TENDERS AND CONSOLIDATED DOCUMENT OF TAX COMPLIANCE (DURF)
Decree Law n. 124/2019 introduced article 17-bis in connection with Legislative decree 241/1997, containing a detailed set of rules to counteract the omitted or insufficient payment of withholding taxes, including through undue offsetting, as well as the use of set-off for the payment of social security and welfare contributions and compulsory insurance premiums. In particular, Article 17-bis provides for a series of measures to combat the omitted or insufficient payment of withholding tax, providing for new obligations, to be met by clients, contractors, subcontractors, agents and other parties with negotiating relations, however named. Paragraph 1 of the aforesaid article states that, as of 1 January 2020, persons acting as withholding agents in relation to taxes on income from employment and similar who reside in Italian territory for income tax purposes, and who entrust the performance of works or services for a total annual amount in excess of 200.000 Euro to third parties in the form of tenders, subcontracts, contracts with consortium members or through negotiating relationships of any kind, are required to obtain from the contractor and the subcontractors, who are obliged to issue them, a copy of the withholding tax payments made by the contractor and subcontractors in relation to the workers directly employed in the execution of the work or service. Such works or services must be characterised by the prevalent use of labour at the client’s place of business with the use of capital goods owned by the latter or traceable to it in any form.
Paragraph 2 of the same article states that, in order to allow the client to verify the total amount paid by the companies, within 5 working days following the payment deadline (if the payment of salary is made in the month following the performance of the work, the aforesaid deadline will ordinarily expire in the second month following the month the pay slip refers to), the contractor and the subcontractors shall deliver to the client and, in the case of subcontractors, also to the contractor, a copy of the payment receipts (the Inland Revenue shall make available a copy of such receipts in the tax mailbox of both the company that made the payment and the company whose tax code is indicated in the dedicated field of the F24 form; if the provisions of article 17-bis, paragraph 1 do not apply to the original client, copies shall be delivered only to the contractor) and a list of all the workers, identified by tax code, directly employed in the execution of the client’s works or services in the previous month, with details of the hours worked by each recipient, the amount of remuneration paid to the employee and details of the withholding taxes concerning said employee for the previous month, with those pertaining to the service contracted by the client shown separately.
The law also applies to procurement, award or subcontracting contracts concluded before 1 January 2020: therefore, withholdings made on salary pertaining to January 2020 (paid in February 2020 if the payment of salaries was due in January) are included in the scope of application; conversely, withholdings on salary for the year 2019 paid in January 2020 (so-called extended cash basis) are not included.
Article 17-bis, paragraph 5, states that the whole of Article 17-bis does not apply if the contractors or subcontractors notify the client that the following requirements have been met on the last day of the month preceding the month in which the payment of withholding tax is due, as certified by the Revenue Agency in an attached document:
- they have been in activity for at least 3 years;
- they are in compliance with their income tax returns obliogations;
- during the tax periods the tax returns submitted in the last three years refer to, they have made total payments recorded to their tax account for an amount not lower than 10% of the amount of income or compensation resulting from the returns;
- have no entries on the tax rolls or enforceable assessments or statements of objections by collection agents in connection with income tax, regional income taxes (IRAP), withholding taxes and social security contributions for amounts in excess of €50,000, for which the payment terms have expired and payments are still due, or no suspension procedures are in place. The aforesaid provisions do not apply to amounts subject to instalment plans for which no forfeiture has occurred.
|Such obligations do not apply if the contractors or subcontractors hand over to the principal the certification, made available by the Revenue Agency, attesting to the fulfilment of the legal requirements (Annex A, measure No 54730/2020).
By order no. 54730 of 6 February 2020, the Director of the Revenue Agency approved the certification scheme for the requirements mentioned above, which is valid for 4 months from the date of issue and is exempt from stamp duty, as well as special taxes. The fulfilment of the requirements is verified on the basis of the entries in the tax registry information system and on the basis of the data transmitted by the collection agents (Annex B). The certificate form and any updates are available on the Inland Revenue’s website.
