The Tax Control Framework is a structured system for identifying, measuring, managing and controlling tax risk, integrated into the broader system of internal controls within the company. Its regulation is provided for by the legislation on the Cooperative Compliance regime, introduced by Legislative Decree No. 128/2015.
TCF as a prevention tool
From an operational point of view, the TCF allows companies to systematically identify and monitor the main areas of tax risk associated with their business activities. Through structured risk mapping and the adoption of appropriate control procedures, the TCF helps prevent errors, omissions and potential disputes, including in relation to particularly sensitive transactions such as extraordinary transactions, asset disposals or the management of intra-group loans.
By way of example, below are some cases highlighting potential risks and related penalties, in order to encourage the use of this tool.
| Case | Potential risk and relative severity | Penalty |
|---|---|---|
| Sale/disposal of assets | Incorrect determination of capital gains/losses | False declaration – criminal offence governed by Article 4 of Legislative Decree No. 74 of 2000. |
| Management of loans in the context of cash pooling relationships | Incorrect/omitted identification of the legal cause of the contract (notional cash pooling vs zero balance for the purposes of any withholding tax and ACE) |
|
The TCF in the context of Cooperative Compliance
The Cooperative Compliance regime aims to establish a relationship of trust and collaboration between taxpayers and the tax authorities, based on constant and preventive dialogue on relevant tax issues.
Access to the scheme is subject to specific subjective requirements, linked to revenue volumes, which have been progressively reduced over the years, and objective requirements, including the availability of an effective integrated tax risk control system, incorporated into the corporate governance system and certified by independent professionals.
Benefits for businesses
The adoption of a TCF within the framework of Cooperative Compliance brings significant rewards, including:
- preliminary consultation procedures with reduced response times;
- simplified procedures for regularising tax positions;
- non-application or reduction of administrative penalties for risks reported in a timely manner;
- exemption from providing guarantees for tax refunds;
- reduction in assessment terms;
- introduction of grounds for non-punishment for certain types of tax offences.
Voluntary adoption of the TCF
Currently, the Cooperative Compliance regime is reserved for resident and non-resident entities (with a permanent establishment in Italy) that generate a turnover or revenue of not less than:
- €750 million for the years 2024 and 2025;
- €500 million for the years 2026 and 2027;
- €100 million from 2028 onwards.
However, the legislator has also provided for the possibility of voluntarily adopting a Tax Control Framework ( ) for companies that do not meet the size requirements for access to Cooperative Compliance. In this case too, if the objective requirements are met and an application is submitted, significant benefits are recognised in terms of penalties and criminal liability.
The role of the Tax Risk Manager
A central element of the system is the Tax Risk Manager, who is responsible for identifying, mitigating and monitoring tax risks. As part of the compliance or risk management functions (and not reporting directly to the CFO), the Tax Risk Manager ensures the independence of tax oversight and is the primary contact in relations with the Revenue Agency. The function can also be outsourced.
The firm's professionals assist leading national and international groups in both the implementation of new Tax Control Frameworks and the monitoring and control (first and second level) of operating models.
