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New Italian tax decree imposes stricter evasion penalties

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A series of important changes are imminent

Gian Luca Nieddu and Barbara Scampuddu of Hager & Partners consider the impact of the innovative provisions brought forward by October 2019’s law decree.

The Law Decree no. 124 of October 26 2019 (published in the Italian Official Gazette no. 252 dated October 26 2019), has set out a number of new tax provisions. The new provisions are immediately effective, but will have to be converted into law by the Italian Parliament by December 25 2019 to become final.

Prohibition on the set-off of tax credits in the event of tax debt assumption 

The previous tax codes had provided for the assumption of third party tax debts without exempting the original tax debtor from tax liability. The tax decree amends the law and sets forth that the party who assumes the debt is excluded from the use of its own tax credits to offset the due payments.

Limit for set-off credits – exceeds €5,000 

The new provisions widen the existing rules concerning the set-off payments in respect to VAT credits by extending it to encompass other types of taxes such as direct and substitute. Credits in regard to direct taxes exceeding €5,000 can be used as set-off payments only after the tenth day following the filing of the income tax return or the request from which such tax credit emerges. 

Tax evasion criminal thresholds 

The new decree imposes stricter penalties and lower criminal thresholds for tax evasion. For the offence of filing a false tax return, the amount for the potential evaded tax has been reduced to €100,000 (from €150,000), while the under-declared taxable base has been cut to €2 million (from €3 million). Meanwhile, the criminalisation threshold for withholding taxes resulting from a tax return or a certificate has been reduced to €100,000 (from €150,000); and for failing to pay VAT is reduced to €150,000 (from €250,000). Furthermore, the provision that had previously excluded the criminalisation of evaluations that differ by less than 10% from the correct amount has been repealed.

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