Italian Voluntary Disclosure Law Passes First Parliamentary Hurdle

By the wide margin of a 250-76 vote on October 16, the Chamber of Deputies of the Italian Parliament passed a decree law to introduce a voluntary disclosure program for undeclared assets and funds held abroad or in Italy.

Under the new program, such taxpayers would be allowed to declare those assets and funds so as to become compliant with Italian regulations, pay smaller penalties than would normally be imposed, and prevent the risk of criminal prosecution.

It is being emphasized that the program is not to be considered as a “tax amnesty” as the taxpayer will not be able to remain anonymous (as was possible in previous Italian disclosure programs), and will have to remit all of the taxes unpaid (plus the reduced penalties) on the undeclared assets.

The program would be available for all undeclared assets, held abroad or in Italy, up to September 30, 2014, and it will be available for declarations made until September 30 next year.

The option of partaking in the voluntary disclosure program would only be permitted to taxpayers who are not already the subject of a prior investigation by the Italian Revenue Agency. Once the Agency has started an official audit into their tax affairs, taxpayers would be unable to take advantage of voluntary disclosure.

The Italian Minster of the Economy Pier Carlo Padoan noted that the passage through the Chamber of Deputies of the voluntary disclosure bill occurred inmmediately after the European Union’s (EU) ECOFIN council in Luxembourg this month, in which it was agreed to expand the scope of mandatory automatic exchange of tax information by 2017.

In his opinion, without EU bank secrecy and with exchange of information, “voluntary disclosure will bring capital funds back into Italy,” although nobody has yet been able to put a solid estimate on the possible amount of such repatriations.