ITALY Law and Practice Contributed by: Giuliano Foglia, Foglia & Partners
6. Penalties and Sanctions 6.1 Tax Penalties
Criminal tax offences are set out in Legislative Decree No 74/2000, with some of the major ones outlined below. • The main tax offence aimed at punishing fraud is the fraudulent tax return, which may be committed by using invoices or other documents relating to sham transactions (Article 2) or by other fraudulent means (Article 3). • Although not constituting fraud in the strict sense, specific conduct resulting in tax evasion may nev - ertheless trigger criminal liability, such as incorrect tax returns (Article 4) and failure to file a tax return (Article 5). • Other offences are aimed at punishing conduct that facilitates or leads to tax evasion, such as the issuance of invoices for sham transactions (Article 8) and the concealment or destruction of account - ing records (Article 10). • Further offences punish the non-payment of taxes, including the failure to pay certified withholding taxes (Article 10-bis), VAT (Article 10-ter) and the improper offsetting of taxes (Article 10-quater). • Finally, Article 11 punishes fraudulent acts commit - ted by taxpayers with the purpose of subtracting their assets from the compulsory tax collection procedures carried out by the Italian Tax Authori - ties. 6.3 Interaction Between Tax and Criminal Procedures When, in the course of a tax audit, facts emerge that may constitute a tax offence, the Italian Tax Authori - ties are obliged to promptly report the alleged criminal offence to the Public Prosecutor, pursuant to Articles 331 and 347 of the Italian Code of Criminal Procedure. Similarly, under Article 129 (3-quarter) of the imple - menting provisions of the Italian Code of Criminal Pro - cedure, when the public prosecutor initiates a criminal proceeding for tax offences, they must inform the Ital - ian Tax Authorities of the charges. As a general rule, tax and criminal proceedings are formally autonomous and independent (see Article 20 of Legislative Decree No 74/2000). Nevertheless, evidence collected in one proceeding can be brought in the other; in particular, evidence collected during
Administrative penalties, applicable to violations con - cerning both pure domestic and cross-border cases, are regulated by Legislative Decree No 471/1997 and are applied and enforced by the Italian Revenue Agency. With specific regard to the violation of the obligation on resident individuals, non-commercial entities and partnerships to report the holding of real estate assets and rights and foreign financial assets and invest - ments (see 5.4 Reporting Obligations and Disclosure Regimes ), a specific administrative penalty ranging from 3% to 15% of the non-reported value applies (see Article 5 of Legislative Decree No 167/1990). The penalty is doubled if the assets and investments are held in countries included in the list of jurisdictions with a privileged tax regime set out in the Ministerial Decree of 4 May 1999. Moreover, in such a latter case, pursuant to Article 12 (2 – 2-bis) of Legislative Decree No 78/2009, two further consequences are triggered: • the sums deposited in the non-reported foreign accounts are considered, by rebuttable presump - tion, as constituted by non-taxed income and should, therefore, be subjected to taxation; and • the ordinary statute of limitation is doubled. Specific penalty protection is provided for violations of transfer pricing adjustments and anti-hybrid rules, provided that taxpayers submit to the Italian Tax Authorities the specific documentation, prepared in line with the applicable regulations, apt to illustrate the application of the relevant provisions. 6.2 Criminal Penalties In general terms, Italian tax criminal law seeks to prosecute offences that cause significant harm to the Treasury; therefore, in order to limit prosecution to violations with greater economic impacts, it is usu - ally provided that tax violations trigger criminal liability only if the specifically determined statutory thresholds are exceeded.
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