Through the decree issued on July 20, 2023, by the Italian Ministry of Economy and Finance, Switzerland has successfully completed its exit process from Italy's latest fiscal Black List targeting individuals.
Established by Italy in 1999, this blacklist encompasses fifty-six countries that were granted fiscal privileges under Article 2, paragraph 2-bis of the Italian Income Tax Code (TU).
The importance of this decree can be attributed to two primary factors:
Firstly, it signifies the outcome of a comprehensive assessment by Italy, leading to the conclusion that Switzerland should be removed from the "blacklist."
Secondly, it brings about practical and operational implications within the taxation landscape as Switzerland's presence on Italy's "blacklist" comes to an end.
Let's explore this matter in a step-by-step manner. The inclusion of a nation in Italy's black list necessitates meeting specific criteria established by the OECD in 1998, which are also recognized at the community level. These criteria involve the considerable absence of corporate income taxes, absence of mandatory substantial business activities for companies, limited transparency within legislative and administrative systems leading to tax privileges, and the absence of an effective mechanism for exchanging tax-related information with other countries to combat international tax evasion and avoidance.
The removal of Switzerland from Italy's "blacklist" marks a shift in perspective. Multiple factors contribute to this transformation, including the evolving international landscape towards greater integration, the implementation of automatic information exchange among European and non-EU nations, and the rising prevalence of agreements to avoid double taxation aimed at safeguarding taxable bases for countries. Consequently, Switzerland's removal from the "blacklist" implies a redefined viewpoint. It portrays the country not only as one without a privileged tax framework but also as a friendly nation with which Italy intends to foster communication, collaboration, and continuous monitoring, particularly in tax-related matters.
The practical and operational impacts of the agreement between Italy and Switzerland are substantial. Firstly, Switzerland's removal from the "blacklist" eradicates the presumption of contrived residency transfers, shifting the responsibility of proof from taxpayers to tax authorities. Previously, taxpayers faced challenges in proving the legitimacy of their residency transfers. However, with the joint declaration in place, a more balanced relationship between taxpayers and tax authorities will prevail, devoid of presumptions in either party's favor.
Moreover, the agreement renders specific measures inapplicable, such as the imposition of "doubled penalties" for violations related to tax monitoring, along with the assumption that investments and financial activities breaching monitoring regulations generate untaxed income. This agreement also impacts regulations concerning tax reports for individuals with residency in blacklisted countries and those governing reports on suspicious transactions.
Additionally, the removal of Switzerland from Italy's "blacklist" reduces the timeframes for tax audits on cross-border activities. Presently, tax administrations possess a window of up to ten years for conducting audits. However, post-removal, the standard deadline of December 31st of the fifth year following the declaration will be enforced. This marks a significant milestone in the realm of taxation.
These projected changes will come into effect starting from the fiscal year 2004.
Hence, this notable development holds considerable interest for Swiss individuals who plan to relocate to Italy, potentially utilizing some of the favorable Italian tax strategies.
Contacts
If you require assistance in relation to the above and/or would like to discuss anything further, please do not hesitate to contact info@act.london or your usual A.C.T. contact.
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