Prepared by Carlo Romano, Flaminia Ferrucci, Daniele Conti and Massimo Pinardi
On July 15, 2020, Legislative Decree no. 75 of 2020 was published in the Italian Official Journal (GU Serie Generale n. 177 del 15-07-2020), aiming at implementing Directive (EU) 2017/1371 (known as the PIF Directive) on the “fight against fraud to the Union’s financial interests by means of criminal law“.
The directive had identified 6 July 2019 as the deadline for the transposition and implementation of the principles enshrined therein.
In this regard, it should be noted that Italy, following the failure to transpose the directive within the said deadline, was subject to an infringement procedure (no. 2019/0279) initiated by the European Commission pursuant to Art. 258 TFEU.
What is the purpose of the PIF directive?
The purpose of the directive, which replaces the previous conventions governing the matter (in particular the Convention of 26 July 1995, also known as the “PIF convention“), is to continue the process of harmonization of the criminal law in the EU Member States by integrating, for the most serious types of fraudulent conducts, the protection of the financial interests of the EU already offered by domestic laws.
A further pivotal aim of the PIF directive is to provide for liability of legal entities within Member States’ criminal legislation (in our system through the Legislative Decree no. 231 of 8 June 2001) with reference to the most serious offences against the common VAT system, linking the “seriousness” of the conduct to the cross-border nature of the illegal conduct and to the relevant harm caused to the EU’s financial interests (set in an overall amount equal to at least 10 million euro).
It should also be borne in mind that the directive was issued in conjunction with regulation (EU) 2017/1939, setting up the European Public Prosecutor (abbreviation “EPPO“) responsible for identifying, prosecuting and bring criminal actions against offenders’ conducts affecting the Union’s financial interests protected by the PIF directive itself.
In this respect, there is clearly a close connection between the respective scopes of EPPO regulation and PIF directive.
What are the main amendments made by Legislative Decree n. 75 of 2020 implementing the PIF directive?
Coming to the analysis of the contents of the decree, it should be noted that the latter, compared to the existing framework, provides for some relevant innovations which can be summarized as follows:
- expansion of the catalog of tax offenses entailing corporations’ criminal liability, now including also the crimes of untrue tax return, of failure to file tax return and of undue offsetting, if committed in the context of “cross – border fraudulent systems” and for the purpose of evading VAT for a total amount of not less than 10 million euro. This means that entities and corporations may be held liable for tax crimes committed by their employees from which they have derived an interest or advantage;
- in order to strengthen the tools available to the judiciary and the police and for the first time into the criminal-tax system, punishment of the attempt of fraudulent tax return by means of false invoices, tax fraud by means of other devices and untrue tax return, provided that the conducts acts aimed at those crimes are committed also in another EU Member State (transnationality), and if the unpaid VAT is greater than 10 million euros ;
- extension of the liability regime for entities and corporations also to the crimes of fraud in public supplies, fraud in agriculture and smuggling.
To include the crime of smuggling among the crimes directly damaging the financial interests of the EU, considering the decriminalization rule of the legislative decree 15 January 2016, n. 8 (and concerning the hypotheses punished exclusively with a monetary penalty), the legislator has newly reshaped the threshold of criminal relevance, which is therefore met in cases where the due customs duties are greater than the threshold of 10,000 euros ;
- further expansion of the panorama of crimes against public administration which corporations can be held liable for, including the crime of misappropriation, misappropriation with others’ error and abuse of office, when to the detriment of the financial interests of the European Union. With reference to abuse of office, the extension of the criminal liability of the entities must be coordinated with the reshaping of the conduct by means of Article 23 of the decree-law of 16 July 2020, no. 76: instead of the generic “violation of law and regulation“, in order for the crime in question to be effectively taking place, a breach of “specific rules of conduct expressly provided for by law or by acts having the force of law and from which there is no margin of discretion” is now required.
Furthermore, the decree intervenes on some kinds of corruption, extending the criminal liability of entities also to cases where the budget of the EU or of its bodies is deprived of money or benefits, and the punishment for corruption also concerns public officials and those in charge of public service within States not belonging to the European Union, when the related detriment harms or endangers the financial interests of the Union.
What are the effects of this decree on tax offences?
The overall system offered by the reform highlights the trend of the Italian legislator to include growing tax offences in the fence of criminal liability of corporations and entities pursuant to Legislative Decree 231/2001.
The focus on the transnationality requirement is clear, for instance, for the punishment of attempt and in the further expansion of the catalog of tax offences giving rise to corporations’ criminal liability.
Outlook of the reform and 231 Models
In light of the said changes, the companies will need to update their 231 Model, in order to include the newly hypothesized offences.
With specific reference to tax offenses, companies that have not yet updated their 231 Model to the other recent law amendments will certainly and conveniently deal with the entry of tax offences into the world of corporate liability in a cohesive fashion.
Moreover, the applicable penalties in the event of crimes committed by employees of the entity without 231 Model, consist of (i) fines (ranging from a minimum of 25,800 euros to a maximum of 1,549,000 euros, accordingly with the “share” mechanism provided for in Art. 10 of Legislative Decree 231/2001, and on the basis of the minimum and maximum foreseen for each offence), (ii) confiscation, (iii) publication of the conviction judgment and, above all, (iv) disqualification penalties such as:
- disqualification from business;
- suspension or revocation of authorizations, licenses or concessions that allowed the commission of the offense;
- ban on contracting with the public administration, except for receiving a public service;
- ineligibility for incentives, loans, contributions or subsidies and the possible revocation of those already granted;
- ban on advertising goods or services.
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