The FATCA agreement will also extend to Italian taxpayers

We already know FATCA (Foreign Account Tax Compliance Act), the US law issued in 2010, with the aim to prevent US taxpayers who are investing through foreign financial intermediaries from tax evasion.  In 2014 the US signed the agreement with the Italian government and extended it to American taxpayers (citizens or US residents) carrying out investments in Italy. The authorities are proceeding so that the agreement becomes bilateral. 

Banks, trust companies, investment companies, investment funds and certain types of insurance companies, must proceed with necessary verifications on tax matters. They also have to provide regular reports to Agenzia Delle Entrate (Italy’s Tax Authority), regarding accounts, deposits, and investments held in Italy by citizens and residents in the US and legal entities, even if they are not American but contain a significant US ownership.

These data are then forwarded to US tax authorities who can more easily trace tax evasion from US taxpayers.

Now, the authorities want the agreement to become bilateral.

So far FATCA had been focusing on the information regarding American tax-payers (US citizens or residents in the US) who invested abroad with the assistance of international intermediaries. Probably from the upcoming year, the agreement will apply to al Italy residents holding bank accounts in the US as well as Italian citizens or companies investing in the US.

US Banks will have to exchange with Italian tax authorities all the data and information regarding Italy residents owning investments overseas.

The Italian legislation will apply in this case. Italy’s tax law, unlike the US, requires not only all financial investments to be declared but also every type of investment and income produced, including real estate.

So, if you live in Italy and have been generating financial or real estate income in the USA, you are now required to declare it by filling up the RW framework of Italy’s annual income statement (Italian ‘dichiarazione dei redditi’).

If as an Italian taxpayer you have not been required to do so until today, we suggest taking into consideration an “active repentance” procedure. It would lead to a penalty, of course, but will prevent American financial institutions from communicating to Italy’s tax authority investments and revenue data before they are spontaneously declared by you in your annual income statement.

We highly recommend evaluating the matter carefully as, in the case of significant amount of undeclared income, legal sanctions might apply.

Our firm is at your disposal to provide information or assistance. Please contact us.