On 26 October 2019, Law Decree No. 124 was published in the Official Gazette No. 252, which entered into force on 27 October 2019. The Law provision introduced with the 2020 Budget with major amendments to the criminal penalty regime that are applicable to the adjustment of income tax return resulting in an incremental tax liability and in the case of assessment of a failure to file certain tax returns.
The relevant law provision is in the form of a Law Decree and it must therefore be converted by Parliament into final legislation within a maximum term of 60 days, or it will lapse. The law Decree in relation to criminal penalties is the following:
- The penalty of 1 to 3 years detention for “unfaithful tax filing” has been increased to 2 to 5 years.
- The penalty of 1.5 to 4 years detention for failure to file an income tax or withholding agent return has been increased to 2 to 6 years.
- The threshold for the application of criminal penalties in the case of a tax authority adjustment of a tax return filing (i.e. unfaithful tax filing) resulting in incremental taxable income in excess of 10% or €3 million (lowered to €2 million) and in an incremental tax liability of at least €150,000 (lowered to €100,000).
- The 10% threshold for excluding from the “unfaithful filing” the valuation adjustments that are individually not in excess of 10% of the originally reported amount has been eliminated. For this purpose, transfer pricing is generally considered to imply a valuation process.
