Among the important news of the package of measures contained in the draft of the implementation decree of the fiscal delegation promoted by the government, the Italian legislators have decided to intervene also on the specific regulations provided for companies that maintain relations with countries included in the so-called black list. As known, such list includes countries that have adopted special tax regimes in relation to which ad hoc rules have been provided in order to counter international fraud.
To this regard, the fulfilments for companies operating with such countries will be simplified on the basis of the decree: the terms for the notice of transactions with countries which are considered “tax havens” will change, and the notice will no longer be on a monthly or quarterly basis, but on an annual one. The threshold above which such notice will be compulsory will also be raised to 10,000 euro.
One of the most controversial aspects of the legislation concerning the so-called black list has always been the position of Hong Kong, the main logistical and financial hub of the Far East which, in light of the growing role of China on the international level, confirms itself as one of the main areas of investment for Italian companies.
The Special Administrative Region (SAR) of China is, in fact, included in the black list provided by the Italian legal system (M.D. 04/04/99 – individuals, M.D. 21/11/01 – foreign subsidiaries; M.D. 23/01/02 – non-deductibility of costs). However, there are signs that the distrust towards the chinese SAR is destined to fade. The agreement signed with Italy on January 14th 2013 will, at least in principle, allow the strengthening of commercial relations between the two countries, removing obstacles to mutual investments and providing greater certainty to contributors. The peculiar functions undertaken by the Convention can be summarized as follows:
- avoiding double taxation of income arising from the business relationship between the two jurisdictions;
- contributing to the development of business investment in Asian markets;
- countering tax evasion with an adequate exchange of information.
On the basis of the current regulatory reform, it will be easier to manage transactions with such an important financial center, and, although the conditional tense is a must, thanks to the above mentioned intergovern-mental agreement we can expect a future cancellation of Hong Kong from the aforementioned black-list, with important consequences in favor of Italian investors. Similarly, a significant impact may occur in relation to the restrictions now in force provided by articles 110, paragraph 10 and 167 of the Tuir (i.e. the Italian Income Tax Act), concerning deductibility of costs relating to transactions with tax privileged countries and tax transparency of certain foreign subsidiaries. Of no less importance, in case of further permanence of Hong Kong in the mentioned list, is the presence in the Convention of an article on the subject of “Non Discrimination” (Art. 23). The thesis, reinforced by recent case-law, according to which the presence of such a provision in an Agreement would lead to the non-application of Art. 110 of the Tuir should be emphasized.
Waiting to verify such effects and in the event that the inclusion of Hong Kong among the black-list countries makes the operation of a company too burdensome, the opportunity provided by the Shanghai Free Trade Zone (see our May Newsletter) -which has undisputed benefits similar to those offered by Hong Kong, without the obligations required for what our legal system still considers a “tax haven”- should be borne in mind.
(Shanghai Office – Luigi Zunarelli, Mattia Nannini – 00862151501952)
