ARE YOU THE “BENEFICIAL OWNER” OF YOUR COMPANY? FIND OUT HOW AND WHEN TO NOTIFY THE REGISTER OF BENEFICIAL OWNERS
By the deadline of 11 December 2023, all corporations, private legal entities, trusts and trust-like legal entities will have to communicate to the territorially competent Chamber of Commerce the data and information relating to their “beneficial owners”.
The notion of “beneficial owner” has become part of our legal system driven by anti-money laundering laws and its typical demands to disclose the real identity of the person who benefits from the effects of a transaction. Indeed, finding precise information on the “beneficial owner” is particularly useful to detect possible illicit uses of the economic system by those who, by hiding behind fiduciary interpositions or particularly opaque structures, would like to conceal their identity to carry out money laundering transactions or the financing of terrorist organizations.
For these reasons, both European and domestic legislation have been paying considerable attention to the “beneficial owner”.
European anti-money laundering efforts date back to the early 1990s and have been reflected over time in five Directives.
The Fourth EU Directive/2015/849 and the Fifth EU Directive/2018/843 strengthened the Member States’ prevention system of the Member States, in line with the lines drawn by the 2012 FATF (Financial Action Task Force) Recommendations, emphasizing the risk-based approach that is considered fundamental for the graduation of preventive measures and controls. The implementation of the Fourth and Fifth Directives into Italian national law took place through two legislative decrees: no. 90 of 25 May 2017 and no. 125 of 4 October 2019, which first fully replaced and then further amended the text of Legislative Decree no. 231 of 21 November 2007 (so-called Anti-Money Laundering Decree).
The identification of the “beneficial owner” must be carried out in accordance with the provisions of Article 20 of the Anti-Money Laundering Decree. Specifically, for corporations, the “beneficial owner” is: (i) the natural person who directly or indirectly owns more than 25% of the share capital. Ownership can be defined as indirect when the share is held through ”subsidiaries, trust companies or intermediaries”; (ii) the natural person who has control of the majority of the votes exercisable at the shareholders’ meeting; (iii) the natural person who has control of sufficient votes to exercise a dominant influence at the shareholders’ meeting (iv) the natural person who, due to particular contractual ties, is in a position to exercise a dominant influence in the shareholders’ meeting; (v) residually, if it is not possible to identify one or more “beneficial owners” by means of the first criteria, the “beneficial owner” must be identified in the natural person(s) holding powers of legal representation or management of the company.
The identification criteria referred to above are still the subject of extensive doctrinal debate and, therefore, their application requires particular attention.
In this regard, the supervised and accredited entities that consult the Register in support of anti-money laundering compliance (e.g. the banks with which the companies maintain current account relationships) must not limit themselves to identifying the “beneficial owner” on the basis of the mere information transmitted by the various entities required to report to the Companies Register; they must always proceed to verify, in the light of the information acquired during customer due diligence, that the “beneficial owner” as identified is the same of the one indicated in the Register of beneficial owners.
Basically, the Register of beneficial owners must be considered an ancillary tool aimed at guiding the obliged party in identifying the “beneficial owner” and not a tool aimed at replacing the obligations to identify the “beneficial owner”, as expressly indicated in Article 21, paragraph 7 of the Anti-Money Laundering Decree.
Article 21, paragraph 5 of the Anti-Money Laundering Decree, namely, provides that a specific Decree of the Ministry of Economy and Finance, in agreement with the Ministry of Economic Development (now the Ministry of Business and Made in Italy), after consultation with the Privacy Authority, shall lay down the provisions on the disclosure, access and consultation of data and information relating to the beneficial ownership of companies having legal personality, private legal persons, trusts producing legal effects relevant for tax purposes and legal institutions similar to trusts.
The implementing decree of the MEF (DM 55/2022) was issued on 11 March 2022. More recently, on 9 October 2023, the MIMIT Decree of 29 September 2023 was published in the Official Gazette (Gazzetta Ufficiale), by which the system of reporting data and information on beneficial ownership was finally made operational.
