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Tax Avoidance: Criminal Liability for a Foreign Companys Management

March 15, 2012

By BERNADETTE ACCILI & DOMENICO GIOIA

On 28 February 2012, the Criminal Chamber of the Italian Supreme Court (Corte di Cassazione) issued the judgment in the case No. 7739 deciding, inter alia, on the criminal tax consequences for the managers of a company formally resident abroad but de facto managed in Italy. In light of this recent ruling of the Supreme Court, fiduciary companies, financial intermediaries, advisors and counsels of foreign companies of Italian groups when acting as members of the board of the said foreign companies should carefully assess whether such companies fall within the definition of sham companies i.e. società esterovestite, in order to identify the potential Italian tax liabilities of the company and avoid potential criminal tax consequences which may derive personally to them from the failure to fulfill such obligations.