Global Tax Alert | 18 March 2014

Italian Parliament passes framework for major tax reform

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On 27 February 2014, the Italian Parliament approved the final version of a framework law (Law) which enables the Government to implement a major tax reform. The Law1 was published in the Official Gazette of 12 March 2014 and will become effective as of 27 March 2014.2

The Law includes 16 articles through which the Parliament empowers the Government to enact the tax reform by issuing a series of Law Decrees (Decrees).

The principles which reportedly inspire the reform embrace general rationalization of the taxing system, a fight against tax evasion and base erosion, support for business internationalization, simplification of tax obligations, certainty and stability of tax rules, and an enhanced relationship between tax authorities and taxpayers.

Once the Law enters into force, the Government will have 12 months to issue the respective Decrees. In order to stimulate the process the Law specifically provides that the Government must deliver at least one of the Decrees within four months from the effective date of the Law for preliminary review. It is also provided that the Government will report to the relevant Parliamentary committees on the work in progress every four months.

Among the various areas of intervention addressed by the Law, the following may be of interest for multinational groups with Italian operations.3

Cooperative compliance and internal tax control

New rules should specifically address the adoption by large taxpayers of internal tax audit models to manage and control their tax risk. Companies complying with such internal control models will benefit from incentives such as penalty reductions, simplified compliance and quicker advance rulings.

Tax avoidance and abuse of law

The Government will have to harmonize the current anti-avoidance rules with the general unwritten principle of Abuse of Law to provide more certainty to taxpayers.

Cross-border activities

The Government is called to reconsider the regimes governing international transactions with specific reference to tax residency, controlled foreign corporations, permanent establishments, dividends from black listed jurisdictions, deduction of blacklist costs, and withholding taxes.

Other

Other areas of tax reform include:

  • Reform of the tax assessment system
  • Review of tax incentives and deductible expenses
  • Simplification of tax payments in installments
  • Revision of the criminal law penalty regime related to tax infractions
  • Rationalization of VAT and other indirect taxes
  • Rationalization of the real estate cadastral register

Endnotes

1. Law no. 23 of 11 March 2014.

2. The law will enter into force 15 days after the day of the publication on the Official Gazette.

3. For additional information see EY Global Tax Alert, Italian Lower Chamber passes guidelines for tax reform, dated 11 October 2013.

For additional information with respect to this Alert, please contact the following:

Studio Legale Tributario in association with Ernst & Young, Milan
  • Domenico Borzumato
    +39 02 851 4503
    domenico.borzumato@it.ey.com
  • Marco Magenta
    +39 02 851 4529
    marco.magenta@it.ey.com
Studio Legale Tributario in association with Ernst & Young, Bologna
  • Mario Ferrol
    +39 335 122 9904
    mario.ferrol@it.ey.com
Ernst & Young, LLP, Italian Tax Desk, New York
  • Emiliano Zanotti
    +1 212 773 6516
    emiliano.zanotti@ey.com
  • Andrea De Nigris
    +1 212 773 0478
    andrea.denigris@ey.com
  • Fabio Rousset
    +1 212 773 9302
    fabio.rousset@ey.com

EYG no. CM4272