With the long circular letter no. 1/E/2020, published a few days before the first payment deadline, the Inland Revenue Service offered the first clarifications on the subject.
The certificate, issued as at the last day of the month preceding the deadline referred to in Article 17-bis, paragraph 2, shall be made available to the company or its representative:
- from the third business day of each month;
- at any territorial office of the Provincial Directorate with jurisdiction over the company, save in case of different provisions made by the Provincial Director (major taxpayers need to apply to the Regional Directorates).
The company or its representative may report any additional data that were not, in their opinion, taken into account to the office that issued the certificate. The office shall verify such data and, where necessary, request confirmation of the information from the collection agents that shall provide the requested feedback. If necessary, the office shall issue a new certificate.
Obligations and penalties
It should be remembered that, within the scope of Article 17-bis, paragraph 1, and in the absence of grounds for exemption, the clients, contractors, sub-contractors and parties in other negotiated relationships are subject to 3 different obligations, in relation to income from employment and equivalent income to be paid subsequently:
- set-off prohibition ;
- sending data by the contractors and controls by the principal;
- suspension of payments by the principal.
In case of non-compliance with such obligations, the principal is required to pay a sum equal to the penalty imposed on the contractor or subcontractor for the incorrect determination and withholding of taxes, as well as for the late payment of the same, without the possibility of set-off, only when the contractor or subcontractor has committed the aforementioned violations, including the violation of the prohibition of set-off, and the relevant penalties have been imposed. This sum is not due when, despite the principal not having fulfilled its obligations correctly, the contractor or subcontractor did, indeed, fulfil such obligations, or availed itself of the voluntary correction or errors procedure to remedy the violations committed before they were discovered by the supervisory authorities. All other tax violations by the contractor or subcontractor not expressly mentioned (e.g. violation of the reporting obligations as tax substitute) shall also remain outside the scope of application of the provision.
The penalty is a non-tax administrative penalty, so the general provisions of Law No 689/1981 shall apply.
Therefore, the principles of Legislative Decree No. 472/1997 do not apply.
|In the event that, during the first months of application of the provision (and, in any case, no later than 30 April 2020), the contractor has correctly determined and made the withholding tax payments (save for the prohibition of offsetting and relevant exceptions), without using separate forms for different clients, the violation detailed in article 17-bis, paragraph 4, concerning non-compliance shall not apply, provided that the client is provided, within the aforesaid term, with the required documentation (payment receipts, list of workers’ names, detail of worked hours, amount of salary paid, detail of withholding taxes).
Reduction of the tax burden on subordinate employment
Given the extraordinary and urgent need to implement a reduction in the tax burden on subordinate employment, Law Decree 3/2020 containing urgent provisions for the reduction of the tax burden on subordinate employment was published in the Official Gazette, is in force since 6 February 2020, and needs to be converted into law.
To date, the decree provides for the abrogation, from 1 July 2020, of article 13, paragraph 1-bis of the Consolidated Law on Income tax (TUIR) concerning the so-called “80 Euro allowance” included among the “Other deductions from Irpef”, replacing it with a supplementary amount of Euro 100 per month and with an additional tax deduction while waiting for the review of income support tools and a structural review of the tax deductions system.
Such measures shall come into force on 1 July 2020 and should not be considered as final, according to the text of the law decree, as it also calls for the review of the current tools and, with regard to the additional tax deduction, it already establishes that it is a temporary measure concerning only the second half-year of 2020.
A supplementary amount, which does not count as income, equal to 600 Euro for the year 2020 and 1,200 Euro from 2021, is granted to subjects whose total income does not exceed 28,000 Euro, provided that the gross tax is higher than the amount of the deduction granted under Article 13, paragraph 1 of Tuir (so-called deduction for subordinate employment).
|The supplementary amount granted must be related to the period of employment and is due for work and services provided from 1 July 2020.
