Voluntary disclosure bis, “obliged choice adhesion”

SAN MARINO – The Voluntary Disclosure bis is “the last train” for Italian taxpayers with unreported current accounts in the Republic of San Marino. Strongly supporting collaboration with the Italian tax authorities is one of the leading experts in the field, the tax lawyer Elio Blasio, owner of an international law firm, university professor of tax law and finance sciences, as well as captain of the Guardia di Finanza.
In addition, he has the experience gained working with Swiss banks during the first edition of the Voluntary Disclosure. Interviewed by the DIRE Agency, Blasio explains why it is better to be in good standing what are the main differences between the first and last edition of the manoeuvre launched by the Italian government to encourage the reporting of undeclared foreign capital.
Not only that: the expert clarifies what are the costs and how to proceed, and finally the advantages of legal and not ‘physical’ repatriation of capital.

Professor Blasio, for Italians who hold capital in San Marino banks what will be involved in the voluntary disclosure required by decree n. 193 of 2016? What are the differences from the first edition of 2014-2015?
The first edition of Voluntary, introduced by law 186 of 2014 was the first ever experiment of active and proactive collaboration between Italian taxpayer, physically resident in Italy, who over the years had failed to declare goods and activities illegally kept abroad . Thus, a frank relationship was sought with the financial administration for the first time to allow the reporting of this capital. The main difference since then is that the Voluntary bis of the decree 193 of 2016 is the second and last possibility to spontaneously allow reporting. The last since San Marino, as it is known, signed in October 2014 the Multilateral Agreement between the Competent Authorities in the field of Automatic Exchange of Financial Information, with the adhesion to the Early Adopters Group, positioning itself among the 54 virtuous countries that will adopt the new OECD standards from 2017. This means that the Clo, liaison office, the public office competent to follow up the administrative collaboration and the exchange of information on tax matters, will proceed in the next months to send to the competent financial administrations all the names, including the number of current account and balance of the same, of Italian taxpayers who have or had accounts in the credit institutions of San Marino. It is therefore a choice, both ethical and obligatory, otherwise within a few months all the names of those who are not be in compliance with the tax authorities will be communicated to the Guardia di Finanza. In short, there will not be another train.

What are the deadlines for submitting an application for entry?
Applications must be submitted by July 31 of this year, with the right to produce additional documentation by September 30th. Payments must be made in one or three instalments, at thirty day intervals, at the taxpayer’s choice, also by the end of September. From that date, September 30th, the Clo will proceed to automatically send the names. My advice is therefore to adhere and not be in more serious trouble with the Italian tax authorities.

Are there any limitations to the possibility of adhering? What needs to be documented? Are there differences more technical in nature than the first edition?
The Voluntary bis has some technical innovations. Among these, there is a procedure of self-liquidation of taxes and sanctions that the taxpayer can do directly, naturally using professionals. In case you decide to resort to this procedure, however, in the hypothesis in which errors occur – or however, as happens under tax law, there are different interpretations also ministerial on specific issues afferent the application that is presented – the risk of penalties from 3 to 10% of the capital could be incurred against the tax payer. As a lawyer and professional who has dealt a lot with vd in the first edition I therefore suggest the self-liquidation procedure only for very simple cases, leaving instead liquidation to the office of the Inland Revenue in more complex cases.

Another new feature of Voluntary Bis is the possibility of reporting cash. In the hypothesis in which the taxpayer decides to report the presence of any cash held illegally and undeclared, a specific procedure should be followed within the scope of application of vd. At the same time, a self-certification on the origin and provenance of the cash will be required, then a certification in which the taxpayer attests, assuming also criminal liability in the event of a false declaration, that the sums subject to cash reporting derive only from tax crimes that are entered as a non-punishable cause in the Vd – thus unfaithful declaration, omitted declaration, fraudulent statement through the use of invoices or other documents for non-existent transactions. This declaration is significant, any false attestation on the origin of the sums can lead not only to the cancellation of the request, but also to a rather serious sentencein this case imprisonment up to 6 years. It is considered a very serious crime. The cash held is presumed to be the result of tax evasion and is therefore taxed by the tax authorities, unless proven otherwise (in truth extremely difficult) by the tax payer. Another new feature consists for the customer who in the first vd only submitted an application for the reporting of a foreign account. In the second edition, it may also present another instance by hypothesis instead of assets and activities not declared in Italy.

Can the Voluntary Bis also include works of art stored in foreign safes?
The Vd concerns goods and activities that have not been declared. In the case of a work of art it would be difficult to understand if it was purchased with money and therefore the origin of that money, if it was not in some way already subjected to taxation. In that case, the money itself would be taxed.

Is there an estimate on the possible return for the Italian tax authorities of the second manoeuvre?
Bank of Italy estimates that there can still be 30 thousand people who did not do it the previous time and could join the Volutary Disclosure bis, for a reporting of 1 billion and 600 million euro. Of these, one billion deriving from undeclared capital and 600 million cash money that was not reported. In the second round of the voluntary the estimates are certainly lower than the first edition that produced about 4 billion in tax, with the reporting of about 60 billion euros.

But how much does it cost the taxpayer to adhere to the Voluntary Disclosure?
The calculation of taxes and penalties that the tax payer-type will pay depends a lot on how much movement there has been in the bank account over the years. If it is an account derived from succession and was always kept dormant by the heirs, taxes and penalties will certainly be low between 7-10%. If we talk instead of cc that in recent years have been very busy for payments and withdrawals, in this case taxes and the total calculation can reach even 60-80%. So the cost varies depending on the case, because the tax payer in any case must pay all taxes due, thus being able to benefit from a discount on penalties. Therefore, signing means having a discount on the penalties, which would be very heavy, but not also on the taxes due. This is why it is repeated that the Voluntary Disclosure is not an amnesty.

Does adhering to the Voluntary involve the obligation og having to bring back goods and capital into Italy?
The important thing is that there is reporting and payment of taxes, then the money, once regularised, can stay at the banks where it is deposited, also through the formula of legal repatriation. The latter, in particular, is performed when an Italian tax substitute is involved in the relationship, as a fiduciary who assumes the administration of the foreign relationship. The existence of the substitute tax in Italy means that the foreign relationship is assimilated to a national relationship, avoiding the Italian taxpayer having declarative obligations related to foreign relations (RW framework). The decision to leave the fund at the foreign bank can have other potential and usefulness: without prejudice to the obligations of transparency with the tax authorities, there is no doubt that the foreign account allows a greater degree of confidentiality with respect to undue curiosity on the part of anyone.