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posted 8 years ago
With section 1(145) of Law no. 208 a new reporting obligation has been introduced for big multinational enterprises. This obligation stems directly from the recommendations under Action 13 of the OECD’s BEPS project (i.e. “Base Erosion and Profit Shifting”) called “Transfer Pricing Documentation and Country-by-Country Reporting”. The Ministerial Decree of 23 February 2017 (hereinafter referred to as “Decree”), published in the Official Journal of 8 March 2017, comprises the provisions on implementation of the law 208/2015 and clearly states the operating limits of this new obligation. In particular, this reporting obligation consists in preparing a document called “country-by-country report” as defined by the OECD, in which the company of the group which has to comply with this obligation has to include the following information with reference to each jurisdiction, in which the group of multinational enterprises does business:
a) aggregate data of all companies of the group on revenues, profits (losses) before income taxes, paid and due income taxes, declared capital, retained earnings, the number of employees and tangible assets different from cash on hand or other equivalent means;
b) identification of each company belonging to the multinational group, tax jurisdiction, in which the company has been incorporated or established, if different from the tax residence, type of business or the main business activities carried out. Permanent establishments must be listed with reference to the tax jurisdiction, in which they are located, specifying the legal entity they belong to. As set forth in section 4, additional details on report submission and in general on the implementation of the Decree will be made available with an ad hoc newsletter by the director of the Italian tax authority. With regard to the provisions’ personal scope, section 2 of the Decree states that the reporting obligation lies mainly with the companies with registered offices in Italy (pursuant to section 73 of the Italian Tax Code), which:
– control multinational groups with a consolidated turnover of at least 750 m euro referred to the tax year previous to the one in which the report is submitted;
– are not controlled by other entities than individuals;
– are required to consolidate financial statements.
However, the same section states that:
– if the controlling company of the group is resident in a country in which this reporting obligation has not yet been introduced; or
– if in the tax residence of the controlling company no agreement on the automatic exchange of country-by-country reports is in place with Italy; or
– if the jurisdiction of the non-resident controlling company does not meet the obligations on automatic information exchange with Italy,
then the group will designate a controlled subsidiary resident in Italy to submit a country-by-country report.
The latter shall inform the Italian tax authority that it will fulfil the obligation, thereby exonerating all other companies of the multinational group resident in the European Union from submitting the report. With regard to the timetable, the Decree states that the reporting obligations apply as of the fiscal year starting on 1 January 2016 or later. In addition, the reporting obligation as such consists of two distinct stages:
– pursuant to section 3 the company required to file a country-by-country report must inform the Italian tax authority about this obligation by the deadline set for filing the tax return for the tax year the report refers to;
– pursuant to section 5 the document itself (i.e. the country-by-country report) must be submitted within one year from the last day of the tax year the report refers to. E.g. in case of the 2016 tax year, which coincides with the calendar year, the obligation must be communicated by 30 September 2017 and the country-by-country report must be submitted by 31 December 2017.
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