Withholding taxes with reference to contract and sub-contract agreements

In derogation to the provision of art. 17, par. 1 of Legislative Decree 241/1997, the subjects required to make withholding taxes on employees’ income and similar income, considered as Italian tax resident for the purpose of direct taxes, which:

    • entrust to a company the performance of one or more works/services with a total annual amount exceeding € 200,000;
    • entrust works/services through procurement contracts, subcontracting, entrusting to consortium subjects or negotiation relationships however named;
    • entrust works/services characterized by the prevailing use of labor that implies the use of instrumental goods owned by the client or which can be traced back to the client itself;

are required to demand to the Contractor/Subcontractor companies the copies of the payment forms (F24) relating to the payment of withholding taxes retained by the Contractor or Subcontractor to the workers directly employed in the execution of the work or service.

  • The payment of such withholding taxes is made by the Contractor or Subcontractor company with separate payment forms (F24) for each Contracting company, without the possibility of compensation.
  • In order to allow the Contracting company to check the total amount of the withholding taxes paid by the Contractor or Subcontractor, within 5 working days following the payment deadline, the Contractor or Subcontractor transmit to the Contracting company:
    • the payment forms (F24);
    • a list of all the workers, identified by tax code, employed in the previous month directly in the execution of works or services entrusted by the Contracting company;
    • the detail of the hours worked by each worker in the execution of the work or service entrusted;
    • the amount of remuneration paid to the employee linked to the service and the detail of the withholding taxes applied to the specific employee in the previous month, with a separate indication of those relating to the service entrusted by the Contracting company.
  • In the event that the Contractor or Subcontractor company has matured the right to receive payments from the Contracting company but the Contractor or Subcontractor company have not complied with the obligation to transmit to the Contracting company the payment forms (F24) and the information relating to the workers employed, or it appears the omitted or insufficient payment of the withholding tax with respect to the data resulting from the transmitted documentation, the Contracting company must:
    • suspend, until the non-fulfillment persists, the payment of the fees matured by the Contractor or Subcontractor company up to 20% of the total value of the work or service, or for an amount equal to the amount of withholding taxes not paid with respect to the data resulting from the documentation sent;
    • communicate it within 90 days to the Tax Offices that is territorially competent towards it;

In such cases, any enforcement action aimed at satisfying the payment that has been suspended is not admitted until the payment of withholding taxes has been carried out.

  • In case of non-compliance with the obligations envisaged, the Contracting company is obliged to pay a sum equal to the sanction imposed on the Contractor or Subcontractor company for the violation of the obligations of correct determination of tax withholdings and of correct execution of the same, as well as timely payment, without the possibility of compensation.
  • The new obligations do not apply if the Contractor or Subcontractor companies communicate to the Contracting company, attaching the relative certification, the existence of the following requirements on the last day of the month preceding that of the deadline for sending payment forms (F24) to the Contracting company:
    • The Contractor or Subcontractor company have been in business for at least 3 years, have been compliant with the tax reporting obligations and have carried out in the last three tax years total payments recorded in the tax account for an amount not less than 10% of the amount of revenues or fees resulting from the declarations themselves;
    • The Contractor or Subcontractor company do not have debts object of public execution or executive assessments or debit notices entrusted to the collection agents relating to income taxes, IRAP, withholding taxes and social security contributions for amounts exceeding € 50,000, for which the payment terms are expired and payments are still due or no suspension measures are in place. These provisions do not apply to the sums subject to installment plans for which installment lapse has not occurred.
  • From the date of application of the new provision, the certification of the existence of the requirements for exemption from the new obligations is made available to individual companies by the Revenue Agency and is valid for 4 months from the date of issue. Actually, the Tax offices have not provided yet clarifications in regard to the certification request procedure.
  • The Tax Offices can issue specific provisions to enact further methods of telematic transmission of the information to be transmitted to the Contracting company in order to allow simplified methods of data feedback.
  • For Contractor or Subcontractor companies is not possible to use the compensation institution as a method of extinguishing the obligations relating to social security and welfare contributions and compulsory insurance premiums, accrued in relation to the work done from the employees. This exclusion operates with regard to all social security and welfare contributions and insurance premiums accrued, during the term of the contract, on the remuneration paid to personnel directly employed in the execution of the works or services entrusted.  These provisions do not apply to subjects for whom the new obligations do not operate due to the possession of the certification attesting the related requirements.
  • The new withholding tax discipline applies from 1.01.2020.