In Italy tax evasion is considered a criminal offence only in case the amount of unpaid taxes overcomes a specific threshold, otherwise only an administrative offence occurs, and it is punished with administrative sanctions.
The following cases can be considered as criminal tax offences:
- Fraudulent tax declaration
A false tax return and/or VAT declaration is made, introducing false liabilities or altering the accounting records.
It is considered as a criminal tax offence, when unpaid taxes amount to more than 30,000 euros, with reference to each single tax, and undeclared income exceeds 5% of the total income or amounts to more than 1.5 million euros.
- Inaccurate tax declaration
Just like the above, this category involves making false statements, but in this case without fraudulent intent.
It is considered as a criminal tax offence when unpaid taxes amount to more than 150,000 euros and undeclared income exceeds 10% of the total income or amounts to more than 3 million euros.
- Omitted tax return
Failure to file a tax/VAT return or a Declaration of tax deducted at source, within 90 days after the deadline.
It is considered as a criminal tax offence only in unpaid taxes amount to more than 50,000 euros.
- Omitted payment of withholding tax and of VAT
It is considered as a criminal tax offence when exceeding the amount of 250,000 euros.
- Issue of improper invoices
It is considered as a criminal tax offence the issue of false invoices or receipts for non-existent operations, in order to facilitate third parties' income tax or VAT avoidance, irrespective of the amount of money involved and of whether or not the receiving party has filed false documents.
Destruction and concealment of accounting documents, in order to prevent the reconstruction of income and of the business volume.
The third penal section of the Italian Court of Cassation, with Sentence no. 12906 pf 25 March 2019, has established that, in case the amount of evaded VAT slightly exceeds the liability threshold provided for by law, the offence is not punishable, since it is particularly tenuous.
Since 2016 the Italian Revenue Agency has been given specific time-limits, within which tax evasion has to be proved.
More in detail, if tax evasion has occurred after 1 January 2016, the assessment must be undertaken:
By 31 December of the fifth year after the filing of tax return, where a remuneration or a consideration was omitted;
By 31 December of the seventh year after the filing of a void tax return or after the deadline for filing an omitted tax return;
Tax evasion in Italy: tax offences and penalties
In case of tax offences, the penalties provided for by law are:
- Fraudulent tax declaration: punishable with imprisonment ranging from 1 year and 6 months up to 6 years;
- Inaccurate tax declaration: punishable with imprisonment ranging from 1 year up to 3 years (read here more information about under-invoicing)
- Omitted tax declaration: punishable with imprisonment ranging from 1 year up to 3 years;
- Issue of improper invoices: punishable with imprisonment ranging from 1 year and 6 months up to 6 years;
- Destruction and concealment of accounting documents: punishable with imprisonment ranging from 6 months up to 5 years.
The conditional suspension of the penalty is not possible in case the evaded tax exceeds 30% of the total business volume and 3 million euros.
Tax evasion in Italy: tax offences and prescription
In order to reduce tax evasion, prescription periods for tax offences have recently been reformed. Today they vary according to the kind of offence occurred.
For tax offences occurred after 17 September 2011 a differentiated regime has been established, that is: prescription periods range from 6 to 8 or 10 years.
The following cases are subject to a prescription period of 6 years (7 years and 6 months in case of interruption of prescription):
- Omitted payment of withholding tax;
- Omitted payment of VAT tax (but for unlawful compensation or fraudulent removal or concealment of property, prescription periods can range up to 7 years and 6 months in case of interruption of prescription).
For all other tax offences mentioned above, such as fraudulent, inaccurate or omitted declarations, destruction and concealment of accounting documents, issue of improper invoices, and so on, prescription periods range from 8 to 10 in case of interruption of prescription.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.