Starting from July 1, Italian enterprises doing business abroad shall have to file a monthly or quarterly return reporting all their transactions entered into with foreign enterprises organized or domiciled in black listed jurisdictions.

According to article 110(10) of Italy’s tax code, deduction of costs, expenses or losses arising from transactions entered into with enterprises based or domiciled in black listed jurisdictions is denied, unless the taxpayer can prove that (i) the transaction served a legitimate business and economic purpose going beyond tax saving and has been actually carried out, or (ii) the foreign enterprise is engaged in a real trade or business in the country in which it is organized or domiciled. In addition, all costs, expenses or losses must be separately stated on the annual income tax return. 

As a result of the new law, an Italian enterprise doing business with foreign enterprises organized in a black listed country shall also have to file an additional monthly or quarterly return reporting all its transactions with those enterprises.

Italy’s Minister of Finance is expected to issue a new list of countries allowing exchange of tax information with Italy, which will fall outside the scope of the disclosure and non deduction rules.