To reduce the tax burden on taxpayers, the Budget Law 2022 (Law no. 234/2022) has introduced important changes effective from 1 January 2022.
These include reducing the number of personal income tax (IRPEF) rates from five to four, reshaping the tax deduction system and supplementary payments.
Below are these changes.
New IRPEF rates
From 1 January 2022, the tax brackets and rates are:
To benefit those with average income, the rates for taxable income between €15,000 and €50,000 have been reduced and the tax rate for income above €50,000 has been increased (until 31 December 2021, the 43% rate was applied to income above €75,000).
Tax deductions
Equally important was the impact of the tax deduction measure under Art. 13, of Presidential Decree no. 917/1986 ( Consolidated Law on Income Tax – TUIR). These reduce the gross tax payable by the taxpayer for the time worked during the year. The deduction from gross tax decreases proportionally to the income increase until it is cancelled when the income reaches the annual threshold of €50,000.
The deduction applicable to the income bracket between €25,000 and €35,000 is increased by €65.
The additional deduction applicable until 31 December 2021 for workers with income above annual €28,000 and up to a €40,000 has been abolished.
Supplementary payment
The Budget Law has lowered the income threshold for which the supplementary payment introduced by Law no. 21/2020 is due.
The maximum amount of the supplementary payment of €1,200 annually is no longer payable to taxpayers with a taxable income of €28,000 but €15,000.
The credit is available to those whose income is between €15,000 and €28,000 only if the value of the following deductions is higher than the gross tax:
The supplementary payment is based on the difference between the sum of the deductions listed above and the gross tax, but not exceeding € 1,200.
Budget Law 2022 (Law no. 234/2022) has made significant changes to some pension regulations that, on an experimental basis, were to expire on 31 December 2021. These are “Quota 100” (from 2022, “Quota 102”), “Opzione donna” and “Ape sociale.”
INPS explained these in its messages no. 97/2022, no. 169/2022 and no. 274/2022, clarifying their application and requirements to access them.
“Quota 102”
In its message no. 97/2022, INPS stated that as of 1 January of this year “Quota 102” has replaced “Quota 100” which was experimentally introduced by the legislator for the 2019-2021 three-year period, which has expired.
INPS explained how it recognises “the right to an early retirement pension on reaching at least 64 years old by 31 December 2022 and a minimum contribution period of 38 years.” INPS pointed out that the legislator intended to coordinate the “Quota 100” rules applicable to the early retirement pension, with the new pension requirements to be met by 2022. The objective and subjective conditions already provided for “Quota 100” remain valid, with the new age requirement, 64 years old instead of 62.
“Opzione donna”
The Budget Law has extended the possibility of early retirement to female workers who have met the prescribed requirements by 31 December 2021.
In its message no. In its message no. 169/2022, INPS clarified that “female workers who, by 31 December 2021, have accrued a minimum contribution period of 35 years and a minimum age of 58 if they are employees and 59 if they are self-employed” can benefit from the measure. The pension allowance recalculation using the contribution method and the non-application of the adjustment of the requirements to life expectancy remain unchanged.
The Institute stated that the right to the pension is achieved after:
The pension may be paid after the first effective date for female workers who meet the requirements by 31 December 2021.
Ape sociale
The 2022 Budget Law postponed the expiry date of the “Ape sociale” experimentation period to 31 December 2022. From 1 January 2022, further changes regarding the conditions for “Ape Sociale” eligibility for unemployed persons or employees who carry out “strenuous” activities were introduced.
In its message no. 274/2022, INPS specified that:
In its ruling no. 35061 of 17 November 2021, the Court of Cassation ruled on the employer’s liability if an employee harasses a colleague.
The facts of the case saw the Court of Appeal of Rome reform the Court of Rome ruling and uphold the claim brought by an employee of the Ministry of Foreign Affairs and International Cooperation working at the Italian Cultural Institute in Chicago, seeking compensation for damages for harassment against the employer and the Institute director.
