The Italian law on corporate criminal liability is contained in Legislative Decree 231/2001 (Decree 231). Decree 231 gives rise to the liability of companies and the application of specific sanctions when company directors, employees, or other collaborators commit crimes in the interest and to the advantage of the company, in the course of their professional services.
The sanctions potentially applicable following a finding of corporate liability include both fines and interdictions such as: the revocation of authorisations, licences or concessions necessary to carry on the business; a prohibition on contracting with the public administrations; a prohibition on carrying out the business; an exclusion from access to State facilitations, loans, contributions or subsidies and the possible revocation of any such benefits previously granted; and a prohibition on advertising goods or services.
Not all crimes will give rise to liability on the part of the company
Decree 231 sets out a list of “relevant crimes” giving rise to corporate criminal liability. It also provides the possibility for a company to avoid – in whole or in part – the application of the sanctions, if, prior to the commission of the crimes, it:
- adopted and effectively enacted an Organisational, Management and Supervisory Model suitable for the prevention of crimes of the type that occurred; and
- appointed a Supervisory Body – duly vested with powers to act on its own initiative – to monitor compliance with the Model and to ensure its constant updating.
When the legislation was originally enacted in 2001, corporate criminal liability only existed for crimes committed against the public administration, such as corruption and bribery, fraud to the detriment of the State or undue receipt of public funding. The list of relevant crimes contained in Decree 231 has been amended and extended year on year and now contains a wide range of offences, from computer crimes, to crimes in financial statements and corruption in the private sector, crimes against competition and the market, market abuse crimes, crimes against copyright, money laundering, environmental crimes and crimes related to health and safety matters.
Further important amendments are under way and concern the introduction of tax crimes among the list of relevant crimes pursuant to Decree 231.
Law Decree 124/2019 entitled “Urgent measures in fiscal matters and for requirements that cannot be postponed”, published on 26 October 2019, has introduced making fraudulent tax returns based on false invoices or other false documents for non-existent transactions, among the relevant crimes pursuant to Decree 231. Fines and none interdictory sanctions are provided.
The entry into force of this provision is subject to the conversion of the Law Decree into law by 25 December 2019 by approval of the Italian Parliament, which is able to modify, amend or cancel the text of the Law Decree.
The PFI Directive and its ongoing transposition in Italy
The introduction of this tax crime among the relevant crimes is considered a first step towards the extension of corporate liability to cover a wider range of tax crimes.
This extension has been the subject of much discussion and has long been expected as a result of the adoption of EU Directive 2017/1371, approved by the European Parliament and the Council of the European Union on 5 July 2017 entitled “Directive on the fight against fraud to the Union’s financial interests by means of criminal law” (the PFI Directive, i.e. protection of financial interests).
The aim of the PFI Directive is to provide a strengthened system of measures to protect the financial resources of the EU by harmonising the individual legal frameworks in the Member States to arrive at a level of protection that is equivalent throughout Europe.
According to the PFI Directive, the Italian legislator will have to provide for sanctions that are “effective, proportionate and dissuasive” when tax fraud is committed “for the benefit [of a company] by any person, acting either individually or as part of an organ of the company, and having a leading position within the company, based on (a) a power to represent the company; (b) an authority to take decisions on behalf of the company; or (c) an authority to exercise control within the company” (art. 6).
In addition to fines, the PFI Directive also provides for the following sanctions: “(a) exclusion from entitlement to public benefits or aid; (b) temporary or permanent exclusion from taking part in public tenders; (c) temporary or permanent disqualification from carrying on business; (d) placing under judicial supervision; (e) judicial winding-up; (f) temporary or permanent closure of establishments which have been used for committing the offence”.
Italy is now acting somewhat tardily to implement the PFI Directive, on the basis of Law dated 4 October 2019 no. 117 (European Delegation Law 2018).
The European Delegation Law 2018 requires the Italian Government to extend the list of crimes under Decree 231 giving rise to relevant corporate criminal liability, so as to include tax crime which may harm the financial interests of the European Union .
The European Delegation Law 2018 also provides, where necessary, and in addition to the existing sanctions contained in Decree 231, that the sanctions expressly indicated in the PFI Directive (see above) can also be applied.
Tax crimes and corporate liability under Decree 231
In line with expectations and as part of the ongoing process for the full implementation of the PFI Directive, Law Decree 124/2019, was approved by the Italian Parliament’s Chamber of Deputies on 6 December, with some amendments and integrations.
The new text of the Decree, which will be discussed and, in all likelihood, definitively approved by the Italian Senate later in December, extends corporate criminal liability to all the most serious tax crimes provided under Italian law and strengthens the sanctions provided in the originally wording of Law Decree.
In particular, the new law, if so approved, would provide as relevant crimes for the purpose of corporate criminal liability not only the making of fraudulent tax returns based on false invoices or other false documents relating to non-existent transactions but also the submission of fraudulent tax returns using other artifices, the issue of invoices or other documents for non-existent transactions, the hiding or destruction of accounting records together with the fraudulent avoidance of tax payment.
A company that has committed these crimes will risk a maximum fine of Euro 774,500 (increased to Euro 1,032,000 if the company has made a substantial profit as a result).
The new text also provides heavy interdictory sanctions and more specifically: i) a prohibition on contracting with the public administrations; ii) exclusion from access to State facilitations, loans, contributions or subsidies and the possible revocation of any such benefits previously granted; and iii) a prohibition on advertising goods or services.
What should businesses be doing now?
Pending the definitive approval and the entry into force of the new law containing the relevant tax crimes and the completion of the regulations, companies and entities that have adopted an Organisational Management and Supervisory Model would be well advised to review their existing risk assessments with respect to the new crimes included and consider reviewing existing models to set out new protocols and/or reinforce existing protocols for the prevention of these