Declaring under 'Voluntary Disclosure' in Italy.

It is not an uncommon occurrence for me to be approached by people who have been living in Italy for quite a number of years, but who are yet to declare their assets abroad.  

In most cases they have heard of Voluntary Disclosure and/or The Common Reporting Standard and are seeking to understand what taxes/penalties/fines need to be paid in Italy to bring themselves 'in regola'.

Voluntary Disclosure

I have to report that the Voluntary Disclosure Programme that provided reduced penalties for undisclosed foreign income and foreign assets is now over.  The final date for submission was 31st December 2015.   However, there are still things you might be able to do to bring your affairs in order.  The main aim of financial planning is to seek to maximise opportunities and reduce tax liabilities where possible and whilst there is not much we can do about the end of the  Voluntary Disclosure programme we can help to manage your financial situation in the best way possible. 

The following should give you a basic idea of your obligations as an Italian tax resident.

As an Italian tax resident you are taxable on your worldwide income, assets and realised gains.  This includes earned and unearned income from inside Italy and abroad.  These include interest from cash deposits, rental income from property, dividends and capital gains from shares and bonds or other financial instruments. 

Failure to disclose assets, in the current tax year or in the past, will require payment of back taxes as well as penalties for non disclosure and late payment. 

Helping to alleviate the tax burden

However, there are investments that benefit from an transparent information exchange and therefore there is no need to disclose them annually to the Italian tax man , namely the Italian compliant Investment Bond.  

The benefit of this vehicle is that whilst money is held within the Bond there is no immediate liability to Italian income or capital gains tax and the funds do not need to be reported annually to the Italian authorities.  Only at the point of withdrawal of some or all of the capital would a tax liability occur,

Statue of Limitations. 

It should also be noted that the Italian tax authorities are bound by the Statue of Limitations which means that you can only be brought to account for undisclosed income, assets and realised gains for the last 5 full tax years, (not including the present tax year).   So, any liabilities relating to the calendar year 2009 will no longer be assessable by the tax authorities from January 2016

If you are in a similar situation then we can help you to arrange your affairs in a better way for tax purposes in Italy.  Contact me on gareth.horsfall@spectrum-ifa.com or on cell +39 3336492356 for more information.