Pursuant to Law No. 83 of 13 June 2023 (which ratified the protocol signed in Rome on 23 December 2020 between Italy and Switzerland related to the income taxation of cross-border workers) the ministry of finance issued the decree of 23 July 2023, which removed Switzerland from the blacklist contained in the decree of 4 May 1999. The blacklist is aimed at tackling fictitious transfers of residence abroad by Italian citizens. The removal reflects a political agreement formalized on 20 April 2023 between the finance ministers of Italy and Switzerland and it will be effective from fiscal year 2024.
The consequences of removing Switzerland from the blacklist for natural persons are manifold.
In more detail
Firstly, it affects tax residence. Pursuant to the Italian Income Tax Code, Italian citizens who remove themselves from the register of the residing population and transfer to states and territories included in the list in the decree of 4 May 1999 are considered tax residents of Italy by operation of a rebuttable presumption. As a result of the removal from the blacklist, the presumption of law will no longer apply to Italian nationals moving to Switzerland, and the tax authorities will have to provide proof of continued tax residence in Italy.
Moreover, removal from the blacklist prevents the stricter and more penalizing regime for Italian residents holding undeclared assets in blacklisted jurisdictions from becoming applicable. In particular, the following legislation will no longer apply to Italian residents holding undisclosed assets in Switzerland:
- The rebuttable presumption whereby the investments and assets held in countries indicated in the list contained in the ministerial decree of 9 May 1999, in breach of the duty to report them pursuant to Italian legislation, are deemed, only for tax purposes and unless contrary evidence is given, formed with unreported income (Therefore, the presence of undeclared funds and assets in Switzerland will not expose the taxpayers to an automatic assessment for tax evasion).
- The doubling of the time limits within which the tax authorities can issue contestations for failure to declare assets held abroad and income assessed pursuant to the above presumption.
- The doubling of penalties for failure to declare the assets held abroad.