No Tax Refunds for Debtors: What’s Changing?

No Refunds for Taxpayers with Debts

The latest decree on Tax Collection, published in the Official Gazette on August 7th, brings alarming news for taxpayers expecting a tax refund.
This new regulation, which had already been hinted at a few months ago, now explicitly states that individuals with outstanding debts will not receive any tax refunds, including those resulting from the annual tax return settlement.

Voluntary Offset of Debts with Tax Credits

This measure is not entirely new, as it was already included in Article 28-ter of Presidential Decree 602/1973, allowing for voluntary offset of debts with tax credits.
Previously, taxpayers could refuse the offset proposal from the collection agent and opt to receive the tax refund instead.
However, the recent Tax Collection decree has revised the regulations significantly.

Up to now, tax refunds and debt collection have operated separately: collection agents could not touch any tax credits without the taxpayer’s consent to settle outstanding debts.
This is about to change due to the total block on tax refunds for individuals with recorded debts who do not choose voluntary offset, as outlined in Article 16 of Decree Law 110/2024.

New Provisions for Tax Refunds Collection

The current version of Article 28-ter mandates the Revenue Agency to verify if the refund beneficiary has any outstanding debts before processing the tax refund from the income tax return.
Previously, in the presence of debts, the Revenue Agency would notify the collection agent responsible for the debt, who would propose the voluntary offset between debts and tax credits.

If the taxpayer accepted the proposal, the collection agent would settle the outstanding debts, and any remaining amount would be refunded directly by the Revenue Agency.
If the taxpayer declined the offset, they would receive their refund, and the collection agent would have to find alternative ways to enforce the outstanding debt (seizure, administrative hold, or other enforcement actions).

Changes Introduced by the Tax Collection Decree

Decree Law 110/2024, known as the Tax Collection decree, has amended Article 28-ter regarding debt offset, maintaining the option for voluntary offset.
However, a significant change introduced by Article 16 of the new decree is that voluntary offset will only be possible for refunds exceeding 500 euros.

Additionally, the beneficiary’s verification will focus on non-compliance with payment obligations that have led to one or more enforcement notices or debts assigned to the collection agent.
The decree also addresses the block on refunds if the taxpayer does not choose voluntary offset, keeping the refund amounts available to the collection agent until December 31st of the following year to initiate debt collection procedures.