|Barbara Scampuddu||Gian Luca Nieddu|
The cooperative compliance programme and the tax agreements recently introduced go in this direction offering strategic opportunities to efficiently manage potential tax liabilities.
The legislative decree of August 5 2015, No. 128, entitled "Provisions on legal certainty in relations between tax authorities and taxpayers, pursuant to Articles 5, 6 and 8, paragraph 2, Law March 11 2014, No. 23", introduced a cooperative compliance regime in order to promote forms of communication and enhanced cooperation between tax authorities and taxpayers with a system of detection, measurement, management and control of (potential) tax risks.
When first applied the regime was reserved to:
- Residents and non-residents achieving turnover or revenues exceeding €10 billion ($11.2 billion);
- Residents and non-residents receiving turnover or revenues exceeding €1 billion and having applied for the Revenue Agency's cooperative compliance pilot project launched on June 25 2013 (hereinafter "pilot project"); and
- Companies wishing to implement the Revenue Agency's reply, paid as result of a ruling application on new investments (minimum threshold €30 million), in Article 2 of Legislative Decree of September 14 2015, No. 147, regardless of turnover or revenues, subject to the requirement, for each of those categories of taxpayers, to adopt an effective detection system, measurement, management and control of the tax risk.
Admission to the cooperative compliance programme allows taxpayers to benefit from several advantages. In particular, the granting of a fast track ruling (no more than 45 days since the receipt of request or the integration of documents) regarding the application of tax provisions. Moreover, tax penalties are reduced by 50% and, in any case, applied to an amount not exceeding the minimum provided by law.
After legislative decree No. 128 entered into force, the Italian tax authorities provided operative provisions to allow proper admission and implementation of the programme. Namely:
- The Decision of the Italian Central Revenue Director of April 14 2016, which provides indications concerning the requirements for access to the tax scheme;
- The Decree of June 15 2016 by the Minister of Economy and Finance, which dictates the rules for applying the special shortened procedure of prior notice made available to taxpayers admitted to the scheme;
- The Circular No. 38/E of September 16 2016 by the Revenue Agency, which provides the first explanatory clarifications; and
- The Ministerial Decree on December 30 2016, which fixes the deadline for the first phase of the new institution as December 31 2019.
Recently, the decision of the Italian Central Revenue Director of May 26 2017 is a further step in the process of defining the overall framework of the rules governing the scheme at stake. In fact, it defines an exclusive competence of the cooperative compliance office during all period of application of the regime, the duties of the Revenue Agency, the duties of the taxpayer, the procedures for carrying out the procedure, the causes of exclusion and revocation, the competence for the controls and the activities related to the regime.
Advance tax agreements for enterprises with international activities
Advance tax agreements are binding agreements between taxpayers and the Italian Revenue Agency (replacing the former procedure of international standard rulings – abrogated Article. 8, D.Lgs. No. 269/2003) aimed at enhancing tax compliance and promoting the business of multinational enterprises by giving them certainty on international tax issues in advance through a pre-assessment of facts and circumstances with the Italian Revenue Agency.
The advance tax agreements are now governed by the new Article 31-ter of the DPR No. 600/1973 (in force from October 7 2015), introduced by Article 1, Legislative Decree September 14 2015 No. 147.
The new rules expand the cases for which the instance can be submitted, including:
- Define the most appropriate transfer pricing methods and criteria applicable to the transactions carried out with related parties, according to Article 9 of OECD model tax convention as provided for by paragraph 7 of Article 110 of the Presidential Decree No. 917 of December 22 1986;
- Determine the attribution of profits to a permanent establishment (PE) in Italy of a non-resident company or to a PE in another state of a resident company, according to the international standard recommended;
- In case a non-resident company starts a new business in Italy, verify through prior assessment whether the conditions for PE to exist in Italy are met, before the business starts; and
- Define the tax law provisions, including double taxation treaty provisions applicable to cross-border items, among which the tax treatment of income (such as dividends, interests, royalties or other income items) paid to/received from non-resident companies.
It is worth considering that the advance tax agreements procedure is also applied for the purposes of the patent box regime.
In general terms, the agreement signed by the taxpayer and the tax administration remains in force for five years starting from the fiscal year in which it is signed, provided that the circumstances – specifically, the critical assumptions – under which the agreement was signed remain unchanged.
Concerning the entry into force, the possibility for a retroactive effect (so-called "roll back") has been introduced:
- In case of bi/multilateral APAs, the validity period can start from the date of the application filing, consistently with the mutual agreement concluded with the treaty partner(s) under Article 25 of the model tax convention; or
- In the event that the factual and/or legal circumstances underlying the agreement relate to one or more fiscal years prior the stipulation, the taxpayer may retroactively enforce the agreement concluded.
Before the filing of the official request of admission to the procedure, the taxpayer can – through a representative (e.g. its consultant) – contact the competent office of the Central Revenue on an anonymous basis: this may give the taxpayer the chance to collect a first reaction of the revenue so to definitely decide to go on with the procedure.
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