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Anti-avoidance framework

Regulation

What legislative and regulatory initiatives has the government taken to combat tax avoidance in your jurisdiction?

General anti-abuse rule

Article 10-bis of Law 212/2000, enacted by Legislative Decree 128/2015, contains a general anti-abuse rule which empowers the Revenue Agency to counteract tax advantages that arise from abusive transactions. The general anti-abuse rule applies to all taxes, except custom duties.

An abuse of law exists when one or more transactions “lack any economic substance and, despite being formally in compliance with tax laws, are essentially aimed at obtaining undue tax advantages”. The authorities must disregard any tax advantages from these abusive schemes and calculate taxes based on the relevant circumvented rules and principles, taking into account any payments made by the taxpayer in connection with abusive transactions. Transactions lack any economic substance if they consist of facts, acts and contracts (even those that interconnect) that do not generate economic effects different from the tax advantages. The undue tax advantages consist of benefits, even if not achieved in the short term, which contradict the purpose of the tax provisions or the principles of the legal framework. However, there is no abuse where a transaction is justified by sound and non-marginal non-tax reasons (eg, managerial and organisational reasons aiming to improve the structure or the functionality of the business).

Other anti-abuse rules

Italy amended its participation exemption regime in 2016, introducing the anti-hybrid provision of the EU Parent Subsidiary Directive and making specific reference to the General Anti-abuse Rule (GAAR). Italian tax law also includes several other anti-abuse rules (eg, the controlled foreign company regime).

To what extent does your jurisdiction follow the OECD Action Plan on Base Erosion and Profit Shifting?

Italy has already implemented a significant number of measures under the Base Erosion and Profit Shifting Action Plan.

Is there a legal distinction between aggressive tax planning and tax avoidance?

The GAAR clarifies that taxpayers may choose between different optional tax regimes provided by the law or between alternative transactions leading to a different tax burden. Therefore, it is recognised that differing tax results arise depending on which choice is made. The GAAR does not challenge such choices. However, it may intervene if the course of action taken by the taxpayer in unreasonable and intended to achieve a favourable tax result as unintended by the lawmaker when it introduced the tax rules in question.

Penalties

What penalties are imposed for non-compliance with anti-avoidance provisions?

Article 10bis(13) of Law 212/00 states that transactions which amount to an abuse of law under the GAAR will be subject to the ordinary administrative tax penalties (ie, the penalties contemplated for filing incorrect tax returns or for failing to make the required tax payments).

The Revenue Agency will adjust the amount of tax to the amount which would have been payable without the abusive structure and, in addition, will charge the ordinary applicable penalties.

It is specifically stated that abusive transactions challenged under the GAAR do not amount to tax crimes.

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