Italy Confirms Removal Of Foreign Capital Declaration Threshold
Monday, December 30, 2013
In a circular dated December 23, 2013, the Italian Revenue Agency has confirmed
that individual taxpayers should now declare on their tax returns all capital
held abroad, as the previous threshold of EUR10,000 (USD13,700) no longer applies.
The Agency's clarification is in line with the latest modifications introduced
to ally Italian regulations with European Union (EU) law and, in particular,
with the need to ensure compliance with the obligation to declare all foreign
capital held to the relevant tax authorities of member countries.
The sections of individual income tax returns that collected information on
transfers to and from non-residents have also been abolished, and the new taxpayer
obligation has been extended to a declaration of all assets and investments
held abroad and over which he or she has the "effective title" (a
concept borrowed from anti-money laundering rules, which includes capital held
in corporate or trust structures).
The EUR10,000 limit, under which, previously, a declaration was not required,
has thereby been eliminated, and it has been specified that all individuals
that exercise control over at least 25 percent of the assets of an entity are
to be considered as having an "effective title."
However, for example, Italian residents who work abroad for the Government,
and those who work in border areas or in neighboring countries, particularly
Switzerland, are exempt from the new obligation, as long as such employment
has been undertaken continuously for the majority of the tax year, and the individual
repatriates all foreign assets on re-entry into Italy.
In addition, taxpayers who put all of their financial assets and wealth in
the hands of an Italian financial intermediary will be absolved from all aspects
of the new control procedures.
After the recent approval of the 2014 Budget, the penalty fees for failure
to declare assets will be reduced to between 3 percent and 15 percent of the
amount of funds undeclared (from between 1-0 percent and 50 percent previously),
to which is added the risk of confiscation for the full value.
Those sanctions have been increased to between 6 percent and 30 percent when
the undeclared financial and investment assets are being held in a "tax
haven" jurisdiction on Italy's black list.
On the other hand, reduced sanctions, down to one-half of the above minima,
are available in exceptional circumstances, and a penalty of only EUR258 is
charged if the necessary declaration is presented within 90 days of its due