Article 1 of Law Decree no. 4 of January 24, 2014 (the
"Decree") introduced a voluntary
disclosure procedure (the "Procedure")
with the purpose of promoting the disclosure of unreported assets
held abroad for tax purposes. While the Decree was not adopted
into law within the requisite period under Italian law, the Finance
Commission is preparing a draft bill which includes much of the
Procedure introduced in the Decree.
Under the Italian tax system, Italian tax resident individuals
are required to report in a special section of their annual tax
return (the "RW Section") the value of
their financial assets held abroad at the end of each financial
year. In the RW Section, Italian tax residents must generally
report all investments held abroad, including financial interests
such as shares, bonds, securities issued by non-Italian entities,
and bank deposits held by foreign credit institutions.
Stock options issued by nonresident companies must be reported
only if (i) they can be exercised; and (ii) their exercise price is
lower than the fair market value of the underlying shares. A
failure to comply with these obligations can result in penalties
ranging from 3 to 15% of the value of the undisclosed assets
(penalties are doubled if such assets are held in black-listed
Pursuant to the Procedure, individuals who have previously
failed to file, or incorrectly completed, an RW Section could
benefit from a reduction in the administrative penalties and from
an exclusion of criminal liability for nonfraudulent conduct by
disclosing to the Tax Authorities any previously unreported (or
incorrectly reported) financial assets as well as the related
taxable income, if any. The Procedure required the taxpayer to pay:
(i) taxes, if any, due on income not reported for Italian tax
purposes that has been used to acquire the financial assets
previously unreported (or incorrectly reported), plus interest;
(ii) taxes due on income arising from unreported assets held
abroad, plus interest; and (iii) reduced administrative penalties
relating to the failure to file or the incorrect filling of the RW
Section and the failure to pay taxes, if any.
Under the draft bill, amendments to the Procedure are being
discussed, which include requiring the taxpayer to pay 50% of the
tax due, plus administrative penalties, rather than the full amount
of the tax, and a reduction in the statute of limitations in
certain cases once the voluntary disclosure process has
begun. Additional guidance is expected.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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