13 Maio 2014
Relationships between the discipline of the RW section and the discipline of IVIE and of IVAFE, the Italian property taxes on foreign investments due by individuals.
The news on the tax monitoring, introduced by Law n. 97/2013 regarding the filling of the RW section, apply from Unico 2014, form of the Italian tax return for individuals. The RW section must be filled by individuals, resident in Italy who hold investments abroad and foreign transactions of a financial nature by way of ownership or other real right regardless of the manner of their acquisition for the purposes of tax monitoring.
If the taxpayer is exempt from monitoring, he is in any case obliged to fill the tax return for the indication of the incomes derived by the foreign financial transactions or to fill the RW section as well as for the calculation of the Italian tax on property held abroad (IVIE) and for the calculation of the Italian tax on financial assets held abroad (IVAFE). In detail it:
- provides the threshold of EUR 10,000 only with reference to deposits and current accounts established abroad, to the exclusion of other financial assets and assets (such as securities, investments, real estate, boats, etc..) subject to the tax monitoring. This threshold has been inserted with the Law Decree n. 4/2014, converted by Law n. 50/2014;
- excludes the obligations contained previously in the sections I and III (i.e, the monitoring of transfers from abroad, towards abroad and foreign is no longer required), indicating only the amount of foreign stocks;
- must also be filled by the so-called "beneficial owners" of foreign investment in accordance with the definition given by the anti-money laundering regulations contained in the Legislative Decree n. 231/2007;
- provides that the IVIE and IVAFE (the Italian property taxes due on foreign investment by individuals) are also paid through the same data.
The Italian Tax Authority’s circular n. 38 of December 23rd, 2013 stated that for the purpose of tax monitoring the foreign assets must be valued according to the criteria useful for the calculation of the tax base of the Italian tax on financial assets held abroad (IVAFE) and of the tax base of the Italian tax on property held abroad (IVIE).
The amounts of assets and investments valued at the beginning of each tax year or at the first day of detention and at the end of the year or at the end of the detention period of the same, as well as the holding period, must be reported in the RW section.
The value used for the determination of the tax base of IVAFE is equal to:
- market value, recorded at the end of the tax period or at the end of the period of detention in the place where they are held;
- nominal value, whether financial assets are not traded on regulated markets;
- redemption value, in the absence of nominal value;
- acquisition cost, in the absence of the nominal value and the redemption value.
When financial assets belonging to the same category are sold, purchased at prices and at different times, the method to be used to determine which financial assets are held in the reporting period is the LIFO method, so the assets acquired in the most recent date shall be deemed sold first.
The number of days of detention for which the tax is due shall be pointed at.
With these criteria of calculation all transactions of purchase / sale / redemption in respect of each title are monitored, obliging the taxpayer to fill more lines of the RW section also in relation to a single financial asset.
The Law 97/2013 eased the penalties regime. The administrative penalty, originally scheduled for the infringement of the obligation of the declaration’s statement of investment stocks abroad and foreign assets of a financial nature, which may generate taxable income in Italy, as far as 10-50% of the amounts not declared, is now established by art. 5, paragraph 2, of D.L. 167/90 to the extent of between 3 and 15%; 6-30%, if foreign investment or foreign activities of a financial nature are held in countries or territories with favorable tax regimes.
With reference to the beneficial owners the aforementioned circular n. 38 stated that the obligation to fill the RW section exists not only in the case of direct ownership of the assets by the taxpayer, but also in the case where those assets are held by the taxpayer for through a third person. This is the case, for example, of those who have the actual availability of financial and capital assets "formally" made out to a trust (whether resident non-resident).
In this case the reform along with the anti-money laundering legislation identifies the beneficial owner of the Trust, respectively as:
- individuals who benefit from 25% or more of the foundation or trust assets, in the event future beneficiaries have already been determined; vice versa, in the event beneficiaries haven’t been determined yet, the group of people the trust is set up or operates in their main interest;
- individual or individuals who, particularly or jointly, control over 25% or more of the foundation or the Trust assets;
- if another case, any Trustee of the Trust, if not already identified as a customer or performer.
As a result, in the cases referred to in point a) and b) the taxpayer must provide a declaration about the total value of the investments held by the Trust abroad and about foreign financial assets in its name, as well as the percentage of the asset itself.
In such cases, in any case, both investments and foreign assets held by the Trust resident in Italy and those held by the Trust abroad, regardless of the foreign state in which they are established, are surveyed. In case there are no requirements for the exercise of control of the Trust (for example, if the beneficiaries are destined a share of less than 25 per cent of the assets), the latter is obliged to directly monitor the investments or foreign assets, provided they are resident non-commercial entities. Therefore, the obligation to report foreign assets of the Trust in the RW section concerns the same Trust (the declaration will be presented by the Trustee on behalf of the Trust). In case of Trust with unidentified beneficiaries and trust with identified beneficiaries resident in Italy, not fictitiously interposed, included among those referred to in Article 73, paragraph 1, letter c) of the Tax Code, they are required to fulfill the tax monitoring of investment abroad and the foreign financial transactions that they hold.
For what concerns resident trust with identified beneficiaries - that is, when the income or assets (or part of it) are directly related to the identified beneficiaries that is, people entitled to claim from the Trustee the assignment of the same - the monitoring obligations of foreign assets concerns Trust (provided it is a non-commercial entity) if the aforementioned beneficiaries do not hold the title of "beneficial owners" according to the above mentioned the anti-money laundering regulation and, in any case, with an indication of the value of foreign assets and the percentage of assets not attributed to the " beneficial owners" if existing.
With regard to the foreign Trust, that is, living abroad, the new rules provide that any beneficiaries, resident in Italy, are in any case subject to the rules on the tax monitoring (the RW section) with respect to assets held abroad by the Trust. More specifically, if the resident beneficiary or beneficiaries are recipients of a share of less than 25% of the Trust foreign assets, without being therefore regarded as beneficial owners under the Italian law, they are required to indicate in the RW section of their tax return, the value of the share of the Trust assets related to it .
Vice versa, if the resident beneficiary or beneficiaries are recipients of a share of over 25%, and are therefore considered beneficial owners under Italian law regarding the property of the Trust, they are required to indicate in the RW section of their tax return, the total value of the Trust foreign assets as well as the percentage of assets related to it.
In order to allow beneficial owners to fulfill the obligations of the RW section (the tax monitoring), the Trustee of foreign Trust are then required to communicate to these beneficial owners all information related to investments and financial assets held abroad required for the fulfillment of their tax obligations. In particular, they have to communicate the share of the assets, investments and foreign assets held by the Trust, also indirectly, their value, as well as the identification data of foreign subjects.