United Arab Emirates: Italy And UAE Automatic Exchange Of Information

Last Updated: 25 July 2017

In April 2017, the UAE formally committed to the CRS (Common Reporting Standard) elaborated within the OECD. The implementation of the international standards will allow the automatic exchange of information between the inland revenues of the contracting countries from September 2018 with regard to the financial activities and asset investments possessed abroad by Italian fiscal residents, starting from the fiscal year 2017.

To learn more about: concerned subjects, control criteria, and procedure of the Voluntary Disclosure...

With respect to international relations between countries and capital and information flows, bilateral treaties and countries' commitment to international cooperation treaties have a fundamental role; they are essential to decrease tax avoidance or profit shifting to countries with low taxation.

Considering the above, on January 22, 1995 the United Arab Emirates and Italy signed the "Convention for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal evasion", which was ratified by Law n. 309 of 28 of August 1997 in Italy and has been in force since November 5, 1997. In particular, Article 26 of the Convention defines and introduces the exchange of information, which is on request and voluntary, between the inland revenues of the two contracting countries. The Convention existence makes possible to consider United Arab Emirates as a white-list country, with respect to the Italian law ( see Ministerial Decree of March 25, 1998 – published on April 16, 1998).

Another important element that should be considered is the announced commitment of United Arab Emirates to the CRS (Common Reporting Standard) implementation by September 2018. As a consequence, the procedure will create automatic exchange of information, based on the global model designed by OECD. Actually, United Arab Emirates will start exchanging information referring to fiscal year 2017.

The CRS implementation will help revenue inspections performed by the Italian Inland Revenue, as defined in the Inland Revenue Provision of March 3, 2017, which describes the "Acquisition methods of data of individuals applying for the registration in the "Registry of Italian citizens residing abroad" (i.e. AIRE) and definition of criteria for the development of selective lists for revenue inspections, with respect to undeclared financial activities and asset investments possessed abroad". The Inland Revenue stated that revenue inspections will be primarily addressed to those individuals – applying for the AIRE registration and showing significant elements of effective residence in Italy – that applied for the AIRE registration starting from the 1st of January 2010. As for the elements showing the actual Italian residence, the Inland Revenue may consider:

Italian residence of the taxpayer's family;

–          Activated utilities, such as electricity, water, natural gas or telephone;

–          Vehicles or motor vehicles availability;

–          Company positions.

Moreover, the Inland Revenue specified that "In order to identify financial activities and asset investments located abroad, data deriving from the automatic exchange of information from foreign Fiscal authorities play a crucial role". Exchanged information under CRS model are primarily financial data, with reference to bank accounts owned abroad by Italian resident, such as:

–          Balance or value;

–          Total gross interest amount;

–          Total gross dividend amount;

–          Other additional income related to the bank account.

The Italian Voluntary Disclosure 2.0 (VD 2.0) can be exploited in order to regularize the individual fiscal standing; indeed, those individuals that own assets located abroad and omitted the filing of the related tax return, may legalize the fiscal standing by paying the whole amount of due taxes and penalties (applying a reduced amount of penalties). Law n. 225 of 2015, which turned into law the Decree n. 193/2016, reopened the period valid for the voluntary regularization that is now applicable until 31st of July 2017.

With reference to VD 2.0, the individuals willing to apply the favorable regime should file a tax return to the Inland Revenue, declaring "all the investments and all the financial activities possessed in foreign countries, even if they are retained indirectly or through a third party. It is necessary to provided also all the documents and information required in order to determine the income that was used to build up or buy those investments". Since United Arab Emirates are considered a while-listed country, the rectifiable years are 2010-2015 in case of inexact tax return and 2009-2015 in case of omitted Italian tax return.

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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