Global Tax Alert | 1 July 2013

Italy launches pilot project for tax Co-operative Compliance Program, applications required by 31 July 2013

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Background

On 25 June 2013, the Italian Revenue Agency announced the launch of a pilot project for a co-operative compliance program aimed at implementing a transparent and truthful relationship framework between tax authorities and Large Business Taxpayers (LBT).

LBT are generally identified as taxpayers with a turnover or operating revenues not less than €100 million. However the pilot project will be open to selected LBT meeting additional requirements as outlined below.

The Co-operative Compliance Program (CCP) is deemed to make the existing Monitoring Activity Program for LBT1 compliant with the guidelines issued by the OECD in the Co-operative Compliance: a Framework – from Enhanced Relationships to Co-operative Compliance report (Co-operative Compliance report).

LBT interested in taking part in the pilot project need to file an application by 31 July 2013 using the tools indentified in the official website of the Italian Revenue Agency.2

The OECD Report

The Italian CCP follows the Co-operative Compliance report issued by the OECD on the basis of the international business community experiences on similar programs. The OECD report highlights the importance of transparency and disclosure from both tax administrations and large business taxpayers in order to reduce uncertainties over companies’ tax positions.

The OECD report suggests that the relationship between tax administrations and large businesses be based on the following five key pillars:

  • Commercial awareness – ensure a good understanding by tax administrations of the commercial drivers behind the transactions and activities undertaken by large corporate taxpayers to avoid uncertainties and costly disputes
  • Impartiality – ensure a high level consistency and objectivity approach by tax administrations in resolving tax issues
  • Proportionality – ensure an efficient allocation of resources to define priorities within the taxpayer selection process through an appropriate level of risks management
  • Openness and responsiveness – ensure “real time” communication (discussions, binding rulings, etc.) to create early certainty on tax issues
  • Disclosure and transparency by taxpayers – ensure that taxpayers comply with the spirit of law and regulations in interpreting rules

The Italian CCP

Based on the 25 June announcement by the Italian Revenue, the CCP should imply a commitment by LBT to a transparency behavior in exchange for openness and responsiveness by the tax authorities in solving significant issues in a timely and effective manner.

As reported by the Italian Revenue Agency, the underlying purpose of this new model of relationships is to implement an ex-ante rather than the traditional ex-post approach to tax controls, with related benefits in terms of taxpayers’ compliance and of providing certainty and predictability in advance.

The CCP should enable taxpayers to reduce the compliance burden, obtain several advantages and benefit as much as possible from advance legal certainty on specific transactions.

Admission to the CCP pilot project

The LBT admitted to the pilot project will engage with the Italian Revenue Agency in ad-hoc meetings in order to jointly discuss and examine several issues, such as taxpayers’ internal tax control framework, role and responsibility of the Revenue Agency, and obligations and/or incentives for taxpayers, among others.

The pilot project will be opened only to LBT filing the proper application.

Qualifying LBT shall meet the following requirements:

  • total turnover or operating revenues in the fiscal year 2011 not less than €100 million; and
  • have implemented an organizational model pursuant to section 6 of Legislative Decree no. 231/2001 (i.e., corporate governance preventing crimes of representatives) or having adopted a Tax Control Framework to manage tax risks.

Since the number of participants in the pilot project is limited, the Revenue Agency defined other optional requirements that will be taken into account within the selection process of LBT such as:

  • being part of a multinational group of companies or carrying out a business activity in Italy or abroad through permanent establishments;
  • participating in similar co-operative compliance programs in other foreign jurisdictions or having subscribed a code of conduct with other tax administrations; and
  • having already entered into initiatives falling within the concept of co-operative compliance in Italy, such as the International Tax Ruling procedure or the the transfer pricing documentation requirements regime.

Filing of the applications

The Italian Revenue Agency website (see endnote 2) clarifies that LBT can file their application to the following e-mail address: dc.acc.grandicontribuenti@agenziaentrate.it no later than 31 July 2013.

The website instructions state that the application should include:

  • a description of the aforementioned necessary/preferential requirement(s);
  • a brief explanation of the motivations for being admitted to the pilot project;
  • a brief description of the Tax Control Framework adopted, if any; and
  • the contact information of the relevant person to be contacted by the Revenue Agency.
Endnotes

1. Law Decree n. 185/2008, as converted by Law n. 2/2009.

2. http://www.agenziaentrate.gov.it/wps/content/nsilib/nsi/
documentazione/regime+di+adempimento+collaborativo+-+grandi+contribuenti/pilot+project+-+english+version
.

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

Ernst & Young, Studio Legale Tributario, Milano
  • Domenico Borzumato
    +39 02 8514 503
    domenico.borzumato@it.ey.com
  • Marco Magenta
    +39 02 8514 529
    marco.magenta@it.ey.com
Ernst & Young, Studio Legale Tributario, Bologna
  • Mario Ferrol
    +39 33 5122 9904
    mario.ferrol@it.ey.com
Ernst & Young, LLP, Italian Tax Desk, New York
  • Emiliano Zanotti
    +1 212 773 6911
    emiliano.zanotti@ey.com
  • Andrea De Nigris
    +1 212 773 0478
    andrea.denigris@ey.com
  • Aldo Bono
    +1 212 773 3216
    baldassare.bono@ey.com

EYG no. CM3600