Tax Pills

Cooperative Compliance. The new frontier for a more transparent relationship between tax authorities and taxpayers
The two-day meeting on the cooperative compliance program, organized by the Italian Revenue Agency, will be attended by the Deputy Minister of Economy and Finance, Luigi Casero, the Agency's Director general, Rossella Orlandi, the Economic Advisor to the tax affairs of the Ministry, Vieri Ceriani, the Director general of Finance, Fabrizia Lapecorella and the Agency’s Head of the tax enforcement Department, Aldo Polito, whose speech will close the event.
Italy to pilot a cooperative compliance program for large business taxpayers. This is the theme at the center of a two-days forum whose sessions was opened today. The debate starts with a consolidated assumption: the traditional taxpayers-tax administrations interaction model, built on the classical approach of the ex-post control, has been subject in recent years to a significant restyling. Such rethinking arises from the fact that, at least for big business taxpayers, the traditional model of interaction has led, over the years, to a gradual radicalization. For this reason, the OECD began to promote new forms of Treasury-taxpayer relationship, based on mutual trust, transparency and understanding of respective needs and purposes. These new ways of approaching this critical issue aim at raising the standard of tax certainty, anticipating the controlled phase and ensuring a common assessment of the factors likely to generate fiscal risks, in advance of the submission of tax returns.

Taxpayers and tax authorities relationship new paradigm - Particularly, to understand the logic of these new forms of interaction, it’s useful to cite the definition of "Enhanced Relationship" contained in an ad hoc report worked by IFA (International Fiscal Association) "Initiative on the Enhanced Relationship" of 31 May 2012. According to the IFA, the term Enhanced relationship means "an institutional relationship specifically defined, based on mutually expressed intentions and not on detailed" to which taxpayers and tax authorities agree voluntarily going beyond their basic legal obligations.

How to put in practice the cooperative model - That said, the challenge before Italy’s Revenue Agency and the other Tax administrations involved in the new cooperative compliance process is to identify effective operational pathways to translate this approach, typically Anglo-Saxon, in a civil law system, such as ours. However, we can already put forward some fixed points. For example, we can start by saying what it will not be the cooperative compliance approach. It will not be the privilege parlor of the Italian tax system, nor will it be the place where a restricted circle of taxpayers will nurture confidential relationships with tax authorities. The new approach will constitute an agile, functional and reciprocal institutional vehicle on which to build a refreshed relationship with all taxpayers, beginning with large business companies that already have implemented an organizational risk control framework to manage complex tax situations.    

A two pillars strategy – The cooperative compliance main assumptions are founded on two clear concepts: transparency in what the administration asks to taxpayers, certainty in the way the administration will provide to businesses information and detailed documentation. Clearly, this approach must be intended as reciprocal.

The crucial tax control framework - In particular, the key tool that will allow tax administrations to measure the level of transparency of the taxpayer and the resulting degree of confidence to be given to it, is a specific management and control of the tax risk instrument called “Tax Control Framework”. This tool is therefore the gateway to institute a collaborative fulfillment.

Rossella Orlandi, Director of the Italian Revenue Service, on the patent box
“The Agency's tax offices are working hard and are already examining the 4500 applications submitted by the companies to take advantage of Italy’s patent box. After this first phase, we will start with meetings in order to finalize the advance arrangements necessary to bring trademarks and innovation products under the Italian tax regime". It has been pointed by Rossella Orlandi, Director-General of Italy’s Revenue Agency, during the Conference-forum organized by Wolters Kluwer with the Revenue Agency for the 40 years of the magazine "The Taxman". In addition, the Head of the Agency has also stressed the fact that the tax authority is engaged on several fronts to implement different measures all aiming at facilitating business operations and at the same time at making the country more attractive and competitive. Particularly, the Director-General has referred to the preventive tax agreements to adjust in advance the tax treatment of certain cross-border transactions, to the extension of e-invoicing even among individuals and, obviously, to the new fiscal regime related to the patent box, just to name a few.
How is preparing the Revenue Agency in the view of the forthcoming patent box’s commitments scheduled next? -  As remembered by the Director, of the 4.500 applications submitted, more than 1.200 have come from Lombardy. In details, most of the requests already worked derive from companies with turnover between 10 and 50 million euros. Particularly, about 1.300 of these requests have been managed. It is interesting to note that 36% of companies have chosen to join the scheme to protect the income originated from the use of trademarks, 22% for incomes from know-how and 18% for income related to the use of patents.
On the Patent box and how it works - In a recent technical document, an ad hoc Circular, the Italian Revenue Agency has agreed an extension of 30 days to the period of time businesses have to complete their applications to take advantage of Italy's "patent box" in its first operational fiscal year. In fact, the Italian patent box regime is only available after the signing of an agreement between the company and the Revenue Agency regarding the calculation method for determining their research and development (R&D) income. Companies that make patent box applications on or before the final date of March 31, 2016, will now be allowed 150 days, rather than 120 days, for the forwarding of complete documentation to the Agency. The additional time is being permitted so that applicants have an adequate time to gather all the necessary evidence and data in support of their request. The patent box offers an optional preferential tax regime for income derived from the use or licensing of qualifying intangible assets (such as patents, trademarks, processes, and other intellectual property) that are linked to R&D activities carried out in Italy. Businesses will be able to exclude up to 50 percent of their income derived from such assets from income taxes (either corporate or individual) and the regional tax on production. The five-year income exclusion will amount to 30 percent in the first year of its operation, 40 percent in the second year, and reach 50 percent from the third year. In addition to Italian companies, foreign residents with a permanent establishment in Italy may also benefit from the patent box if they are resident in a country with which Italy has an effective tax information exchange agreement.

FiscoOggi è una pubblicazione dell'Agenzia delle Entrate - Ufficio Comunicazione
Testata registrata al Tribunale di Roma il 19.9.2001 con n. 405/2001
Direttore responsabile Claudio Borgnino