"NEWS of the credit for foreign taxes May 19, 2016-Riliquidazione"

Posted by on May 19, 2016

It happens quite often that a society that produces foreign income, and qualifying for tax credit therefore performed abroad, occur with late payment of additional foreign taxes based on the same income to which the deduction has already been used. In this situation applies the rule referred to in paragraph 7 of article 165 of the tax code: it is therefore necessary to proceed to the "riliquidazione" of the credit for foreign taxes, which must be made in the tax return for the tax year in which the taxes payable on the income abroad take becoming final.

However, even in this condition, the proportion of Italian tax to compare to total foreign taxes (sum of sets originally and supervening) undertaken by that State and that time must be reduced by tax credit already taken in order to avoid duplication of recovery, and also the deduction altogether due to the company shall not however exceed the tax due in the period in which the foreign income contributed to the formation of the tax base.

Therefore, in the first tax return handy, that relating to the tax period in which supervened foreign taxes are fulfilled once and for all, you will have to make a special riliquidazione of the credit for foreign taxes, as if those taxes were acquitted for their full amount, and outright, in the tax period the responsibility of foreign income. Then, the riliquidazione of the credit for foreign taxes should be calculated having regard to the Declaration of the tax period of taxation of foreign income, but any further deduction should be subtracted from the set of the first declaration useful after the period in which new foreign taxes have been paid outright.

The fact that they brought new foreign taxes for a past period can be ideally due to two circumstances.

The first is one in which, while remaining unchanged foreign income taxed, foreign tax authorities cleared a supplementary amount of tax on that income; in this circumstance, there is evidently not a taxable foreign income growth effect in Italy, whereby for the riliquidazione of the credit for foreign taxes Act concerns solely the amount of new taxes acquitted outright.

The second circumstance, however, originates from a foreign taxable income adjustment; in this case, when applying the rule above set forth and contained in paragraph 7 of article 165 of the tax code, you should also consider increasing the overall income tax if the tax period of competence for taxation of foreign income is still open on time limits for the assessment.

In the event that the terms have passed instead to ascertain of the tax period in which the foreign income tax competition, the largest foreign income will not be considered for the determination of taxes owed in Italy; Therefore, the major foreign taxes will be recoverable under article 165, paragraph 7, of the tax code while holding for the purposes of the report, the Italian tax and changing the amount of foreign tax paid, increased further as memo.

Finally, a situation more rare to occur, but that it still requires the need for a posthumous credit for foreign taxes management, is when the foreign State has a partial refund of the tax in his time paid outright. In this case also require the "riliquidazione" of the credit for foreign taxes that, according to the Bureau of internal revenue, should take place with the supplementary statement against the time when foreign income contributed to taxation; in this statement, then, will be restated the credit for foreign taxes assuming a reduced amount of tax than was the subject of a refund. In this circumstance is more than reasonable to exclude the imposition of sanctions against the taxpayer, since riliquidazione not at all dependent behaviors due to him.

Fabio Lad