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16 October 2009
The government has enacted a new tax measure to allow Italian residents to repatriate financial operations and assets held abroad illegally.
An amendment to Legislative Decree 78 was published in the Official Gazette on July 1 2009 and converted into Law 102/2009 on August 3 2009. It was introduced into law with changes as Law 141/2009 on October 3 2009. The amendment provides an opportunity for taxpayers with either financial assets (eg, money, shares, bonds and other securities or holdings) or non-financial assets (eg, real estate and works of art) held abroad and not disclosed to the Italian tax authorities in violation of fiscal and administrative provisions. Such assets may be transferred to Italy subject to the payment of an extraordinary 5% tax.
If the tax is paid pursuant to the transfer of the assets to Italy, an amnesty will be granted in respect of the taxpayer's non-declaration of the financial and non-financial assets, as well as for any associated violations. This provision - comprising the right of transfer, the payment of an extraordinary tax and an amnesty - is known as the 'tax shield'.
The tax amnesty is open to individuals (including self-employed individuals and recipients of business income), non-commercial partnerships, simple partnerships and associations (treated as simple partnerships in accordance with Article 5 of the Tax Code) that are resident in Italy for tax purposes. Controlled or affiliated foreign companies under Articles 167 and 168(1) are also eligible for the tax shield, in which case the effects in terms of the tax amnesty are produced in the hands of shareholders in respect of amounts remitted or identified. The general rules do not apply to commercial entities, commercial partnerships or companies.
The transfer to Italy must be performed by means of (i) the remittance of the financial operations and assets in countries outside the European Union; and (ii) the remittance or identification (without remittance to Italy) of financial activities and assets held in EU or EEA countries (where exchange of information rules with Italy are in accordance with the and Development (OECD) standards).
In respect of transfer to Italy of activities and assets in non-EU countries, the Revenue Agency claims that according to Article 56 of the EC Treaty,(2) the availability of the identification option will be extended to the non-EU countries with which Italy has a tax information exchange agreement that meets the internationally agreed OECD standard.
The transfer back to Italy shall be executed through an authorised intermediary agent.(3) Taxpayers have until December 15 2009 to file a return, which will remain confidential, to the intermediary of the assets that they wish to transfer to Italy.
The extraordinary tax will be based on (i) an assumed gross annual yield of 2% for the five years before the remittance or regularization (totalling 10%), and (ii) a tax rate of 50% a year (including interest and penalties) applied on the gross yield. This results in a total tax of 5%, which will be payable on financial operations and assets held abroad up to December 31 2008 and declared between September 15 2009 and December 15 2009.
The tax shield becomes effective upon payment of the tax. Information derived from the tax amnesty cannot be used against the taxpayer in any circumstances and the taxpayer's anonymity is guaranteed.(4)
In order to encourage use of the tax shield, the range of penalties for non-declaration of foreign investments has been increased to up to 50% of the value of the foreign assets.
For further information on this topic please contact Marco Abramo Lanza or Simona Zangrandi at Studio Legale Tributario Biscozzi Nobili by telephone (+39 02 763 6931), fax (+39 02 780 146) or email (firstname.lastname@example.org or email@example.com).
(1) According to Article 167, income earned by a foreign enterprise, company or entity is deemed to be the income of an Italian taxpayer if the resident person controls, directly or indirectly, a foreign enterprise (ie, a company or other entity) and the foreign enterprise is not resident in a 'whitelisted' state or territory (ie, one included in the list of states or territories allowing an adequate exchange of information).
According to Article 168 the controlled foreign company legislation also applies where an Italian resident entity directly or indirectly holds 20% or more of the capital of a foreign entity that is resident or established in a non-whitelisted state.
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