularly relevant (and, so far, controversial) tax issue, consisting of whether the force majeure can be invoked or not, as not to forfeit the tax benefit provided by Article 33, paragraph 3, of Law no. 388 of 2000, in the event that the building activity does not occur within the mandatory five-year term.

In taking a position on the specific tax issue, it treated also some force majeure more general topics, with obiter dicta which can be important also in other contexts.

Once the force majeure concept is clear, by the decision at issue the Supreme Judges adhere to the traditional opinion and recognize the immanence of the force majeure principle also in the tax legal system. Therefore,, they confirm the applicability of said principle in favor of the taxpayer, as the exemption from liabilities due to unpredictable and inevitable events depending on external causes and occurred notwithstanding the adoption of all the necessary precautions, constitutes a general principle of our legal system.

Let’s then see more in detail the specific facts considered by the judges and the reasoning path they followed.

The case

The case in question originated from the purchase of a building area, included in a municipal allotment plan under an agreement, by a company which had applied for the benefit provided for in the abovementioned Article 33, paragraph 3, implying the reduction of the relevant registration, mortgage and cadastral taxes.

According to said provision, the application of the relief in question was subject to the condition that the building use of the area took place within the period of five years after the transfer.

Once the deadline had elapsed without the purchaser having built, the tax authorities served the company a tax settlement notice for the recovery of taxes in the ordinary amount. The notice was then challenged by the company before the competent Provincial Tax Commission, claiming that the failure to build the area was due to force majeure, and in particular to the unforeseeable impossibility due to an event not attributable to the company, consisting in "the change of the majority of the municipal board and the refusal of the new administration to perform the allotment agreement executed by the previous administration".

The exception was rejected in both the first and the second instance degree, on the basis of an alleged irrelevance of the exemption, for two kinds of reason.

A first, purely literal, for which the irrelevance of the exemption is to be inferred ex se from the lack of an express reference, in the benefit legal provision, to the hypothesis of failure to build due to force majeure; a second, systematic, which was in line with the consolidated position in the jurisprudence of legitimacy (see Court of Cassation no. 288/2012), according to which, under the combined provisions of Articles 23 of the Constitution and 14 of the Civil General Provision, no interpretation by analogy would be allowed in the matter of extraordinary benefits.

The company thus appealed to the Supreme Court of Cassation, and by virtue of the contrast accrued within the competent tax section, the case was assigned to the United Sections.

The reasoning and position of the United Sections

Examining the question, the judges start from a reconnaissance of the relevant legal framework and of different positions in the interpretation of the benefit measure at issue.

In fact, there were opposite orientations: the first, more recent and of strict interpretation, anchored to the rigorous formalism of paragraph 3 of Art. 33 of the Law n. 388/2000, pursuant to which the tax benefits would not be due, at the moment of the purchase, whenever the actual building use is not carried out within the period prescribed by law; the second, traditional and completely different, resulting in the taxpayer’s favour, under which, even in the absence of an express regulatory reference, the force majeure may imply the not forfeiture of the tax benefits, in consideration that a different conclusion would frustrate the general rule according to which a no action can be claimed when it has become impossible without fault of those by whom it would be due (on this point, see Cass. No. 2616/2016, on the matter of 'first home' benefits).

The Supreme Court has adhered to the second of the abovementioned opinions on the ground of the reasons, some of which are of general enforceability, summarised below:

• the concept of force majeure and the relevant requirements (unpredictability, exceptionality and inevitability of the event) are univocal both in the national and supranational law;
• force majeure applies even in the absence of a specific provision of law, and includes any cause of objective impossibility not resulting from the conduct directly or indirectly attributable to the taxpayer, since it is a rule of general application;
• the failure to build within the period established by the law due to an external cause which occurs and is not attributable to the taxpayer constitutes a case falling within the perimeter delimited by the benefit rule, as integrated by the force majeure general rule;
• then, we have to consider either the purpose of the rule and the distinction of the institution of forfeiture in the private and public sphere. As for the purpose of the rule, it is providing incentives for the purchase of real estate through the reduction of costs for construction (such as the reduction in the purchase cost of the area). As a consequence, the regulatory conditions for the benefits must be met at the time of the purchase, and therefore the tax judge must assess the existence of the force majeure that may have occurred afterward;
• then, if in private law the forfeiture is an institution aimed at regulating a conflict of interest between the parties, for the sake of certainty of legal relations, in the ambit of public law - with respect to which the tax law is set in terms of species a genus - the forfeiture stops the expansion of the private party’s position, making it return to the initial position. This is the reason why the administrative jurisprudence, in investigating the relationship between PA and citizen in accordance with the principle of good administration (art. 97 Cost.), has never doubted that the forfeiture can be prevented by the force majeure or factum principis;
• finally, the building activity is neither an obligation nor a burden for the purchaser.

By virtue of the foregoing considerations, the judges therefore upheld the appeal, referring the case back to a different Regional Tax Commission, for a new examination of the matter in compliance of the following principle of law: 'With regard to tax relief, the benefit provided by Article 33(3) of Law No. 388 of 2000, in the wording applicable ratione temporis to the present judgment, also applies if the construction is not carried out within the period prescribed by law, provided that this result does not derive from a conduct directly or indirectly attributable to the purchaser, who promptly activated himself, but from an external, unforeseeable, and inevitable cause, occurred notwithstanding the adoption of all the necessary precautions, such as to constitute the force majeure, that is to say the factum principis, so that, according to a general rule immanent in the legal system, the conduct required by the law, within the period laid down therein, could not be claimed".