Recently we have published an article about the Supervisory Body, which is responsible for monitoring and possibly updating the 231 Organizational Model for administrative liability under the Legislative Decree 231/2001.
This update will generally depend on any regulatory or organizational changes in the company. However, it should also follow recent adjustments and extensions relating to tax offenses, i.e., violations of tax regulations with possible criminal relevance for the entity.
A few notes on tax crimes
The main types of tax crimes include fraudulent declarations of non-existent transactions through invoices or other documents; unfaithful declarations and omitted tax returns; tax evasions; concealment or destruction of accounting documents; failure to pay certified withholdings or VAT and undue compensation.
In 2019, the tax offenses reform (Legislative Decree no. 124/2019) extended the 231 liability to the criminal-tax area by expanding the so-called “predicate offenses”. Inevitably, the companies felt the necessity to update their organizational models.
The reason is that this change leads to a review of the risk areas that the MOG 231 already took into consideration, such as:
- Supplier management, including the demonstration of their ability to guarantee performance and their inclusion in the supply chain logic.
- Customer management, including supply chain management and verification of correspondence between invoice holders and service recipients.
- The link between accounting, financial statements and tax determination.
- The qualification of concluded transactions even when they are not reflected in invoices or similar documents.
We should also note that the Legislative Decree no.75, July 14, 2020, has transposed the EU directive no. 2017/1371, i.e., the so-called P.I.F. (Financial Interest Protection) relating to the rules for the fight against frauds affecting the EU’s financial interests by criminal law. This implementation further extended the administrative liability of entities regarding tax offenses.
The fundamental characteristics of the administrative liability of entities
The fundamental characteristics of the companies’ administrative liability are expressed by the Legislative Decree 231/2001. The Decree configures liability in all those circumstances in which a person belonging to the entity commits one of the predicate offenses. Such offenses include those listed in article 24 and subsequent of the Decree itself (i.e., undue receipt of funds, fraud against the State or a public body or for the achievement of public funds and IT fraud against the State or a public body; extortion and corruption, attempted crimes).
It will always have to be verified that the crime or harmful event is indeed attributable to the company. In this sense, reference will be made to the objective or subjective criteria for indictment in Article 5 of the Decree.
The objective criterion of indictment indicates that the administrative responsibility of the tax offense is attributable to the company if the crime was committed by a person who is part of the company’s organizational structure in such a way as to generate an interest that benefits the organization itself. In this case, interest means the purpose of the criminal conduct, while the benefit is the material profit from the crime.
The subjective criterion of indictment relates to the qualifications of the subjects who can commit the offense: top managers or subordinates. Top managers are those who perform management, administration, or representation roles in the company or in a part of the company that has managerial and financial autonomy. Typical examples include managing and non-managing directors, members of the management or supervisory board; employee directors and general managers. On the other hand, subordinate subjects are individuals who are always subjected to the top management’s control.
This is an important distinction since if the person – senior or subordinate – has committed the crime for a personal or third-party purpose, no responsibility can fall on the company. The same principle will also apply if the company can prove that it has adopted and implemented an effective organizational model, supervised by a specific body with control and initiative powers and that the crime was committed by circumventing the MOG.
Tax offenses presupposed of liability according to art. 25 quinquiesdecies
We should also dedicate some clarifications to Law 159/2019, which introduced article no. 25 quinquiesdecies. The scope of this article was then extended by Legislative Decree 75/2020.
This is a highly noteworthy text since it establishes the administrative responsibility of the companies for some criminal offenses indicated and governed by the Legislative Decree 74/2020.
These predicate offenses include, in particular:
- Fraudulent declaration using invoices or other documents for non-existent operations, for example to obtain tax savings.
- Fraudulent declaration through other devices, such as, for example, false documents aimed at tax evasion.
- Issuance of invoices or other documents for non-existent transactions, so as to allow other companies to evade taxes.
- Concealment or destruction of accounting documents in such a way as to make it impossible to reconstruct the company’s turnover effectively.
- Fraudulent evasion of tax payment, exemplified by the dispersion of corporate assets capable of generating fraudulent savings for the company.
To these crimes we must add those committed in the context of fraudulent cross-border systems with the aim of evading value-added tax for a total amount of at least ten million euros:
- Unfaithful declaration, for example, by falsifying the declaration for value added tax to obtain savings.
- Failure to declare, for example, for the purposes of value added tax.
- Undue compensation, for example, through the production of false documents to benefit from undue or even non-existent credits.
Based on what we just stated, reconsidering the 231 Organizational Model and its update become essential operations.
It is highly recommended to adopt a MOG 231 specifically oriented to the prevention of tax crimes, moreover in complete consistency with the spirit of the same Decree Law 231/2001, which provides for the identification of the risks-offenses and the possibility of choosing which of them to prevent through an adequate Organizational Model.
The necessary steps to adapt the 231 Organizational Models to tax offenses
To adapt their 231 Models, companies will have to act according to four main guidelines:
- By analyzing the fiscal history of the company and evaluating the validity of the existing compliance models.
- By mapping the processes and sensitive activities at the risk of tax crimes.
- By analyzing, evaluating and developing an adequate Internal Control System.
- By updating the Organizational Model 231 and implementing it promptly.
In conclusion, the constant adaptation of the 231 Organizational Model with particular attention to tax crimes is to be considered a fundamental activity in the overall and practical improvement of the Internal Control and Risk Management System. The MOG is an opportunity to review the organization’s internal processes critically and objectively, with broad-spectrum objectives of improving their effectiveness and efficiency thanks to the formalization of increasingly advanced procedures and protocols. It is also useful to enhance the company’s transparency and reputation towards all its stakeholders.
Get in touch with Stella Law Firm’s specialists to immediately get reliable advice on these issues.