Law no. 186/2014 has introduced new voluntary disclosure rules:
- International voluntary disclosure - allows disclosure of assets made or held abroad which violate tax monitoring rules
- National voluntary disclosure - regulates tax return violations in relation to direct tax and value added tax
The voluntary disclosure rules apply to violations made prior to 30 September 2014 for financial years where the limitation period (as set out in the statute of limitations) has not expired at the date of filing the request.
The deadline for filing the specific form for voluntary disclosure is 30 September 2015.
International voluntary disclosure
Individuals, non-commercial entities and assimilated entities (eg trusts and foundations), who are resident in Italy for tax purposes can benefit from voluntary disclosure. Also, individuals who, despite being registered as Italian foreign residents, have continued to be habitually resident in Italy can also benefit.
The international voluntary disclosure procedure allows for regularisation of assets made or held abroad which have not been declared in a tax return and further for violations in relation to the income used to purchase those assets. It is carried out by filing a specific form with the Tax Agency which includes all the information and documentation necessary to determine the assets held and taxes which have not been declared.
The documentation must cover all tax periods where the limitation period to challenge the violations on the tax return has not expired. According to the statute of limitation the limitation period expires 31 December of the fifth year following the occurrence of a violation. Please note that this is subject to the assets being held in a non-black listed country, if the assets are held in a black listed country then the term is doubled.
Voluntary disclosure provides a simplified procedure to determine the remuneration of the assets held abroad. Provided the value of assets does not exceed 2 million euros for each financial year, a flat rate is applied to the amount due (the remuneration is determined at a rate of 5% of assets held abroad for each year to which the tax rate of 27% has to be applied).
For breach of tax monitoring rules, the minimum fine is 3% for assets held in non-black listed countries and 6% for assets held in black listed countries (reduced to 5% for tax returns filed after 5 August 2009). The fine is reduced by 25%, and may be reduced by 50%, in cases where assets are transferred following disclosure in Italy, in any other European Union country or in the European Economic Area which has an effective exchange of information (eg Iceland and Norway). The fines calculated as above will be further reduced by one third if the payment of the notice of assessment issued by the Tax Agency is enacted within 60 days.
For fines relating to evasion of income tax (including related surtaxes, substitutive taxes, local Italian tax, VAT and withholding taxes) the minimum fines are reduced by 25% (eg the minimum fines are equal to 100% in the case of unfaithful tax return and 120% in the case of an omitted tax return, increased by 33% if the income was generated abroad).
The fine can further be reduced to one sixth where payment is made within 15 days before the meeting scheduled with the Tax Agency. Alternatively, the taxpayer can attend the meeting with the Tax Agency to carry out the acceptance procedure to try and reduce the taxable base and this would reduce the fine to one third.
The taxpayer cannot benefit from the voluntary disclosure if before submitting the application they are aware of any inspections or audits. However in the case of audits involving just one financial year, the taxpayer can make use of voluntary disclosure for the financial years which are not involved in the audit.
Finally, it is noted that the Treaties for the exchange of information with Switzerland, Liechtenstein and the Principality of Monaco have been recently signed. These Treaties will be beneficial for taxpayers in those jurisdictions wishing to avail themselves of the voluntary disclosure procedures.
National Voluntary disclosure
When a taxpayer follows the international voluntary disclosure procedure, the taxpayer must also follow the national voluntary disclosure procedure to disclose any tax return violations in relation to direct taxes, VAT and withholding taxes. Individuals, companies and non-commercial entities can benefit from this procedure. The same fines and procedures for international voluntary disclosure are applicable.
Criminal law aspects
In both procedures, punishment is excluded for those who adhere to the voluntary disclosure rules where the following crimes are committed; fraudulent tax return by the use of invoices or other documents for non-existent operations, fraudulent tax return by other methods, unfaithful tax return, omitted tax return, omitted payment of certified withholding tax and omitted payment of VAT is expected. This is also the case for crimes involving money laundering and self-money laundering, if committed in relation to the above tax violations.