Italy’s Voluntary Disclosure programme, introduced by Law No. 186 (the “Law”) on 15 December 2014, is already showing signs of success. Based on the latest information, the Italian Tax Authority has received 25,000 applications in the first three months of the programme. This gives reason to believe that the success of the programme will exceed initial expectations. There is still time to apply until 30 September 2015 and talks of an extension of the programme are foreseen.

The Italian Voluntary Disclosure programme consists of the full payment of unpaid taxes and interest deriving from undeclared assets. The attractive “criminal amnesty” of the programme offers:
  • a reduction of the penalties for unpaid tax;
  • the application of a reduction of the sanctions for unreported assets held abroad (section RW), where the reduction depends on whether the assets were held in a white-list or black-list jurisdiction;
  • a reduction of the period of limitation for assets held in a white-list jurisdiction (2009 instead of 2004);
  • the possibility of a simplified tax calculation for small cases (up to €2m of unpaid tax);
  • exemption from criminal prosecution.

Creating cooperation

Following the publication of the Law in December 2014, the market operators were confronted by a number of  procedural and legal uncertainties, which have been partially clarified with the first circular letter (the “Circular”), n. 10/E on 13 March 2015.

In this lengthy circular letter the Italian Tax Authority answered important procedural questions, clarified open points and confirmed that assets held in a black-list jurisdiction would have double the period of limitation (extension from 2009 to 2004). By extending the period of limitation, the Tax Authority succeeded where other Italian legislators had failed despite considerable efforts (e.g. Scudo, EUSD, Rubik). Liechtenstein, Monaco, Switzerland and the Vatican State have now signed last-minute tax cooperation agreements (the so-called TIEAs, Tax Information Exchange Agreements) with Italy and are considered white-list jurisdictions in the context of the Voluntary Disclosure programme.

The programme has not only helped in the creation of tax agreements, but it has also managed to put into effect exchange of information between Italy and “tax havens” like Liechtenstein, Monaco, Switzerland and the Vatican State.

In addition, on the basis of these recently signed agreements, the Italian Tax Authority will not treat Luxembourg, San Marino, Malta, Cyprus, Kuwait, Singapore or South Korea as black-listed countries. Further news is awaited concerning jurisdictions like Jersey, Guernsey, Gibraltar, Hong Kong and the Cayman Islands.

Making a difference

The Circular provides answers to the different uncertainties raised by the market operators, but it has also left important issues unresolved. To mention one, until today there exists uncertainty regarding the documentation required in the instance where the undeclared assets have been constituted years ago outside of Italy.

However, the Circular settles many issues of the complex Italian tax system by following the path of the OECD procedures. Individuals, corporate entities, trusts and other special purpose vehicles may benefit from an almost complete amnesty from criminal charges related to tax crimes and a strong reduction of administrative sanctions, although taxes need to be paid in full.

Moreover, the Circular clarifies structures such as trusts and private insurances and defines the demands of the Tax Office regarding the years to be covered.

The discussions around the issues of the Voluntary Disclosure programme are heating up and it is more than likely that in the coming weeks there will be further comments from the Italian Tax Authority. At Parliamentary level the discussion continues around the general disapplication of the doubled terms following crime rules.

The Luxembourg advantage

Lombard International Assurance’s solutions are ideal to manage the new disclosed wealth following the Voluntary Disclosure programme. The solutions offer many benefits including tax efficiency, succession planning and simplification of tax reporting duties for clients.

With the strengthening of tax exchange networks, it becomes even more important to choose an insurance company that can offer solutions that benefit from both the domestic distribution and the Luxembourgish value proposition. This latter point is realised through the Italian branch of Lombard International Assurance which is able to provide services based upon the Freedom of Establishment. In addition the Freedom of Service guarantees that Lombard International Assurance is also able to maintain the services from Luxembourg.