Tax Risk Management and Tax Control Framework

1. Normative

The Tax Control Framework (TCF) originates internationally and draws its inspiration from theOECD Guidelines . In particular, it is based on the principles outlined in the documents ‘Co-operative Compliance: A Framework’ (2013) and the OECD Guidelines 2016, which in turn draw on the CoSO Framework, a framework used to assess companies’ internal control systems.

As far as European legislation is concerned, the paper does not refer to specific EU directives directly applicable to TCF. However, the concept of ‘cooperative compliance ’ and tax risk management principles are aligned with international best practices also promoted at the European level.

In Italy, the TCF has been transposed and regulated through Legislative Decree 128/2015, which regulates the cooperative compliance regime. This regulatory framework aims to improve transparency and collaboration between taxpayers and tax authorities, reducing the risks of litigation

2. Commitments and Risks for the Taxpayer in Adhering to the Tax Control Framework

Adherence to the Tax Control Framework (TCF) entails a number of significant commitments for the taxpayer:

·  Implementation of an internal control system compliant with OECD guidelines, with documented procedures for the detection, measurement and management of tax risks.

·  Certification of the TCF by an independent professional.

·  Integration of the tax control system within the corporate governance system.

·  Obligations of transparency and prior dialogue with the Internal Revenue Service to anticipate possible tax disputes.

·       Periodic reports on tax risk management to be sent to corporate governance bodies and the tax authorities.

3. Opportunities and Advantages of Joining the Tax Control Framework

Adherence to the TCF offers significant advantages for companies, particularly for multinational groups:

·       Reduction of tax uncertainty through prior dialogue with the tax authorities.

·       Improvement of corporate reputation, with positive effects on investors and stakeholders.

·       Possibility of reducing administrative and criminal sanctions, thanks to the collaborative compliance reward scheme.

·       Minimisation of the risk of tax litigation, through the early management of any critical issues.

·       Greater certainty in tax planning by ensuring compliance with national and international standards.

4. Requirements for Entering the Tax Control Framework Facilitation Scheme

In order to join the Tax Control Framework regime, companies must follow a series of fulfilments:

1.    Preparation and adoption of an effective TCF, including detailed tax risk mapping and documented management procedures.

2.    Certification of the TCF by an independent professional.

3.    Submission of application to the Tax Agency, with documentation on the control system adopted attached.

4.    Verification by the Tax Agency, which may include meetings, requests for clarification and inspections.

5.    Ongoing dialogue with the Revenue Agency for the management of tax risks and the updating of the system.

6.    Periodic monitoring and updating of the TCF, with reports sent to corporate management bodies and tax authorities.

Adherence to the Tax Control Framework therefore represents a strategic opportunity for multinational companies wishing to optimise tax planning and minimise risks, operating within a framework of transparency and collaboration with the tax authorities.

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