The local Court disagreed with the first ruling’s assessment, where the evidence of harassment conduct did not emerge from witness statements.
There was direct testimony about the harassment suffered by the appellant employee, that the director asked her “to make continuous corrections of the texts she had drafted and obliged her to wait for a long time behind the door of her office. She often imposed tasks taking many hours of overtime and criticised her work with expressions such as ‘wretch’, ‘idiot’. She also said that [the employee’s] work ‘sucked’ in front of her colleagues and assigned her the task of opening the office, replacing absent colleagues and carry out disqualifying tasks. The director presented [the employee] externally as an ‘assistant’ and did not use her superior qualification (‘consular agent’).”
These circumstances were confirmed by further witnesses, which added that the director denied the employee the required leave, even though she had accumulated many overtime hours, and assigned interns to tasks for which she was responsible, often using her as a switchboard operator.
The Supreme Court noted that the conduct described was “a set of repeated conduct clearly aimed at belittling and downgrading the employee personality outside and inside the working environment, make it intolerable and causing her to be dismissed.”
Based on these circumstances, the Court of Appeal held that the Ministry, the employer, was liable for the harassment perpetrated against the employee and that this liability applied to the Institute director, as the author of the conduct.
In confirming the local Court findings, the court-appointed expert confirmed that the employer’s conduct had caused the employee biological damage, consisting of “adjustment disorder, in a person with dependent personality disorder with avoidance traits”, resulting in permanent disability of four percent and temporary partial disability of 25 per cent for 60 days.
In the case in question, the appeal Court positively verified the violation of contractual obligations and the employee’s personal rights of constitutional importance. This included the right to dignity in the workplace (Article 2 of the Italian Constitution) and the right to health (Article 32 of the Italian Constitution). It was confirmed that the Institute director conduct was intentional, which is necessary for the harassment definition.
In the second instance proceedings, the existence of a series of repeated conduct “clearly aimed at belittling and downgrading the employee personality outside and inside the working environment, making it intolerable and cause her dismissal”, was confirmed.
In her appeal against the second instance ruling, the director claimed that the appeal Court “violated the case-law principles on harassment, by listing a series of behaviours committed against the employee without verifying the offence’s subjective profile or that they were accompanied by an intention to marginalise, harass or harm the employee.”
However, for the Supreme Court, this appeal was inadmissible. It ignored the positive finding, contained in the ruling under appeal, of the intentional nature of the director’s conduct aimed at “belittling and downgrading” the employee personality and “making the working environment intolerable for her.”
In her appeal, the director argued that in this case, the aetiological link between the conduct and the biological damage had not been proved. It was stated that the court-appointed expert said that the employee’s personality was characterised by a “dependent” disorder with “avoidance” traits, which had contributed to “making her structurally fragile and vulnerable to stressful events. In its conclusions it stated that the work event was a contributing factor along with personality characteristics.”
This argument was considered unfounded. According to case law, “in case of concurrence between human causality and natural contributing factor, the person responsible for the offence is liable for everything.” “A comparison of the degree of aetiological incidence of several causes can be established only among a plurality of culpable human behaviours.”
The Supreme Court pointed out that when an injured person is more vulnerable than others of the same age and sex due to their subjective condition, “this circumstance does not affect either the causal relationship, or the culpability nor the payment of damages.”
The aetiological relationship between the harassment and the injury to the right to health is verified even when the conduct constitutes only a contributing cause and has operated on a pre-existing psychological background, under art. 41 of the Italian criminal code, which states that “the combination of pre-existing or simultaneous or supervening causes […] does not exclude the causal relationship between the action or omission and the event.”
Finally, the employer’s cross-appeal was rejected. The Court of Cassation pointed out that case law has repeatedly determined how a series of persecutory behaviours with vexatious intentions constituting harassment can be directly perpetrated by the employer or one of its representatives or by other employees, subject to its management power. In this case, “the fact that the harassment originated from another employee who is in a position of hierarchical superiority over the victim is not sufficient to exclude the employer’s liability where it remained culpably inactive in removing the harmful act.”
