With the decree of July 20, 2023, issued by the Italian Ministry of Economy and Finance, Switzerland’s exit process from Italy’s latest fiscal Black List, concerning individuals, is finally completed.
The blacklist, established by Italy back in 1999, includes fifty-six countries deemed fiscally privileged for the application of Article 2, paragraph 2-bis of the Italian Income Tax Code (TU).
The significance of this decree stems from two key reasons:
Firstly, it results from Italy’s comprehensive evaluation, leading to the decision to exclude Switzerland from the “blacklist.”
Secondly, it entails practical and operational implications in the realm of taxation once Switzerland is no longer on Italy’s “blacklist.”
Let’s delve into the matter step by step. The inclusion of a country in Italy’s black list requires meeting certain criteria set by the OECD in 1998, which are also acknowledged at the community level. These criteria include the significant absence of corporate income taxes, no obligation for companies to conduct substantial business activities, limited transparency in legislative and administrative systems leading to tax privileges, and the lack of an effective mechanism for exchanging tax information with other countries to combat international tax evasion and avoidance.
The removal of Switzerland from Italy’s “blacklist” signifies a shift in perception. Several factors contribute to this change, such as the evolving international context towards greater integration, the implementation of automatic information exchange among European and non-EU countries, and the increasing prevalence of double taxation avoidance agreements to preserve taxable bases for states.
As a result, Switzerland’s exclusion from the “blacklist” implies viewing the country not only as one without a privileged tax regime but also as a friendly state with which Italy aims to foster communication, collaboration, and continuous monitoring, even in tax matters.
The practical and operational effects of the Italy-Switzerland agreement are considerable. Firstly, the removal of Switzerland from the “blacklist” eliminates the presumption of artificial residency transfers, shifting the burden of proof from taxpayers to tax authorities. Previously, taxpayers had to demonstrate the legitimacy of their residency transfers, sometimes facing significant challenges. However, with the signing of the joint declaration, a more ordinary relationship between taxpayers and tax authorities will prevail, without presumptions in favour of the latter.
Additionally, the agreement renders certain measures inapplicable, such as the “doubling of penalties” for tax monitoring violations and the presumption that investments and financial activities in breach of monitoring rules generate untaxed income. It also affects rules regarding tax reports for taxpayers with residency in blacklisted countries and those governing reports on suspicious transactions.
Furthermore, Switzerland’s removal from Italy’s “blacklist” reduces tax audit timeframes for cross-border activities. Presently, the tax administration has up to ten years for audits, but after the removal, the ordinary deadline of December 31st of the fifth year from the declaration will apply. This constitutes a landmark development in the field of taxation.
The aforementioned forecasts will take effect starting from the fiscal year 2004.
This significant development can, therefore, be highly interesting for Swiss individuals who intend to move to Italy, even using some of the favorable Italian tax schemes.