Conversion into law of the “Milleproroghe decree”: new developments for employment

Law no. 18/2024, converting the Decree Law no. 215/2023 (so-called “Milleproroghe” Decree), has been published in the Official Gazette no. 49 of February 28, 2024. We highlight the following novelties concerning employment and personnel administration.

Fixed-term contracts

The possibility of justifying fixed-term employment relationships beyond 12 months due to technical, organizational, or production-related needs, even in the absence of specific provisions in collective agreements, is extended until December 31, 2024 (Article 18, paragraph 4-bis). Please note that this date represents the deadline for signing fixed-term contracts exceeding the 12-month threshold based on reasons unrelated to collective bargaining: the contract expiration date may indeed be after this date. Finally, it is important to specify in the contract the temporary and objective reasons that fall within the aforementioned grounds and justify the fixed-term duration of that contract.

Sports employment

Instructors at sports facilities and clubs of any kind, technical directors, and instructors at sports clubs, already enrolled in the Pension Fund for Entertainment Workers, have the right to opt, by June 30, 2024, for maintaining the current pension scheme.

An exemption from withholding tax on prizes awarded to athletes and coaches for results achieved in sports competitions is provided until December 31, 2024 (Article 14, paragraphs 2-bis, 2-ter, and 2-quater).

Special correction

The special correction procedure (payment of one-eighteenth of the minimum statutory amount of penalties, in addition to the tax and interest due) also applies to violations concerning tax returns validly submitted for the tax period ending on December 31, 2022. For this purpose, the payment of the amounts due can be made in a single installment by March 31, 2024, or in 4 installments of equal amounts to be paid, respectively, by March 31, 2024, June 30, 2024, September 30, 2024, and December 20, 2024. Interest at a rate of 2% per annum is due on installments after the first one. The regularization under this paragraph is completed by paying the amount due in a single installment or by paying the first installment by March 31, 2024, and by rectifying irregularities or omissions.

Taxation of performance bonuses

The  the Revenue Agency, through Circular No. 5/E/2024 and in response to Interpellation No. 59/E/2024, has provided the following clarifications regarding the tax exemption of performance bonuses:

• For the year 2024, the reduced tax rate for performance bonuses remains at 5% (rather than the usual 10%).
• The incremental index provided by collective bargaining for the purpose of obtaining the tax exemption must be directly related to the determination of the bonus. For tax relief purposes, an efficiency index that is solely incremental for tax relief purposes and not for the payment of the bonus cannot be provided.

Taxation of fringe benefits for the year 2024

The Revenue Agency, through Circular No. 5/E/2024, has provided guidance regarding the management of fringe benefits in the year 2024. In particular, the Tax Authority has clarified the following aspects:

• For the year 2024, fringe benefits do not contribute to the income of workers within the overall limit of 1,000 euros. This threshold is raised to 2,000 euros for employed workers with fiscally dependent children. For this purpose, the worker must declare the right to it by indicating the tax code of the children.
• Employers must inform the RSUs (Unitary Union Representatives) where present in the company of the use of the benefit.
• Sums paid or reimbursed to workers for payment of domestic utility bills for integrated water services, electricity, natural gas, and sums paid for expenses related to renting the primary residence or for mortgage interest on the primary residence are also within the exemption thresholds.
• The term “primary residence” refers to the main residence useful for obtaining deductions on mortgage interest or lease payments.
• The tax-exempt reimbursable expenses must concern residential properties owned or held, based on an appropriate title, by the employee, spouse, or their family members, where they habitually reside, provided they actually incur the related expenses.
• Rental expenses include the rent specified in the lease contract that has been properly registered and paid during the year.
• The employer must obtain and retain necessary documentation for potential audits to justify that the reimbursement falls within the tax and contribution exemption limit. Alternatively, the employer may obtain and retain a substitute declaration of notarial deed from the employee attesting to the fulfillment of the conditions provided by the law.

Regarding the new taxation of loans, the Tax Authority states that Decree Law no. 145/2023 has provided that: for variable-rate loans, the reference rate to be used is the prevailing market rate at the maturity date of each installment; for fixed-rate loans, however, the reference rate to be considered is the prevailing market rate at the time of granting the loan or at the date of signing the loan assignment/substitution/renegotiation/subrogation contract. This provision is valid starting from the tax period of 2023.

Clarifications regarding categories for company welfare

The Revenue Agency, in response to Interpellation No. 57/E/2024, has provided a clarification regarding the identification of categories relevant for providing tax-exempt goods and services in kind within a company welfare plan. This clarification, divergent from previous indications and therefore deserving attention, pertains to the determination of useful categories for disbursing tax-exempt benefits within the framework of an enterprise’s welfare program.

