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Italy: Compliance

Under Italian tax law, companies are obligated to provide the Italian tax authorities with a list of the assets the company provided for use by its private individual shareholders, as well as loans and capital the company has received from its private individual shareholders. Failure to comply results in penalties.

Under Italian tax law, companies are obligated to provide the Italian tax authorities with a list of the assets the company provided for use by its private individual shareholders, as well as loans and capital that the company has received from its private individual shareholders. In the past, private individual shareholders would evade personal income taxes by using their company’s assets and not paying an at arm’s length reimbursement or funding their companies with private loans and capital contributions. The obligation to submit information on these particular circumstances to the Italian tax authorities was introduced to counter the aforementioned personal income tax evasion.

The obligation to submit information on the use of company’s assets by its private individual shareholders affects the use of both movable and immovable assets. If a family member of an individual shareholder uses a company asset, for the application of this obligation, the asset is considered to be used by the private individual shareholder himself. There are, however, two exceptions from the obligation to submit information to the tax authorities:

  1. The value of the asset is below EUR 3,000 (this exception does not apply to cars, aircrafts and real estate, regardless of the value).
  2. The private individual shareholder pays the company an (at least) at arm’s length reimbursement for using the asset.

If a private individual shareholder uses a company asset without paying an at arm’s length reimbursement, this has tax consequences for both the company and the private individual shareholder. The company cannot deduct the costs related to the asset. The private individual shareholder must declare the difference between the at arm’s length reimbursement and the reimbursement he actually paid in his personal income tax return.

The obligation to submit information on the loans and capital the company has received from its private individual shareholders remains in place even if the loan or capital is paid back in full before the end of the same year. However, this obligation to submit information does not apply to loans and capital contributions that do not exceed EUR 3,600.

The information must be submitted to the Italian tax authorities electronically. Failure to comply results in a penalty that consists of:

  1. A fixed amount that may vary between EUR 258 and EUR 2,065 and;
  2. A variable amount that consists of 30% of the difference between the reimbursements paid for using the company assets and the at arm’s length reimbursement that should have been paid.
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