- recognise the supplementary amount and pay it out proportionally with the salary paid from 1 July 2020;
- verify that the amount is due during the adjustment and, if not due, recover the relevant amount, taking into account the possible right to the newly introduced further deduction and the fact that, if the amount not due exceeds 60 Euro, it must be recovered in 4 equal instalments starting from the salary that is affected by the adjustment;
- offset the disbursed amounts through the procedure referred to in Article 17 of Legislative Decree 241/1997.
This is an additional deduction from gross tax, proportional to the period of work, of an amount equal to:
- 480 Euro, increased by the product between 120 Euro and the amount corresponding to the ratio between 35,000 Euro, less total income, and 7,000 Euro, if the amount of the total income exceeds 28,000 Euro but not 35,000 Euro;
- 480 Euro if the total income exceeds 35,000 Euro but not 40,000 Euro; the deduction applies to the part corresponding to the ratio between the amount of 40,000 Euro less total income and the amount of 5,000 Euro.
|The additional deduction applies to work and services provided from 1 July 2020 to 31 December 2020.
The withholding agents:
- recognize the additional deduction apply it proportionally to the salary paid from 1 July 2020;
- verify that the amount is due during the adjustment and, if not due, recover the relevant amount which, if higher than 60 Euro, is withheld in 4 equal instalments starting from the salary which is subject to the effects of the adjustment.
Both the supplementary amount and the additional tax deduction apply to:
- income from subordinate employment, with the exclusions of Article 49(2)(a) of Tuir (pensions of all kinds and comparable allowances);
- income comparable to income from subordinate employment referred to in Article 50(1)(a), (b), (c), (c-bis), (d), (h-bis) and (l) of Tuir.
In particular, such comparable income includes:
- A) remuneration received, within the limits of current salary increased by 20%, by workers who are members of producer and worker cooperatives, service cooperatives, agricultural cooperatives and produce primary processing cooperatives and small fishing cooperatives;
- b) allowances and salary received from third parties by employees for work carried out in this capacity, with the exception of those which by contract must be paid back to the employer and those which by law must be paid back to the State;
- c) sums paid by anyone by way of scholarships or grants, bonuses or subsidies for the purposes of study or professional training, if the beneficiary is not bound by an employment relationship with the provider;
c-bis) sums and securities in general, for whatever reason received during the tax period, also in the form of donations, in relation to the offices of director, auditor or auditor of companies, associations and other legal and other entities, to collaborations with newspapers, magazines, encyclopaedias and the like, memberships in boards and committees, as well as salary received in relation to other collaborative relationships having as their object the performance of activities carried out by the taxpayer on an independent basis in favour of a specific subject within the framework of a unitary and long-term relationship without the use of professional equipment and with pre-established periodic remuneration, provided that the offices or collaborations are not institutional tasks included in the employment activity referred to in Article 49, paragraph 1 of Tuir on income from subordinate employment, or the object of the art or profession referred to in Article 53, paragraph 1 of Tuir on income from self-employment;
- d) the remuneration of priests, referred to in Articles 24, 33 (a) and 34 of Law 222/1985, as well as the appropriate stipends and stipend supplements referred to in Article 33 (1) of Law 343/1974;
h-bis) the pension benefits referred to in Legislative Decree no. 124/1993, however paid;
- l) compensation received by persons engaged in community work in accordance with specific regulatory provisions.
For the purpose of determining total income, the exempt portion of subsidized income pursuant to Article 44, paragraph 1 of Decree Law 78/2010 and article 16 of Legislative Decree no. 147/2015 is also taken into account.
The total income is considered net of the income of the real estate unit used as the main dwelling and that of the related appurtenances referred to in Article 10, paragraph 3-bis of Tuir.
Our firm is always available to provide additional information or clarification on the above subjects and invites anyone who believes that they fall within the scope of application of the law referred to above to contact us in order to verify the conditions of application and organize the work.
De Carlo Arianna – firstname.lastname@example.org
Head of Payroll Department