PAYMENT OF THE TAX WITHHOLDINGS AND CONTRIUBUTIONS WITHIN TENDER CONTRACTS OR PROVISION OF WORKS AND SERVICES – CHANGES IN LAW No. 157/2019
Art. 4 of Decree Law 124/2019 converted into law with Law 157/2019 introduced the new art. 17-a in Legislative Decree no. 241/97 regarding the payments of the tax and welfare withholdings by contracting undertakings, as better specified below.
The law envisages that the contracting undertakings, contractors and sub-contractors are obliged to pay the withholdings on the income from employment and equivalent work for the workers employed in executing the work or the service, without being able to offset it in the F24 form with their own credits, if they perform works or services for an overall annual amount exceeding 200,000.00 euro to be carried out with a prevalent use of manpower. The customer, on the other hand, is obliged to ensure that the undertaking fulfils the payment of the withholdings and if they find a non-fulfilment, they must suspend the payment of the consideration and communicate it to the competent Revenue Office.
The law applies to customers who assign the fulfilment of one or more works or one or more services, who are withholding agents and resident for the purposes of direct taxation in the State.
The exception introduced with art. 17-bis of Legislative Decree 241/97 applies to customers who assign the execution of one or more works or one or more services to a contracting undertaking, contractor or sub-contractor for an annual amount exceeding 200,000.00 euro, through “tender contracts, sub-contracts, assignments to consortia or commercial relations, however they may be called, characterised by the prevalent use of manpower at the customer’s places of business with the use of the instrumental assets owned by the latter”.
In order to come within the applicative environment of the provision, the following conditions must co-exist:
- the overall annual amount of the works and of the service or services commissioned must exceed 200,000.00 euro;
- the execution must be characterised by the prevalence of use of the manpower at the customer’s places of business with the latter’s instrumental assets.
OBLIGATIONS OF THE CONTRACTING UNDERTAKING OR CONTRACTOR AND SUB-CONTRACTORS
The contracting undertaking or contractor and sub-contractor:
- shall determine and withhold the amount of the tax withholdings calculated on the income from employment and equivalent work paid to the workers involved in executing the work or the service for the whole duration of the contract;
- shall pay them in, respecting the ordinary term, but without being able to offset them in the F24 form with their own credits
In the 5 working days after the expiry of the term for paying the withholdings, the contracting undertaking or contractor and the subcontractors will send the customer, and for the subcontractors, also the contracting undertaking:
- the F24 forms used for the payment of the withholdings on the income from employment and equivalent work of the workers employed to provide the work or the service assigned to them by the same customer, completed in accordance with the instructions contained in resolution no. 109 of the Revenue Office dated 24.12.2019. Particularly, in order to allow the undertaking to make the relevant payments and indicate, in the“F24” form, the customer to whom they refer, identification code “09″ has been established standing for “Customer”. Furthermore, in the “CONTRIBUENTE” section of the “F24” form:
– in the “codice fiscale” field, the tax code of the contracting undertaking or contractor or the subcontractor obliged to make the payment shall be indicated.
– in the field “Codice fiscale del coobbligato, erede, genitore, tutore o curatore fallimentare“, the tax code of the customer shall be indicated along with the identification code “09”, to be reported in the field “codice identificativo”;
- a list of the names of all the workers, also indicating their tax code, employed in the previous month in executing the work or the service, with details of the working hours provided by each worker;
- the amount of consideration paid to each worker employed in executing the work or service assigned by the customer;
- the breakdown of the tax withholdings made in the previous month for each worker, with a separate indication of the withholdings regarding the service assigned by the customer.
RESPONSIBILITIES OF THE CONTRACTING UNDERTAKING, CONTRACTOR OR SUB-CONTRACTOR AND CONSEQUENT OBLIGATIONS OF THE CUSTOMER IN THE EVENT OF NON-FULFILMENT OF THE CONTRACTING UNDERTAKING, CONTRACTOR OR SUB-CONTRACTOR
The contracting undertaking, contractor and subcontractor is responsible in the event of their not providing the customer the F24 forms used for paying the withholdings and the data necessary for allowing them to verify their correct determination. If the contracting undertaking, contractor and subcontractor does not perform this, the customer must:
- ask the contracting undertaking or contractor and the subcontractors for a copy of the F24 forms regarding the payment of the withholdings, in order to check the correct fulfilment;
- suspend the payment of the consideration matured by the contracting undertaking or contractor, as long as the non fulfilment continues, up to 20% of the overall value of the work or of the service or if less for an amount equal to the sum of the withholdings not paid, in the event of not receiving the F24 forms used for the payment of the withholdings on the income from employment and equivalent work owed in relation to the workers employed in executing the work or service, or if they have received them and found an omitted or insufficient payment;
- communicate the non-fulfilment found to the competent Revenue Office within 90 days (starting from the 5th working day after paying the withholdings).
REPONSABILITIES AND PENALTIES OF THE CUSTOMER
The non-fulfilment of the obligations envisaged for the customer by article 17-a of Legislative Decree 241/97 gives rise to the customer’s responsibility only in the event of there being a failure to pay or partial payment of the withholdings by the contracting undertaking, contractor or sub-contractor, exposing them to the obligation of paying a sum commensurate with the sanction paid to the contracting undertaking, contractor or sub-contractor.
