Commentary on Judgment No. 10837 of 2024: Compensation for Actual Damage and Taxation

The judgment no. 10837 of April 22, 2024, by the Court of Cassation offers an important reflection on the issue of compensation for actual damage and its taxation. In particular, the Court reiterated that the amounts due as compensation for damage are not subject to VAT, but only to proportional registration tax. This clarification is crucial for understanding the fiscal dynamics related to damages from contractual non-performance.

The Issue of Compensation for Actual Damage

Compensation for actual damage represents the immediate economic loss suffered by the holder of the asset due to a contractual breach. According to the Court, this type of damage includes not only the direct loss but also the economic value of the services to which the creditor would have been entitled. The judgment in question stated that such compensation does not contribute to forming the taxable base of VAT, by virtue of the provisions of Article 15 of Presidential Decree No. 633 of 1972.

Relevant Tax Legislation

In general. The judgment condemning compensation for actual damage - which corresponds to the immediate economic loss caused to the holder of the asset, including the economic value of the service to which the creditor was entitled and which was not obtained due to non-performance - is subject to proportional registration tax, as, according to the provisions of Article 15 of Presidential Decree No. 633 of 1972, the amounts due as compensation for damage, as well as for late interest, penalties for delays, or other irregularities in fulfilling contractual obligations, do not contribute to forming the taxable base of VAT, which results from the transfer of goods and the provision of services. (In this case, the Supreme Court confirmed the contested decision that deemed the amount due for compensation for actual damage not subject to VAT, while subjecting the court's judgment, which, in acceptance of a request for contractual resolution, condemned the defendant to compensate for the damage from non-performance, to proportional registration tax).

This principle is based on a clear distinction between compensations and amounts arising from the transfer of goods or services, which are instead subject to VAT. It is important to note that, in situations of non-performance, compensatory amounts are treated differently from revenues arising from normal commercial transactions.

Practical Implications of the Judgment

  • Clarity on how to fiscally treat compensations for actual damage.
  • Distinction between proportional registration tax and VAT for compensatory amounts.
  • References to previous case law that supports the established principle.

The implications of this judgment are significant for professionals and taxpayers, as they provide guidance on how to proceed in the event of disputes related to contractual non-performance.

Conclusions

In conclusion, judgment no. 10837 of 2024 by the Court of Cassation represents an important step forward in understanding the taxation of compensations for actual damage. The distinction between VAT and proportional registration tax clarifies the taxation methods and provides a solid legal basis for addressing the fiscal issues related to contractual non-performance. It is essential that professionals and taxpayers are informed about these provisions to avoid unpleasant surprises in the fiscal realm.

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