It is well known that the general rule contained in the Tax Code (Article 51) establishes that “The income from employment consists of all sums and values ​​in general, received for any reason during the tax period, even in the form of liberal payments, in relation to the employment relationship.” This provision enshrines the so-called “principle of comprehensiveness” of employee income, under which all sums and values ​​received by the employee, for any reason, in relation to the employment relationship, contribute to the determination of employee income.

However, the same Article 51 identifies, at paragraph 2 and in the last period of paragraph 3, specific exemptions, listing works, services, performances, and expense reimbursements that do not contribute to forming the taxable base or only partially contribute, provided that the in-kind provision does not circumvent ordinary criteria for determining employee income in violation of the principles of tax capacity and progressivity of taxation. In other words, as clarified by the technicians of the Revenue Agency, the non-taxability of employee income must be coordinated with the principle of comprehensiveness, which, by encompassing within this income category everything the employee receives in relation to the employment relationship, recognizes the residual application of the aforementioned exemptions, also considering that the benefits therein provided do not always have a strictly income-related connotation.

Therefore, if these benefits serve remuneration purposes (for example, to incentivize the worker’s performance or specific groups of workers), the regime of total or partial exemption cannot be applied. The same Revenue Agency, in Circular No. 28/E/2016, defines company welfare as “benefits, works, services provided to the employee in kind or as expense reimbursements with purposes that can be defined, briefly, as socially relevant, excluded from taxable employee income.”

As reiterated in Resolution No. 55/E/2020, it is necessary for the benefits to be made available to the majority of employees or to categories of employees. In this regard, the Tax Administration has repeatedly clarified that regardless of the use of the expression “to the majority of employees” or “categories of employees,” the legislator does not recognize the application of the provisions exhaustively listed in paragraph 2 whenever the sums or services indicated therein are addressed on a personal basis, or constitute benefits only for some specifically identified workers.

The aforementioned practice has further clarified that the expression “categories of employees” used by the legislator should not be understood solely with reference to the categories provided for in the civil code (managers, workers, etc.), but to all employees of a certain “type” or “level” or “qualification” (for example, all night shift workers), or to a homogeneous group of employees, even if some of them do not actually benefit from the “utilities” provided.

However, it is not considered possible to identify a “category of employees” based on a distinction, and here lies the sudden reversal of the Revenue Agency, not related to work performance but to personal or family characteristics or conditions of the employee.

Moreover, in the event that the welfare plan is also funded by amounts constituting fixed or variable remuneration of the members – with the exception of the scenario regulated for taxable productivity bonuses – or if the portion of the amount recognized to employees in the form of welfare (the so-called welfare credit) that is not used is converted into cash, the income relevance of the “values” corresponding to the services offered to them would remain unaffected by the ordinary rules dictated for the determination of employee income.

Specifically, the Revenue Agency has examined the case of an employer intending to provide, to mothers on parental leave, an amount under welfare, corresponding to the difference between 100% of the gross pay and the parental leave allowance, for a period of 3 months. It is noted that the sum funding the individual welfare credit would consist of the difference between what is paid by INPS (National Social Security Institute) and the fixed salary due to the employee if she were to return to work. In response to the query, it is noted that the allocation of company welfare based on maternity status does not appear suitable for identifying a “category of employees” in the sense outlined above. Therefore, the amounts in question are considered to have income relevance since they represent a disbursement replacing sums constituting fixed or variable remuneration, thus serving remunerative purposes.

Periodic Report on Male and Female Employees

Companies with more than 50 employees are required to prepare, biennially, a report on the situation of male and female personnel, both concerning the overall workforce and dependencies, and with reference to each production unit with more than 50 employees.

The Interministerial Decree of March 29, 2022, and its Annex A define the methods of preparation. Companies with up to 50 employees may voluntarily prepare the report.

The report must be prepared exclusively in electronic mode using the software available on the Employment Services portal.

For the biennium 2020-2021, the deadline for submitting the report was extended to September 30, 2022. For subsequent biennia, the submission deadline is confirmed for April 30 of the year following the end of each biennium (for the biennium 2022-2023 by April 30, 2024).

Through the computer application, by December 31 of each year, the list, prepared regionally, of companies required to submit the report is made available to the national equality councillor. Similarly, lists are made available to regional equality councillors, metropolitan city councillors, and councillors of vast area entities for their respective territories.

Failure to submit – even after a request for regularization by the competent Labor Inspectorate – results in the application of sanctions pursuant to Article 11 of Presidential Decree 520/1995; if non-compliance continues for more than 12 months, the company’s potentially enjoyed contributory benefits are suspended for one year.

The National Labor Inspectorate verifies the accuracy of the reports, and in the case of false or incomplete reports, an administrative fine ranging from 1,000 to 5,000 euros is applied.