By Giuliana Polacco, Senior Counsel, and Annarita De Carne, Senior Associate, Studio Legale Bird & Bird, Milan
Two significant developments were made this month to the Italian cooperative compliance regime (adempimento collaborativo), which first went into effect in Italy in 2016 (legislative decree n. 128 of August 5, 2015).
The regime aimed to replace the antagonistic relationship between taxpayers and tax administration officials with a dialogue based on mutual trust and transparency. The admission to the cooperative compliance regime entitles the taxpayer to prevent tax audits and to agree in advance with the Italian Revenue Agency regarding the tax treatment of specific uncertain transactions. In addition, it is a procedure aimed at managing tax risks inside business processes. For this reason, many multinational groups have already requested and received admittance into the regime.
The regime is not open to all enterprises, but only to those that reach certain turnover or revenue thresholds.
The first phase of the application was dedicated only to large taxpayers with at least EUR 10 billion (USD 11.8 billion) turnover or revenues, or EUR 1 billion turnover or revenues if the taxpayers applied to the initial pilot project. Over the years, the above threshold has been reduced further and, effective February 9, 2022, it has been lowered to EUR 1 billion for fiscal years 2022, 2023, and 2024, according to Ministry of Finance decree of January 31, published in the Italian Gazette on March 8, 2022.
The change is an indication that the Italian Revenue Agency intends to expand the number of companies that enter the regime. The goal is that companies with a turnover, or revenue, of EUR 100,000 million may have access to it with a consequent change of mindset on the part of both large taxpayers and the tax agency.
The threshold reduction was coupled with another important Italian Revenue Agency provision, published on March 9, 2022, that refers to the identification of the tax offices authorized to support taxpayers that entered the regime. Until recently, all activities were concentrated with the cooperative compliance office at the central directorate. Following the March 9 change, however, the large taxpayers’ offices of the regional directorates are now in charge of large taxpayers with turnover or revenue of EUR 100 million or more with a presence in the following regions: Lombardy, Lazio, Campania, Emilia-Romagna, Piedmont, Puglia, Sicily, Tuscany, and Veneto.
Their role will be to participate in the process of risk analysis and, based on the indications the central directorate provides, focus on the tax position of the taxpayers admitted to the regime. The change does not significantly impact the central directorate’s responsibilities of issuing directives to the regional offices for the performance of the risk analysis; carrying out the activity of risk-analysis of taxpayers admitted to the regime through the review of their tax position, and monitoring the relevant activities and verifying the relative results.
The delegation of powers and activities to the selected regional directorates may raise concerns because taxpayers may be reluctant to increase the number of their counterparts within the Italian Revenue Agency, taking into account that the current activities of the regional directorates are more focused on regular tax audits. However, the Italian Revenue Agency’s strategy instead may be a sign of its willingness to increase the number of taxpayers with which it will engage in a positive and transparent dialogue and, therefore, promote the cooperative compliance regime.
It is, therefore, necessary to underscore that—apart from resident and nonresident taxpayers with a permanent establishment in Italy that record revenues or turnover of no lower than EUR 1 billion—other taxpayers eligible to enter the regime are resident and nonresident taxpayers that intend to carry out and implement new investment in Italy of no less than EUR 20 million by hiring new employees and increasing their taxable basis in Italy. In addition, companies that are part of a VAT group of companies are already admitted to the regime.
It is important to keep in mind that the duties the legislative decree specifically provided are not only for the taxpayers but also for the Italian Revenue Agency. In fact, under the regime taxpayers are incentivized to provide complete and timely spontaneous information and to behave in a transparent and cooperative manner.
The Italian Revenue Agency appears committed to making tax compliance easier, to objectively and reasonably analyze the business model of companies, and to help them achieve a greater degree of certainty.
As of today, more than 30 companies—including groups—have accessed the Italian cooperative compliance regime, but the true goal is to raise the number even higher by making the regime more appealing.
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