Accordingly, by the deadline of 11 December 2023, joint-stock companies, limited liability companies, companies partly limited by shares, cooperative societies, private legal entities, and trustees of trusts with tax-relevant legal effects or trust-like legal arrangements must make the disclosures of beneficial ownership data and information. Companies with legal personality and private legal persons, the incorporated after 9 October 2023, must make such disclosure within the shortest period of 30 days from the entry in their respective registers (or from the date of incorporation, in the case of trusts or trust-like mandates).
The communication must be made by means of a self-declaration to be transmitted electronically to the office of the Commercial Register of the competent Chamber of Commerce. The reporting obligation is fulfilled by the directors for companies having legal personality, by the founder (if still alive) or by those entrusted with the representation and management for private legal persons such as foundations and recognized associations, as well as by the trustees of trusts or similar legal institutions.
More specifically, the above-mentioned persons must: (i) access ‘DIRE’ (the Chamber of Commerce’s service for the compilation of telematic dossiers) or another market solution, provided that it is updated with the ministerial forms for the compilation and sending of dossiers; (ii) indicate the company or institution that is the subject of the communication and the data relating to the “beneficial owner”; (iii) digitally sign the dossier.
Failure to comply with the reporting obligations entails the imposition of an administrative sanction on each obliged party from a minimum of €103 to a maximum of €1,032.
MODELS 231: THE JUSTICE DECREE INTERVENES ON ARTICLES 24 AND 25-OCTIES.1 OF LEGISLATIVE DECREE 231 BY EXTENDING THE CATALOGUE OF ‘PREDICATE OFFENCES’ FOR THE LIABILITY OF ENTITIES.
On 9 October 2023, Law no. 137 was published in the Official Gazette, converting with amendments Decree-Law no. 105 of 10 August 2023, which, among other things, implemented a new extension of the catalogue of ‘predicate offences’ for the liability of entities for offences, regulated by Legislative Decree no. 231/2001.
In particular, the legislator, by means of the so-called ‘Justice Decree’, intervened by adding three new types of offences by amending only the following two articles:
– 24, Legislative Decree no. 231/2001, under the heading “Undue receipt of funds, fraud to the detriment of the State, a public body or the European Union or for the purpose of obtaining public funds, computer fraud to the detriment of the State or a public body and fraud in public supplies“, is increased by two new “predicate offences”, specifically: (i) the offence referred to in art. 353 of the Criminal Code “Obstructing the freedom to bid“, which punishes the conduct of anyone who, with violence or threats, or with gifts, promises, collusion or other fraudulent means, prevents or disrupts the bidding process in public tenders or private tenders on behalf of public authorities, or drives away the bidders; and (ii) the offence referred to in art. 353 bis of the Criminal Code “Obstructing the choice of contractors“, which punishes, unless the offence constitutes a more serious offence, anyone who, by means of violence or threats, or with gifts, promises, collusion or other fraudulent means, disrupts the administrative procedure aimed at establishing the content of the call for tenders or other equivalent act in order to influence the manner in which the public administration chooses the contractor.
It should be specified that for both offences, the entity is subject to a monetary penalty of up to five hundred quotas (or from two hundred to six hundred quotas, in the event of a significant profit or particularly serious damage), as well as the disqualification sanctions of prohibition from contracting with the public administration, exclusion from facilitations, financing, contributions or subsidies and the possible revocation of those already granted; and prohibition from advertising goods or services.
– 25-octies.1, Legislative Decree no. 231/2001, entitled “offences relating to non-cash means of payment”, is increased by the offence referred to in art. 512 bis of the Criminal Code “fraudulent transfer of valuables“, which punishes the conduct of anyone who, unless the fact constitutes a more serious offence, fictitiously attributes to another person the ownership or availability of money, goods or other utilities in order to evade the provisions of the law on asset prevention measures or smuggling, or to facilitate the commission of one of the offences of receiving, laundering or using money, goods or utilities of unlawful origin.
