Country-by-Country Reporting (CbCR) is a critical element of international tax compliance for multinational enterprises (MNEs). In Italy, the Agenzia delle Entrate (Italian Revenue Agency) has implemented specific guidelines aligned with the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13. This article provides Chief Financial Officers (CFOs) and financial executives with a comprehensive understanding of the CbCR requirements in Italy, including applicability, filing procedures, and penalties for non-compliance.

Applicability of CbCR in Italy

Criteria for Reporting:

• MNE groups with consolidated group revenue of €750 million or more in the preceding fiscal year are required to submit a CbC report.
• The reporting entity is typically the ultimate parent entity of the MNE group that is a tax resident in Italy. In certain cases, surrogate parent entities or constituent entities may also be required to file.

Relevant Legislation:

• The primary legislative framework for CbCR in Italy is outlined in Article 1, paragraphs 145-152, of Law No. 208 of 28 December 2015 (the 2016 Budget Law).
• Further details are provided in the Ministerial Decree of 23 February 2017.

Reporting Requirements

Information to be Reported:

• The CbC report must include aggregate information relating to the global allocation of income, taxes paid, taxes accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash or cash equivalents.
• It must also include details of all the constituent entities for which financial information is reported, indicating the jurisdiction of tax residence of each entity and the main business activities.

Form and Submission:

• MNEs must complete and submit the CbC report using the specific XML schema provided by the Italian tax authorities.
• The report should be filed electronically via the Entratel system or Fisconline portal.

Filing Deadlines

• The CbC report must be submitted within 12 months from the end of the reporting fiscal year. For example, if the fiscal year ends on 31 December 2023, the report must be submitted by 31 December 2024.

Penalties for Non-Compliance

Penalties:

• Failure to file the CbC report by the deadline can result in a penalty ranging from €10,000 to €50,000.
• Additional penalties may apply for inaccurate information, non-compliance, or failure to keep adequate records.

Defences:

• Entities may avoid penalties if they can demonstrate that there was a reasonable cause for the failure to comply.

Confidentiality and Use of Information

Data Protection:

• The information in the CbC report is treated as confidential and will only be exchanged with tax authorities in jurisdictions with which Italy has a competent authority agreement.
• The data is used to assess high-level transfer pricing and other BEPS-related risks.

Conclusion

Compliance with Country-by-Country Reporting requirements is essential for multinational enterprises operating in Italy. By understanding the criteria for applicability, the necessary information to be reported, and the deadlines for submission, MNEs can ensure they meet their obligations under Italian tax regulations. Failure to comply can result in significant penalties, making it crucial for CFOs and financial executives to stay informed and prepared. Consulting with tax professionals or legal advisors experienced in CbCR can provide additional guidance and support.