The Revenue Agency, with the FAQ of March 31, 2025, has clarified the procedures for notifying the possession of documentation on hybrid mismatches.
The communication, provided for by Article 9 of the Ministerial Decree of December 6, 2024 (hereinafter referred to as the Decree), allows access to the optional regime known as 'penalty protection' (i.e., the exemption from administrative penalties). All entities resident in Italy for tax purposes and permanent establishments of non-resident entities can access this new regime.
As confirmed by the FAQs, the communication must be made by indicating in the income tax return:
· whether the documentation is prepared only for the tax period of 2024;
· whether the documentation is prepared for the tax period of 2024 and at least one of the tax periods from 2020 to 2023;
· whether the documentation is prepared for at least one of the tax periods from 2020 to 2023.
It is therefore possible to select only one tax period, or even several tax periods, between 2020 and 2024 to elect for the regime.
The publication of the FAQs further completes the normative and interpretative framework for the implementation of EU legislation on hybrid mismatches.
The current legislation aims to counteract the use of instruments (so called “hybrids”) that, due to different qualifications attributed in different EU Member States, may give raise to mismatches, such as double deduction in both States (double deduction) or deduction in one State without inclusion of the income in the other State (deduction without inclusion). Misalignments may also originate, for example, from different qualifications of the entity (transparent, or not) in two different States or from different applications of the criteria for determining residence.
In order to manage more efficiently mismatches (even unintentional) that are not fully monitored, the law has introduced – similarly to what is already in force for transfer pricing purposes – a penalty protection regime applicable to taxpayers preparing adequate documentation, according to the methods and terms set by the Decree, aimed at identifying potentially relevant transactions and ascertaining the existence of hybrid mismatches.
In case of disputes arising from hybrid mismatches, the existence of adequate documentation allows taxpayers to benefit from the non-application of administrative penalties.
Based on the current normative and practical framework, the deadlines for preparing the documentation are as follows:
· for the tax periods 2020, 2021, 2022 by June 30, 2025; and
· for the tax periods 2023 and 2024 by October 31, 2025.
Compliance with the above deadlines is ensured by applying a digital signature and a timestamp to the documentation.