In this case, the company will be subject to a fine of between 250 and 600 quotas and all the disqualification sanctions provided for in Article 9(2) of Legislative Decree No. 231/2001 (disqualification from engaging in commercial activities; suspension or withdrawal of authorisations and licences; prohibition from contracting with the public administration; exclusion from facilitations, financing, contributions or subsidies and the possible withdrawal of those already granted; prohibition from advertising goods or services).
This further intervention to supplement the catalogue of predicate offences confirms the importance and centrality of the prevention and control system outlined in Legislative Decree no. 231/2001, which remains a priority for the legislator regardless of changes in government.
NEW TAX RESIDENCE DEFINITION FOR ITALIAN INDIVIDUALS AND LEGAL ENTITIES.
October 16th, 2023, the Italian Council of Ministers approved, in a preliminary way, a legislative decree implementing the tax reform on international taxation. Two provisions of the decree entail the review of the notion of tax residence applicable to individuals, companies and other legal entities. The new definition shall finally align the domestic tax rules with most recent international practices and OECD Model Tax Convention.
Current legal framework.
The current provisions – Articles 2 and 73 of the Income Tax Code governing, respectively, the tax residence for individuals and companies and other legal entities – provide for the application of the “worldwide principle” for resident persons and the “source taxation” for non-residents.
The linking criteria used to trigger the tax residence of individuals are the following:
– the enrolment in the Registry Office of Italian resident population (formal requirement);
– the set of civil domicile in Italy (i.e., the taxpayer’s principal place of business and interests; material requirement);
– the set of civil residence in Italy (i.e., the place where the individual has his habitual home; material requirement).
All of the above three alternative conditions shall be verified for the majority of the tax period (i.e. 183 days in the calendar year).
If one of the above conditions is met for most of the tax period, the individual qualifies as tax resident for Italian tax purposes.
On the other way, the linking criteria used to trigger the tax residence of corporations/legal entities are the following:
– the registered office (intended in a formal meaning as the place indicated by the legal entity in its bylaws; formal requirement);
– the administrative seat (i.e., the place where the management activity is actually carried out and/or the company’s administration);
– the location of the main object of the activity (i.e. the place where the legal entity carries out the essential activity to realise its primary purposes or where its economic activity takes place).
Also in this case, all of the above three alternative conditions shall be verified for the majority of the tax period (i.e. 183 days in the financial period).
Special provisions to attract the tax residence of individuals transferring their tax residence to Italy from low tax jurisdictions (including e.g., Liechtenstein, Monaco; please note that Switzerland will be repealed from the list of non-cooperative countries starting from 2024 and thus shall be considered for fiscal year 2023) and trusts, foundations and similar vehicles (e.g., trusts having settlors/beneficiaries non-tax resident in Italy or having properties abroad).
The new legislation according to the envisaged (and desired) reform.
The tax reform aligns the domestic tax rules with updated international practices and most recent OECD approach with double tax treaties.
With respect to the notion of tax residence of individuals, the tax reform amends the definition of domicile making reference to a more substantial criterion, whereby the “domicile” is the place where the taxpayer’s personal and family relationships are primarily developed. The physical (and ongoing) presence in Italy will be a key factor to trigger the Italian tax residence.
The formal criteria connected with the enrolment in the Registry Office and the civil residence will also be included in the new provisions, even if the taxpayer shall now be allowed to provide proof to the contrary.
No modifications also apply to the relevant timeframe (183 days), that now considers also fraction of days.
As regards the notion of tax residence of corporations/legal entities, the tax reform eliminates the reference to both main object and administrative seat criteria that have given rise to several audits and disputes in the last decades. Two new criteria shall be introduced to be verified for the majority of the tax period (183 days):
– the “place of effective management” criterion (material requirement), mirrored by the OECD Model Tax Convention, and to be interpreted accordingly;
– the “principal ordinary management” criterion (material requirement) in case there is no management but anyway there is a “strong” establishment of the legal entity in Italy.
