(Nov. 4, 2010) Two circulars issued recently by the Italian Tax Authority (ITA) (Agenzia delle Entrate) seek to clarify the valued-added-tax (VAT) regime, in connection with black-listed countries. The black-listed countries are tax havens, whose rate of taxation is significantly lower than that applied in Italy.
Circular No. 53, issued on October 21, 2010, provides clarification of Act No. 73 of May 22, 2010, and related circulars, on measures to combat tax fraud, particularly in the form of “carousels” and “paper [invoice] mills.” The Act covers the obligation of Italian entities subject to VAT to file an electronic communication with the Inland Revenue, from July 1, 2010, onward, on the goods and services they provided or received, recorded, or registered in connection with transactions with traders (“economic operators”) established, resident in, or domiciled in black-listed countries. (Eva Sorgato, Italy:New Disclosure Requirements for Blacklist Countries, INTERNATIONAL TAX REVIEW (Oct. 2010), http://www.internationaltaxreview.com/default.asp?Page=10&PUB=35&a
In “carousel” or “missing trader” fraud, goods are repeatedly moved across EU borders in order to reclaim the VAT each time; it is done so quickly and the paper trail is so well hidden that the authorities have difficulty in tracking down the trail and prosecuting those involved. The rapid circulation of goods between companies and jurisdictions is likened to a carousel going round and round. (See, for example, Ashley Seager, Raids on VAT Fraud Gangs Lead to 22 Arrests Across UK, THE GUARDIAN (Aug. 16, 2006), http://www.guardian.co.uk/uk/2006/aug/16/ukcrime.eco
Circular No. 53 addresses the disclosure of relevant data by Italian taxpayers subject to pay VAT in connection with their transactions involving economic operators resident in blacklisted countries. The Circular clarifies such aspects as the parties responsible for providing the electronic communication, including non-residents; the transactions subject to disclosure and the contents of the communication; the scope of actions subject to disclosure; deadlines; and penalties. (Agenzia delle Entrate, Circolare N. 53/E (Oct. 21, 2010), http://w
Circular No. 54 of October 28, 2010, takes into account the fact that the stakeholders involved in filing the VAT disclosure form required under Act No. 73 and the related circulars might make mistakes in first adjusting to the new procedures and recognizes that there are “objective conditions of uncertainty” involved in the process. It therefore provides that the tax authorities will waive penalties for incorrect filings for the quarterly filers for July-September 2010 and for monthly filers for the months July-November 2010, provided that the taxpayers take remedial steps. (Agenzia delle Entrate, Circolare N. 54/E (Oct. 28, 2010), “http://www.agenziaentrate.gov.it/wps/wcm/connect/8726dc80447b5ac591
The related circulars include a Ministry of Finance Decree of March 30, 2010, elaborating on the “timing, content and penalty aspects of the disclosure process” of Act No. 73, and a ministerial decree of August 5, 2010, which “introduced some exclusions/extensions of the disclosure requirements in relation to transactions carried out with specific countries or regarding certain industries.” (Sorgato, supra.)