On 24th of October the Italian government published the second version of the Italian voluntary disclosure (VD) programme under art. 7 of Decree-Law no. 193/2016.
In the same fashion as the first VD, introduced in 2014, this measure is aimed at Italian tax residents holding assets abroad that have not been disclosed to the tax authorities. Moreover, it involves the disclosure of cash held in Italy: thus, this law allows Italian taxable entities and individuals to regularize their assets by reporting them to the Italian Revenue Agency. As mentioned below, this program provides the applicants with some benefits. In contrast, no fiscal advantage is granted to those who regularise 'national assets', namely undisclosed cash held in Italian safe deposit boxes.
1. SUBJECTIVE REQUIREMENTS: WHO CAN PARTICIPATE?
The new VD is aimed at anyone has violated the Italian tax regime up to September 30th, 2016: all applications should be presented by July 31st and completed by September 30th, 2017.
There is only one proviso: those applicants who benefited from the previous version of the VD with respect to their assets held abroad can only now apply for regularising their 'national assets', and vice versa.
2. RELEVANT CHANGES FROM THE FIRST VERSION.
The new version of the VD has introduced four main changes. Firstly, taxpayers, together with their advisors, should calculate and pay the exact amount of taxes and sanctions due. The sanctions to be applied for any violations of 'Section RW', which concerns any assets held abroad by Italian taxpayers, will be reduced at a rate of either 0.5% or 1.5% respectively, dependent on whether the foreign country in which the assets were held was on Italy's White or Black List of jurisdictions. Thus, the Italian Revenue Agency will only intervene in exceptional circumstances in the new procedure; namely in case of any mistakes regarding the assessment of the amount due. In particular, the Agency will have the powers to address any faults in the use of the VD procedure up until December 31st, 2018. In case of mistakes, taxpayers will be subject to severe sanctions:
( a ) With respect to withholding taxes, the sum due will be increased by 10%, where, due to mistakes, the taxpayer paid at least 10% less than they should have;
( b ) In other cases, an increase of 10% will be applied to those who paid 30% less than the amount due;
( c ) For any other mistakes, there will be an increase of 3% on the amount due.
Secondly, the legislator has clarified the procedure for regularizing cash held in Italy, though those who disclose such assets will enjoy no advantages. In particular:
( a ) By the time they apply for the VD, the taxpayers should provide a declaration that states that these assets do not derive from criminal offences;
( b ) By the time they deposit all the documents related to the VD, they should open and register, under the control of a Notary, the safe deposit boxes in which the assets are held;
( c ) By the same point, they should also deposit the cash or other assets with financial intermediaries who are authorised for this purpose.
Thirdly, the taxpayer is exempted from preparing his tax return for 2016, though this exemption covers only the assets included in the VD procedure. In fact, the new voluntary disclosure permits the taxpayer to disclose any activity he did not declare to the Italian Revenue Agency before December 31st, 2016. More noteworthy, the statute of limitations for assessments is extended to (i) 31 December 2018 with regard to the new voluntary disclosure, and (ii) 30 June 2017 with regard to the former voluntary disclosure.
Lastly, the legislator has introduced a new criminal offence for the fraudulent disclosure of assets related to crimes that are not exempted under the VD procedure. This provision concerns only those who apply for the new VD, whereas those who applied for the previous VD programme are not involved.
3. WHAT MAKES THE NEW VD ATTRACTIVE?
The success of the previous VD was based on the offer of regularizing assets held abroad before the introduction of the automatic exchange of information between Italy and some financial havens, such as Switzerland and Monaco (as well as FATCA and CRS). Another incentive was the introduction of a new criminal offence for 'self-laundering', in other words, any attempt by those using the voluntary disclosure process to disguise the origins of undeclared funds or goods. The incentives remain the same, except for those who are holding undisclosed assets in the countries that have agreed to automatically exchange information from 1st January 2017. These taxpayers will have to remit all taxes that would have been payable on undisclosed assets, but with much reduced administrative penalties.
As before, any person filing a voluntary disclosure is granted impunity for specific crimes, such as misrepresentation, failure to declare, non-payment of certified withholding tax, non-payment of VAT, and fraudulent misrepresentation using invoices or non-existent transactions or other mechanisms.
With a great deal of expertise on Italian and international fiscal matters, Withers is ideally placed to advise Italian tax residents holding undisclosed assets abroad as well as regularising Italian assets. As a leading tax law firm, Withers is particularly suited to assist those clients who are interested in this procedure.