Source: Sintesi
In circular no. 189/2021, INPS has provided operating instructions on the new “SARS CoV-2 parental leave” provided for by Article 9, Decree-Law no. 146/2021, which can be taken by parents who are private-sector employees, working parents who are exclusively registered with the Separate Management Scheme and self-employed parents registered with INPS.
The leave under management can be taken by either parents, but not on the same days, for:
the presence of a cohabiting child under 14 years of age.
For the abstention periods, an indemnity equal to half of the salary or income is paid, depending on the applicant parent working category, covered by imputed contributions. Only working days within the requested leave can be compensated.
Parents of children aged 14 -16 can take leave from work without pay or allowance, or imputed contribution, without being dismissed or losing their job. Applications must be submitted only to employers and not to INPS.
Leave can be taken by working parents who are foster parents or foster carers. The circular summarises the situations of compatibility/incompatibility between the leave and other institutions, providing instructions for event management in the UniEmens flow.
Use of leave
Leave can be taken on a daily or hourly basis and the following requirements must be met:
Leave can be taken for children with disabilities in a serious situation under article 3, paragraph 3, Law 104/1992, and enrolled in schools at every level or in daycare centres even if the child is older than 14. It is irrelevant if they live with the parent taking the leave, the other requirements remain unchanged.
Conversion of parental leave periods
Periods or extensions of parental leave taken from the 2021/2022 school year until 21 October 2021 may be converted, on application, to “SARS CoV-2 Parental Leave” and shall not be counted and compensated as parental leave.
At the person’s request, periods or extensions of parental leave taken from 22 October 2021 and until the issue of the telematic application procedure for the new “SARS CoV-2 Parental Leave” may be converted.
The employed parent may submit the new application without sending a formal cancellation notice of the previously submitted application for parental leave or its extension.
Employees with advance allowance payment by their employer must promptly notify their employer of submitting an INPS application. This is to pay the allowance of half of the salary instead of the standard 30 per cent and allow the employer to adjust the UniEmens flows.
In its answer to question no. 798 of 3 December 2021, the Inland Revenue has examined the case presented by an employer wishing to reimburse its employees the costs incurred for the performance of remote work.
Facts of the case
To facilitate its digital teaching transition, the requesting employer (a school) wanted to reimburse its staff for any documented and paid-in-advance expenses incurred to carry out teaching.
Such expenses included IT equipment, paper, toner and internet connection, and their reimbursement will be subject to a request by the entitled parties and not exceed a maximum of € 520 per applicant.
The answer to the question shows how “to determine the maximum reimbursement to be paid to its employees, the applicant has developed objective and analytical criteria to determine the share of costs saved by the employer and incurred by the employee for each type of expenditure.”
This method to determine the cost is based, partly on statistical data deriving from market research (for example, the quantification of the average useful life of IT devices and the average costs for the consumption of paper and network connection) and, collection of data concerning the hours spent by staff in distance teaching.
The all-inclusive principle of employee income
As for the taxation of these refunds, the Inland Revenue considers the sector legislation, under art. 51 of Presidential Decree no. 917 of 22 December 1986 no. 917 (“TUIR”).
This provision states that “general sums and, for whatever reason received during the tax period, including donations, as part of the employment relationship, constitute employment income. The general sums and values paid by the employer by the 12th January for the tax period following the one to which is referred, are considered to have been received during the tax period.”
This provision essentially rules on the “all-inclusive principle” of employment income, according to which “cash emoluments and values corresponding to goods, services and works offered by the employer to its employees constitute taxable income and are included in the calculation of employment income.”
The Inland Revenue observed – that “all sums that the employer pays to the employee, including as reimbursement of expenses, constitute employment income.”
The Inland Revenue added that reimbursements of expenses other than those incurred to produce the employer’s income, when advanced by the employee (for example, for the purchase of capital goods of low value, such as paper for the photocopier or printer, batteries for the calculator) might be excluded from taxation.
