Recently the Italian Government approved a new decree to constitute a legal framework to allow for the regularization of undeclared capital held abroad by Italian residents. The new decree allows for favorable treatment, including penalty reductions, for those who make “self-declarations” and voluntarily collaborate with the Italian tax authorities, but provides for a tightening of the penalties for those that do not cooperate and could later be discovered by way of international information exchange or by the activities of the financial police.

The operation of the law will therefore begin with a voluntary application, from the non-taxpayer – an individual or partnership – who has undeclared assets held abroad. The application will need to be made by September 30, 2015, and will need to contain details of all of the investments or financial assets held abroad (either directly or indirectly) up to December 31, 2013, such as how they were set up and the interest, dividends and capital gains made on them over the last ten years.

Disclosure is not allowed if the application is presented after the individual or partnership has already been identified within a tax audit or inspection, and each application will result in an examination by the Revenue Agency to ascertain the tax due, which will then be due in its entirety.

Penalties for the regularization of assets after a voluntary disclosure will be reduced by a quarter, unless the capital is transferred into Italy or into another European country that has agreed to the effective exchange of tax information, when the penalties are to be reduced by one-half.