After months of uncertainty and political failings, the Italian legislator has  introduced Law No. 186 of 15 December 2014 (the “Law”), bringing into effect a Voluntary Disclosure programme to enable qualifying Italian taxpayers to regularise their tax position. The Law also represents the conclusion of implementing a common Europe-wide standard that allows Italian taxable individuals and entities to regularise undeclared assets before the introduction of automatic exchange of information. The often-cited statement by the Revenue Agency’s General Manager, Rossella Orlandi, clarifies the intention and the determination of the Italian Government: “As Europe is proceeding towards the full exchange of information, [the voluntary disclosure programme will] really be the last chance for taxpayers to regularise their undeclared assets”.

Italy2The Voluntary Disclosure programme is not a tax amnesty like the Italian Scudo programmes of the last decade. In fact, the two programmes are fundamentally different: for the Voluntary Disclosure programme, there is no anonymity and the taxpayer will have to pay all unpaid taxes, but with a reduction of the tax offence sanctions and criminal amnesty. The attractiveness of this programme derives from the approach of the automatic exchange of information, which will make assets held in financial centres worldwide instantly and automatically transparent when it takes full effect.

Under the terms of the programme, Italian taxpayers have the chance to report assets held in Italy or abroad that they have omitted to declare in their income tax return up until 30 September 2014, unless they are already subject to a tax audit or inspection. Indeed, the Voluntary Disclosure must identify all assets held, under penalty of losing the benefits associated with the procedure. Any taxpayer filing a voluntary disclosure is granted impunity for specific tax crimes and, in particular, for the crimes of misrepresentation, failure to declare, non-payment of certified withholding tax and non-payment of VAT, as well as any crimes of fraudulent misrepresentation using invoices or non-existent transactions or other mechanisms.

The Voluntary Disclosure is designed as a quite straightforward procedure in which taxpayers opting for the programme will have to remit all taxes that would have been payable on undeclared assets and investments, in one amount or over three monthly instalments, but providing much reduced administrative penalties. The first step is an analysis of their own wealth which may fall into the scope of the programme, as well as proper due diligence of all relevant bank and other financial details concerning the assets held abroad or in Italy. The second step will involve the Italian Tax Authority who will have the whole set of data needed to reconstruct the taxpayer’s tax history, including income from undeclared investments, assets potentially covered and even intermediary details. The aim is to calculate the exact amount of taxes due to comply with the programme. In detail, after the first step, a “self declaration” form of undeclared assets will need to be filled in and sent to the Italian Revenue Agency by 30 September 2015, either through the two dedicated e-channels, “Entratel” and “Fisconline”, managed and administered directly by the Agency itself, or by professional tax intermediaries duly qualified to file the form.

For the purpose of completeness, it is worth mentioning that where the value of the undisclosed activities does not exceed EUR 2 million, taxpayers may also opt for a simplified assessment procedure, under which the Italian Revenue Agency will calculate the due amount by applying a flat rate of 27% on 5% of the value of the undisclosed activities at the end of each tax year subject to assessment.

The statute of limitation for filing a Voluntary Disclosure is 5 years. The doubling of the 5-year term to 10 years, as foreseen by Italian law for blacklisted countries shall not apply if, within 60 days after the law entered into force (i.e. 2 March 2015), Italy and the blacklisted country signed an agreement providing the exchange of information in accordance with Article 26 of the OECD Model Tax Convention, and the relevant requests for assistance have been accepted as at the date of signature of the agreement. The taxpayer must also sign a declaration to the extent that he will not oppose the transmission of banking information to Italy. In this respect, following public announcements, Monaco, San Marino and Switzerland signed an agreement to provide the exchange of information tightening the loopholes exploited to escape the authorities. Consequently, with the new crime of “self-laundering” introduced by the Law, this makes the tax situation even more complex for those who continue to hide their assets from the Italian Tax Authority.

Once the Voluntary Disclosure programme is concluded, the regularised taxpayer is subject to complex tax scrutiny and tax reporting declarations. Lombard International Assurance solutions are ideal not only to achieve tax efficiency and succession planning, but also to simplify the tax reporting duties for our clients.