This approach is explained by the consolidated practice of tax authorities, particularly Resolutions 9 September 2003 no. 178/E and 7 December 2007, no. 357/E.
Methods of quantifying the reimbursement of the expenses
Institute practice is that expenses incurred by the employee and reimbursed by the employer in a lump sum are excluded from the taxable amount if the legislature has provided a criterion for calculating the portion which may be excluded from taxation. This is because it is used in the employer’s interest.
The Inland Revenue stated that under Resolution of 20 June 2017, no. 74/E, “if the legislator has not provided a criterion for calculating the portion excluded from taxation, the costs incurred by the employee in the employer’s interest must be identified based on objective elements and documentary evidence, to avoid that the relevant reimbursement contributes to the employment income.”
In this case, it emerged that the reimbursement granted by the school to employees to use IT devices is based on “objective parameters to determine costs saved by the institution that were incurred by the employee in the performance of their work.”
Because of the analytical method to calculate the amounts, the Inland Revenue has held that the amounts paid by the school to reimburse employees for costs incurred in the employer’s interest were not taxable for IRPEF purposes.
In its ruling no. 31182 of 2 November 2021, the Court of Cassation ruled on compensation due to deprivation of duties assigned to the employee, in violation of Art. 2013 of the Italian Civil Code.
The facts of the case saw the Court of Rome partially uphold the claims brought by an employee, who requested that his employer be ordered to pay compensation for the damage to his career by depriving him of all tasks, which determined “a serious prejudice of the free expression of his personality in the workplace”, causing the employee “a considerable reduction in the opportunities for professional growth.”
The Court of First Instance decision was overturned by the District Court, which rejected the worker’s claim in its entirety. The worker appealed to the Court of Cassation to protect his right to compensation for damage.
The Court of Cassation criticised the Trial Court conclusions. According to the Supreme Court, there was a failure to examine decisive facts in the second instance, “failing to consider the results of previous litigation” relating to the period of employment prior to the secondment subsequently ordered and under examination. “On the basis of which it emerged, with final judgement, that the applicant was not only demoted, but totally deprived of the attribution of any work.” It failed to consider that “the conduct was part of a long and manifestly unlawful management of the employment relationship, the continuation of which was the subject of assessment in these proceedings”, clearly pointing out “the substantial situation of inertia at work in which the applicant was placed.”
The Court of Cassation stated that according to art. 2103 of the Italian Civil Code, paragraph 1 – in the text version prior to the amendments set out in Legislative Decree 15 June 2015, no. 81 – “the employee must be assigned to the duties for which he was hired […] or duties equivalent to those last carried out.” This rule is violated, having regard to the worker’s freedom and dignity in the places where he works and to the system of protection of his professional background, when the employee is assigned to inferior tasks.
The Court observed that this constitutes a “protection traditionally understood as mandatory, in respect of which Art. 2103 Civil Code, paragraph 2, determines the nullity of any contrary agreement. The assignment to inferior duties is potentially capable of producing a plurality of harmful financial and non-financial consequences.”
On this point, the Supreme Court considers how the employer’s failure to comply with its obligations may entail “damage from loss of professional expertise of a financial nature which may consist either in the impoverishment of the employee’s skills, failure to acquire greater knowledge, and prejudice suffered due to the loss of opportunity, i.e. further earning possibilities or employment potential.”
The violation of Art. 2103 of the Italian Civil Code can impair “that set of skills and attitudes defined by the term professional expertise, which is certainly a financially assessable asset, since it is one of the main parameters for determining the value of an employee on the labour market.” According to the Court, the change in peius of the tasks, is potentially capable of causing damage to intangible assets, even beyond health. In the employment relationship regulation, many provisions ensure enhanced worker protection by recognising rights subject to constitutional protection, “which include a non-financial damage payable whenever they are violated, exceeding the limit of tolerable sacrifices, rights of the worker subject to special protection at the highest level.”