No modifications apply to the application and interpretation of the registered office’s formal requirement.
NEW RULES FOR HIRING EUROPEAN WORKERS IN THE UNITED KINGDOM AFTER BREXIT.
The decision of the United Kingdom (UK) to permanently leave the European Union (EU) from 2021 onwards has made it significantly more complicated for European citizens to work in the UK and for UK employers themselves to hire them. As the UK is no longer part of the EU, and the principle of European law on the free movement of workers, enshrined in Article 45 of the Treaty on the Functioning of the European Union (TFEU) has ceased to apply, it is no longer possible for European citizens to work in the UK without first obtaining a specific entry visa.
As of today, the legislative discipline applicable to EU citizens who wish to work in the UK is the same as that applicable to any other non-EU foreign worker.
Before discussing the rules specifically concerning the employment of foreign workers in the UK, it is worth noting that European citizens can still travel to the UK as standard visitors, without a visa, for a maximum of six months to carry out the following activities:
1) for tourism, e.g. as part of a holiday or vacation;
2) to see family or friends;
3) to volunteer for up to 30 days with a registered charity;
4) to transit the UK to another country (‘in transit’);
5) for certain business activities, e.g. to attend a meeting or a job interview;
6) to participate in a school exchange programme;
7) to attend a recreational course lasting up to 30 days, e.g. a dance course;
8) to study, do an internship or take an examination;
9) as an academic, senior doctor or dentist;
10) for medical reasons.
However, if a UK organisation (meaning a legal entity) wishes to permanently employ a foreigner who does not have the right to work in the UK, it must be explicitly authorised by the UK Home Office. Employers possessing an SPL acquire the status of ‘sponsor’. It should be noted that only legal persons, and not natural persons, can obtain an SPL.
A legal entity wishing to become sponsor must meet specific eligibility and suitability requirements.
The applying legal entity must be ‘genuine’ and ‘operating and/or trading’ within the UK. In other words, the English authority wants to make sure that the employer is not an ad hoc company created to circumvent English immigration rules, but instead is already operating in the UK. It is not necessary for the legal entity to occupy physical premises, although in this case it would be easier to prove the genuineness of the company to the competent English authority.
– The legal entity must have an internal organisation that enables it to fulfil the sponsor’s obligations under English law. Specifically, these are obligations of: reporting; keeping records and data relating to the foreign worker; and compliance with English immigration regulations.
– The legal entity must declare where the foreigner will work. The English authority in charge during the application process for the SPL will carry out inspections to verify the existence and suitability of such workplace. In the event that the legal entity declares that the worker will carry out his/her duties at the offices of a third party, the same legal entity must be able to prove the existence of a written agreement in this regard.
– The legal entity must prove that it is in a condition to employ a worker in the offered position. To be able to determine the treatment that the employer should provide to the foreign worker, it is necessary to identify the latter within one of the categories for which sponsorship is granted (i.e.: “skilled worker”; “senior or specialist worker”; etc.).
– The legal entity must never have infringed English immigration law.
Once the legal entity has demonstrated that it meets the above requirements, it can obtain an SPL and officially become a sponsor. Sponsors have access to the online ‘Sponsor Management System’ (SMS). The SMS is used to award a Certificate of Sponsorship (CoS). The CoS is an electronic document and contains personal information about the migrant worker, as well as details about the role he or she will hold and the salary he or she will receive. Each CoS has its own number and allows the migrant worker to apply for permission to enter (a visa) or stay (a residence permit) in the UK to carry out his/her work.
A CoS can only be used by the specific person to whom it has been allocated. However, the allocation of a CoS to a migrant does not guarantee that they can enter or remain in the UK. The Home Office must ensure that there is a genuine vacancy for the role, that he/she is sufficiently qualified and that the migrant is paid appropriately (according to English minimum wage regulations). The migrant must also meet specific eligibility criteria. The criteria vary depending on the category of sponsorship but may include minimum English language and financial requirements.
