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    Wednesday 26 June 2019

    The war on tax evasion: an Italian perspective

    The Italian tax police – Guardia di Finanza – has released new guidelines on tax audits to be carried out during the 2013 fiscal year to combat endemic tax evasion.

    According to the Bank of Italy, more than a quarter of the Italian economy eludes taxation and the ‘underground economy’ is a major hindrance to business growth and investment.

    In line with European Union and Organisation for Economic Co-operation and Development (OECD) measures, aimed at tackling tax evasion, tax fraud and aggressive tax planning, over the last few years the Italian tax authorities have adopted a range of intervention methodologies designed to extend control over all types of taxpayers – large, medium and small enterprises, non-commercial institutions and individuals.

    New guidelines
    New guidelines have reaffirmed the scope and extent of tax audits for 2013. To safeguard tax revenues and step up the fight against tax fraudulent behaviour, the guidelines set out a minimum level of inspection on taxpayers carrying out their business in Italy, based on their turnover, as set out below.

    Tier 1 – taxpayers with turnover up to €5,165,568
    For the 2013 fiscal year, the tax police plans to undertake only 17,000 audits of small enterprises. These audits will be aimed at identifying evasive transactions, with the support of consultants and shifted income derived from areas such as bribery, etc.

    Tier 2 – taxpayers with turnover ranging from €5,165,568 to €100,000,000
    Examination of the tax position of mid-size enterprises (not subject to the application of the so-called ‘studi di settore’, an estimate of taxes due by firms in specific industries) is to be carried out together with the tax administration (Agenzia delle Entrate) on an annual basis. The number of enterprises in this tier to be audited is believed to have increased (by approximately 8%) compared to the previous year.

    Tier 3 – taxpayers with a turnover higher than €100,000,000
    These taxpayers are subject to an analysis of the risks related to the industry and with a specific risk core, and will be scrutinised for a systematic preventive control design to ensure the correctness of target tax behaviours.

    All high taxpayers, once their tax returns are submitted, are subject to a tax audit the following year. The guidelines determine the minimum number of audits to be undertaken in relation to taxes and VAT. Taxpayers will be selected based on evidence that they are a high tax risk and on specific evidence of tax evasion.

    Monitoring will also include using schemes and policies utilised by the OECD, such as:
    • international tax-planning schemes
    • policies aimed at an instrumental use of tax losses
    • tax arbitrage based on complex financial instruments
    • transfer pricing policies not in compliance with the arm’s length principle.

    Companies need to carefully monitor compliance with the Italian rules, as the tax police will be focusing its resources on tackling fraud, evasion and economic illegality and adopting investigative measures to identify taxpayers for further examination.

    For more information, contact:
    Richard Burchia
    Hager & Partners, Italy
    T +39 0471 971197
    E richard.burchia@hager-partners.it

    Diletta Fuxa
    Hager & Partners, Italy
    T +39 027 780711
    E diletta.fuxa@hager-partners.it

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