The Court of Cassation’s ruling affirms that the denial or hindering of the performance of duties, like professional demotion, entails the infringement of the fundamental right to the free expression of the worker’s personality in the workplace, causing a prejudice that affects the professional and social life of the person concerned. Such an injury takes on an “undoubted financial nature”, which makes the injury “susceptible to compensation and assessment, even on an equitable basis.”
If art. 2103 of the Italian Civil Code’s wording explicitly recognises the worker’s right to carry out the duties for which he has been recruited or equivalent to the last duties carried out, the worker’s consequent right “not to be left in a condition of forced inactivity and without assignment of duties, even in the absence of consequences on remuneration, must be considered to exist. The worker has the duty and right to work, to which the employer has the corresponding obligation to assign. This is because work is not only a means of earning money, but a way of expressing the professional value and dignity of each citizen.”
In overturning the Court of Appeal’s decision, the Supreme Court pointed out that, even in the absence of a persecutory intent, the conduct of an employer who leaves the employee in a condition of inactivity constitutes a violation of art. 2103 of the Italian Civil Code, and infringes the right to work, understood as “a means of expressing the personality of each citizen, and the employee professional expertise.”
In its ruling no. 25901 of 23 September 2021, the Court of Cassation dealt with the case of a dismissal of a female civil servant after disciplinary proceedings were reopened.
The case involved a female municipal employee who was dismissed on disciplinary grounds for having “repeatedly slandered and damaged the honour and dignity of the Municipal Police Chief and other superiors. This was based unfounded accusations contained in a complaint for sexual violence lodged against the Chief and a superior and for assault and threats against another superior, which was subsequently dismissed by the local court preliminary investigation judge.”
Given these circumstances, the employee was subjected to disciplinary dismissal, under art. 3, paragraph 7, letter F) of the Local government sector NCLA, for cases of “recidivism in the two-year period […] of aggressive, hostile and denigrating acts and behaviour and forms of moral violence or psychological persecution towards a colleague to cause them damage in the work environment or exclude them from the work environment.”
This sanction, challenged in court, was first annulled by the Court of Teramo on the grounds that a previous dismissal had already been imposed for the same facts and was still sub iudice, with mixed results. The local Court of Appeal confirmed the annulment, not considering that the provisions of art. 55-ter, paragraph 3, Legislative Decree 165/2001 could be applied to this case.
This provision states in detail that “if the disciplinary proceedings end with the case’s dismissal and criminal proceedings end with an irrevocable conviction, the office responsible for disciplinary proceedings shall reopen the disciplinary proceedings to adjust the final decisions to the outcome of the criminal proceedings. Disciplinary proceedings can be reopened if the irrevocable conviction shows that the fact chargeable to the employee in the disciplinary proceedings entails the dismissal while another sanction was applied instead.”
The Municipality, having become aware of the fact that, because of the employee’s unfounded complaints, a criminal trial for slander had taken place, which had ended with a conviction against her, imposed a new dismissal cause under art. 3, paragraph 8, letter. E) of the NCLA, concerning the case of a “final conviction for an offence which, although not directly related to the employment relationship, does not allow continuation because of its seriousness.”
The second dismissal, once challenged, was also annulled by the Court of Teramo, with a sentence upheld on Appeal. In the meantime, the original ruling annulling the first dismissal was firstly overturned by the Court of Appeal of L’Aquila, whose ruling was revoked by the Supreme Court, confirming the rejection of the appeal against the first dismissal.
The Supreme Court observed that it is necessary to exclude that the two disciplinary proceedings relate to different offences. “The two disciplinary provisions have specialising elements: the first applies the sanction of dismissal if the conduct constitutes a repetition of other similar offensive or disparaging acts; the second disciplinary case, has as its special feature the element of a final criminal conviction. This does not mean that the core of the conduct […] is the same and consists of denigrating behaviour towards superiors.”
The Court of Cassation stated that the conduct is always the same and the second dismissal cannot be said to relate to a different fact.
The issue arises of whether it is possible to reopen the disciplinary proceedings if a criminal conviction occurs which was not considered in the previous disciplinary procedure conducted regardless of the pending criminal case, for an act prosecuted and potentially constituting an offence.