Article 17-a (4) of legislative Decree 241/97 orders that the non-fulfilling customer is obliged to pay a sum equal to the penalty issued to the contracting undertaking, contractor or sub-contractor for violating the obligations of:
- correctly determining the withholdings;
- correctly executing them;
timely payment of the withholdings without possibility of offsetting.
The amount requested to the customer adds to the penalty issued for the non-fulfilment of the contracting undertaking, contractor or sub-contractor and cannot be paid by means of offsetting in the F24 form.
The term of 90 days envisaged for the customer who, having noticed a non-fulfilment of the contracting undertaking, contractor or sub-contractor must communicate it to the Revenue Office, allows the latter to avail of the voluntary correction to remediate the violation committed, so that they can benefit from the reduction of the penalty to a tenth if it is completed within 30 days from the date of the violation and to a ninth if it is performed within 90 days of the violation committed.
The contracting undertaking, contractor or sub-contractor may regularise the violation committed even after the 90-day term, but in this case the customer will have communicated the non-fulfilment to the Revenue Office. Therefore, there is an increase in the risk of the contracting undertaking, contractor or sub-contractor not being able to voluntarily correct the violation committed, if one of the deeds that prevent the right to voluntary correction is notified (e.g. deed of assessment, imposition of penalties, notice of payment).
SOCIAL SECURITY CONTRIBUTIONS AND INAIL (WORKPLACE ACCIDENT INSURANCE) PREMIUMS – EXCLUSION OF OFFSETTING
The new art. 17-a of Legislative Decree 241/97 also envisages that contracting undertakings or contractors and the sub-contractors must pay, without being able to offset its own credit positions in the F24 form, what is owed for social security contributions and compulsory insurance policies matured:
- in relation to the payments made to the employees directly employed in executing the works or the services assigned;
- during the course of the contract.
RIGHT TO DISREGARD THE NEW LEGISLATION
The contracting undertaking, contractor and sub-contractor disregards art. 17-a of Legislative Decree 241/97 (also for insurance contributions) if, on the last day of the month prior to the one envisaged for the payment of the withholdings, it satisfies the following requirements:
- it has been operating for at least 3 years, it is up-to-date with reporting obligations and it has made overall payments recorded in the tax account for an amount of no less than 10% of the sum of the revenue or consideration resulting from these declarations, during the course of the tax periods to which the income tax returns presented in the last three years refer;
- it does not have entries in the taxpayers’ list or executive assessments or notices of violation assigned to the Collection Agents for Income Tax, Regional Manufacturing Tax (IRAP), social security withholdings and contributions for amounts exceeding 50,000.00 euro, for which payments are still due or for which there are no measures of suspension or instalment plans leading to their revocation.
A certificate is issued by the Revenue Office to certify the possession of the indicated requirements and that is valid for 4 months from the date of issue. Regarding this certification, there has been no official clarification yet as regards the forms and the operating methods. We will inform you as soon as any further clarification is provided.
The new provisions apply starting from 1.1.2020, therefore, insofar as the payments made from 17th February 2020 are concerned, also with reference to contracts stipulated before 1st January (Revenue Office resolution no. 108 dated 23.12.2019).
The provisions contained in article 29 (2) of Legislative Decree 276/2003 remain unchanged: therefore, the customer who has paid amounts owed to employees within the contract (by virtue of the joint responsibility in terms of salary) is obliged, where envisaged, to fulfil the obligations of the withholding agent on the basis of the provisions of Presidential Decree 600/1973, without prejudice to the possibility of exercising the action of recourse against the co-obliged party according to the general rules.
CONTRACTUAL CLAUSES TO BE REVIEWED
The new legal obligations on tender contracts impose a significant revision of the contractual arrangements adopted by the enterprises to manage outsourcing, both in terms of the contracts involved by this new procedure, and those that do not come into it.
As regards the tenders subject to the new obligations, the parties must, firstly worry about precisely identifying which group of workers is involved and what the consideration is to be taken as the basis for calculating tax and welfare contributions. In particular, the customer must ensure to verify the correct fulfilment of the tax obligations (amongst other things) by the contractors (and any sub-contractors).
Another significant effect of the new rules concerns the mechanism of suspension of the payment of the consideration matured by the contracting undertaking or contractor in the event of failure to transmit it or if payments are omitted or insufficient. The suspension effect will always occur, regardless of whether it is envisaged in the tender contract: however, it will be worthwhile drawing up agreements coherent with this system, avoiding the inclusion of clauses or rules that might contrast with the new constraint.
The parties must also regulate the mechanisms of recovery by the customer of any damages incurred as a result of the contractor’s non-fulfilment: automatic blocking of the payments, indeed, despite being devised to protect the customer, they might cause precisely this subject significant damages. Just consider the case in which the whole production process is blocked due to any blocking of the payment of the consideration of the employees by the contractors affected by the absence of liquid assets.
LDP TAX & LAW office remains at your disposal for any further or more thorough information regarding the matters described above.
Dott.ssa Monica Di Oronzo