Italy: Italy is reviewing the criteria to identify tax havens

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Italy: Italy is reviewing the criteria to identify tax havens

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Giuliano Foglia


Giovanni d’Ayala Valva

The Italian government is pressing ahead with a plan to attract foreign capital and investment. The idea is to make the Italian environment more appealing to investors through measures aimed at promoting economic growth. More specifically, certain measures have been recently approved (for example, the voluntary disclosure programme, patent box regime, research and development tax credit) and others should be introduced in the future either as part of the Investment Compact Bill or in the context of the so called Fiscal Delegation Law (which will, inter alia, review the Italian abuse of law regime, the tax avoidance discipline and introduce the new tax compliance scheme).

In this context, on December 22 2014, the Italian parliament approved the 2015 Stability Law, which, among others, set forth new criteria to identify blacklist countries, in order to confront a recurrent issue for companies working with foreign suppliers.

Indeed, the Italian income tax code requires for Italian entities an additional burden of proof to allow the deduction of costs (expenses and other negative income) deriving from transactions incurred with entities (or professionals) resident or located in certain countries identified in the so called blacklist.

In such respect, 2015 Stability Law revised the criteria to identify blacklist countries introducing as guiding principle the level of exchange of information between the third state and Italy (irrespective of the effective level of taxation in the third state).

Consequently, a new decree of the Minister of Finance will be issued in the near future to amend the previous blacklist, with the aim to delist all the countries that now have an adequate exchange of information with Italy.

In practical terms, such provision will simplify the relationship between Italy and commercial operators previously located in blacklisted countries which have an exchange of information clause in their treaty with Italy, such as Ecuador, Mauritius, Philippines, Singapore, South Korea and United Arab Emirates. Hong Kong could also be removed from the blacklist once the relevant bilateral tax treaty is ratified by the Italian parliament.

The review of blacklist countries is consistent with the recent approach of the OECD to boost tax transparency and to promote automatic sharing of information between tax authorities. In this scenario, the Italian government is close to signing agreements with numerous blacklisted countries (for example, Switzerland) based on OECD standards which, on the one hand, will have the effect to intensify the exchange of data between tax authorities but, on the other hand, should also grant certain benefits for taxpayers in their relationship with the Italian tax authority.

Giuliano Foglia (foglia@virtax.it) and Giovanni d'Ayala Valva (dayala@virtax.it)

Tremonti Vitali Romagnoli Piccardi e Associati

Tel: +39 06 3218022 (Rome); +39 02 58313707 (Milan)

Website: www.virtax.it

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