In order to identify black list controlled foreign company (CFC) countries, a single and objective criterion is now provided for in Italy.
On the matter of international taxation, Italy’s 2016 Stability Law has provided:
- a full repeal of the rules regarding costs deriving from transactions entered into with companies and professionals located in low-taxation countries or territories (Art. 110 par. 10 – 12-bis of the Consolidated Income Tax Code)
- a review of the CFC regulations (Art. 167 of the Consolidated Income Tax Code), in order to restrict the tax penalties to those cases where the subsidiaries are subject to a nominal taxation in the foreign country, 50% above the Italian one.
Amendments have also been made to the content of Art. 167 of the Consolidated Income Tax Code where countries or territories considered as having privileged tax regimes were identified for the purposes of the application of the CFC rules.
In order to identify the black list CFC countries, a single and objective criterion is now provided for, consisting of the presence of a nominal taxation level 50% below that applicable in Italy.
Also, in the presence of specific conditions mostly relating to a lower taxation level, the CFC regulations may be applied to the member countries of the European Union or to European Economic Area countries which have an agreement with Italy on the matter of exchange of information for tax purposes. Finally, a specific obligation was introduced upon multinational companies required to draw up consolidated financial statements (with a consolidated turnover equal to at least €750 million), consisting of the submission of a report to the Revenue Agency, divided per country, indicating the amount of gross revenues, taxes paid and accrued and all other indicators of a real economic activity.
Failure to submit, or submission of an inaccurate report - compared to the methods, terms and elements laid down by a special decree of the Minister of Economy and Finance - will result in a financial penalty ranging from €10,000 to €50,000.
Deductibility of the so-called "black list" costs will be subject to the conditions laid down for any other cost (ie. relevance and accrual) beginning with the Modello UNICO 2017.
Following changes to the discipline of corporate income regarding foreign countries, introduced over the course of last year, the Stability Law once again intervenes on rules relating to costs from Black List suppliers, and on CFCs.
Italian Legislative Decree 147/2015 had eliminated, from financial year 2015, the full undeductability of costs incurred from suppliers domiciled in low-tax countries or territories (Ministerial Decree 23 January 2002), replacing it with the normal value rule. In practice, if the cost does not exceed the normal value, the deduction is free; while to deduct any amount that exceeds this value it is necessary to prove the existence of a specific economic interest. The black list costs, even when moderate in normal value, will still need to be recorded separately in the Modello UNICO 2016.
Still on the subject of the black list, Law 190/2014 also established that, for the cost regime, only the countries that do not ensure an adequate exchange of information (Ministerial Decree 27 April 2015 has consequently rewritten the relevant list) must be considered, regardless of the taxation level. This year more changes have been introduced: paragraph 142 of the Stability Law repeals paragraphs 10 to 12 of Art. 110 of the Consolidated Income Tax Code, and therefore eliminates any special regime for costs from black list suppliers. The deductibility of these negative components, beginning with the Modello UNICO form 2017, will be subject solely to the conditions laid down for any other cost or expense (relevance and accrual).
The reporting obligation relating to asset and liability transactions for VAT purposes with said countries (multi-purpose reporting BL framework) is still valid.
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