Finally, it should be noted that it is not always necessary for an English employer to obtain an SPL to hire a foreign worker. Indeed, if the UK employer wishes to hire a foreign worker for services performed remotely, without having the same worker residing in the UK, it will not have to obtain an SPL and the worker, by continuing to reside in his or her home country, will not need an entry visa.
THE UNAVAILABILITY OF THE DAMAGED CAR AND VEHICLE DOWNTIME: WHAT ARE THE RULES FOR DAMAGE COMPENSATION?
Damage from vehicle downtime is that damage resulting from the unavailability of a vehicle during repairs in a workshop; its compensation is not in re ipsa but follows precise rules that should be followed when instituting proceedings before the judicial authority.
In the event of a traffic accident or, simply, a vehicle breakdown, the owner or user has to face costs and economic losses due to the vehicle being unavailable while it is being repaired; such damages, usually referred to as vehicle downtime, are often the subject of an action for compensation by the injured party who, it must be said, must still comply with specific rules regarding the burden of proof when taking legal action.
Vehicle downtime can be traced back to extra-contractual liability if caused by an accident or a product defect (e.g., engine failure due to a defect); in such contexts, the burden to prove the wrongful conduct, the injury suffered, and the causal link between these two elements is on the person who suffered the damage (Art. 2043 Italian Civil Code).
In fact, case law suggesting that vehicle downtime would be in re ipsa with the simple burden on the injured party to prove the mere unavailability of the vehicle for the duration of the repair, is now outdated; in fact, the Supreme Court recently ruled that “… Damage resulting from vehicle downtime as a result of a crashed vehicle must be attached and proven, and the relevant proof cannot be related to the mere unavailability of the vehicle, but must be substantiated by the evidence of either the expense incurred in procuring a replacement vehicle, or the loss incurred due to the forced renunciation of the income obtainable from the use of the car …” (Italian Supreme Court, Section III, 14/03/2023, no. 7358 published Diritto & Giustizia 2023, 15 marzo; complies with Italian Supreme Court, Section VI, 28/02/2020, no. 5447 published in Giust. Civ. Mass. 2020).
The above principle must be applied even when the vehicle downtime is attributable to a breach of contract (e.g., delayed repair due to the workshop’s inexperience or the difficulties encountered in finding the spare part), and it could not be any different because otherwise workshops would run the risk of paying damages for each and every repair.
But what are the damages that the user usually claims in compensation?
First of all, the cost of renting a replacement vehicle; or, the loss incurred due to the forced relinquishment of income derived from the use of the vehicle (loss of profit) or the fee for the lease spent unnecessarily if the inactivity lasts for one or more months; sometimes, if the repair continues for a long time, a share of the insurance premium and car tax is claimed.
Finally, it is also useful to remember that a crashed vehicle, stationary in the workshop, does not always legitimize a claim for damages due to its unavailability: if the vehicle is beyond repair because, for example, it has been completely destroyed, vehicle downtime cannot be invoked; for the Italian Supreme Court “… The so-called <vehicle downtime> of the vehicle damaged by a traffic accident does not exist when the vehicle, as a result of the accident, has become unserviceable, resulting in that case in a permanent loss in the assets of the injured party with the right to compensation for both the damage from the loss of the motor vehicle and the damage relating to the expenses of operating the car during the period in which it was not used ”..” (Italian Supreme Court, Section III, 30/01/2014, n. 2070 published in Giustizia Civile Massimario 2014 – complies with Italian Supreme Court, Section III, 15/11/2016, no. 23191).
DISCLAIMER: This newsletter merely provides general information and does not constitute legal advice of any kind from Macchi di Cellere Gangemi. The newsletter does not replace individual legal consultation. Macchi di Cellere Gangemi assumes no liability whatsoever for the content and correctness of the newsletter.
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