Italy: New Rules on Administrative and Criminal Tax Sanctions

On 3 July 2024, Legislative Decree No. 87 of 14 June 2024 introduced significant amendments to the original structure of Legislative Decree No. 471/1997, aligning it with the principle of ne bis in idem and proportionality, as stipulated in Article 20 of Delegated Law No. 111/2023. These changes affect penalties for omitted and unfaithful declarations in income tax, VAT, and withholding tax declarations.

KEY AMENDMENTS

Rationalization of Sanctions:

• Greater integration between administrative and criminal sanctions to comply with the ne bis in idem principle.
• Reduction and proportional adjustment of penalties to levels comparable with other European states.

Penalties for Omitted and Unfaithful Declarations:

• Omitted Declarations: The penalty is now set at 120% of the taxes due, reduced from the previous range of 120% to 240%. For those required to keep accounting records, penalties can be doubled if no taxes are due. For withholding agents, if withholdings are paid but not declared, an administrative penalty of EUR 250 to 2,000 applies.
• Late Omitted Declarations: If filed within 90 days but before any administrative assessment begins, penalties for unpaid taxes are increased to three times the original amount.
• Unfaithful Declarations: Penalties have been reduced to 70% of the higher tax due or credit difference, with a minimum of EUR 150, down from the previous range of 90% to 180%. For withholding agents, a penalty of 70% of unpaid taxes is applied if the declared amount is lower than the assessed amount.

Penalties Related to VAT Fraud:

• Increased penalties (from half to double) for using invoices for non-existent transactions or false documentation, targeting the transferee or principal proven to have participated in the fraud.
• Reduced penalties for certain VAT regimes and for underreported tax, with specific reductions for timely filed returns.

Penalties for Incorrect VAT Refunds and Declarations:

• Reduced penalties for requesting refunds without proper conditions (from 30% to 25%).
• A single penalty of 70% for violations related to documentation and registration of taxable transactions.
• Reduced penalties for unregistered fees, untimely electronic storage, and telematic transmission of fee data (from 90% to 70%).
• Penalties for improperly deducted tax reduced from 90% to 70%.

Penalties for Undocumented Transactions:

• Reduced maximum penalty for failure to issue proper documentation from EUR 20,000 to EUR 10,000.
• Adjustments to penalties for various documentation violations and improper VAT deductions.

Changes to Penalties for Misuse of Tax Credits:

• Differentiation between "non-existent" and "non-due" credits, with a penalty of 25% for using non-due credits in compensation.
• Specific penalties for using non-existent credits, with increased penalties for fraudulent representations.

SOURCES/RECOMMENDED READ:

• Gazzetta Ufficiale
• Implementing decree on sanctions – 2 the "recalculation" of administrative elections | FiscoOggi.it
• KPMG Tax & Legal Alert