The Court observed that the disciplinary procedure “maintains its autonomy and may be affected by the criminal judgement if the disciplinary action is not yet defined or only if […] the finality of the criminal investigation is placed […] as a basis for the obligations to reopen it.”
It is pointed out that, in the field of employment relationships, it is a well-established principle that disciplinary power cannot be reiterated, for the same fact once it has already been exercised by applying a sanction. This is the case even if the first sanction is less than the sanction subsequently found to be applicable based on additional circumstances.
Even though disciplinary proceedings were independent from criminal proceedings, the legislator provided for cases where the criminal case differed from the determinations made in the disciplinary proceedings but were still bound to have effects although formally closed.
This is the case, in favour of the accused, if the criminal proceedings end with an irrevocable acquittal which recognises that the there is no case to answer against the employee, or the fact does not constitute a criminal offence, or the employee did not commit the offence. In such cases, the disciplinary proceedings must be reopened to adjust their outcome to the judicial findings.
Starting a second disciplinary proceeding cannot be considered admissible, for the same fact, except in the cases expressly allowed by Art. 55-ter of Legislative Decree no. 165/2001.
Reopening disciplinary proceedings which have been closed with a precautionary sanction, for facts that lead to dismissal which have been ascertained in criminal proceedings, is expressly regulated because of its divergence, to protect the public interest, from the general principle of the “termination” of disciplinary power.
Given the above, the Court determined that the Municipality in question “could not have opened a new disciplinary procedure, for the same facts, because the dismissal was (provisionally) annulled by the first instance ruling. It could not have done so even if that annulment became final, because that case did not allow for possible further disciplinary power for the same fact. At that point, the judgement on the existing employment and the inability of the disciplinary action to affect it, prevailed.”
In its answer to question no. 789 of 24 November 2021, the Inland Revenue clarified that those who meet the requirements provided for by Decree Law no. 34/2019, can benefit from the favourable tax regime for repatriated workers for a further five tax periods if they have been registered with AIRE.
Question subject
The applicant taxpayer is an Italian citizen with a university degree who:
The worker, who is a mother of two minors, has purchased a property in 2019 where she lives.
The Applicant considered that she met the requirements set forth in Article 5, paragraph 2-bis, letter a), of Decree Law no. 34/2019 for the benefit extension outlined in article 16 of Legislative Decree no. 147/2015 for a further five tax periods. According to her, AIRE registration for a period of less than two tax periods (i) was irrelevant (ii) the “AIRE amnesty”, under article 16, paragraph 5-ter, of Legislative Decree no. 147/2015, introduced by the Growth Decree, should be applied.
The favourable tax regime regulatory evolution
In its reply, the Inland Revenue explained how Article 5, paragraph 1 of the Decree has (i) modified the requirements relating to the tax benefit scope, (ii) increased the taxable income reduction percentage and (iii) extended the tax benefit period for a further five years, if conditions were met.
These amendments, applicable to persons transferring their tax residence in the Country as of 30 April 2019, were clarified in Circular no. 33/E of 28 December 2020.
The circular stated that, through the amendments made by the Growth Decree to the legislation, the legislator introduced a temporal extension of the tax benefit to a further five tax periods, with taxation at a rate of 50 per cent of taxable income, if one of the requirements were met such as:
The tax authority stated that Article 1, paragraph 50, of Law no. 178/2020 (“Budget Law 2021”) inserted in the above Article 5 of the Growth Decree, paragraph 2-bis, to allow the extension for a further five years of the tax benefit for repatriated workers including those “who have been registered with AIRE or are EU Member State citizens who have transferred their residence before 2020 and who, as of 31 December 2019, are beneficiaries of the regime under Article 16 of Legislative Decree 14 September 2015, no. 147.”
The 2021 Budget Law established that the following individuals could benefit from the extension, by exercising a specific option:
This option is completed by paying:
If the applicant fails to meet the requirements the additional benefit will be refunded without penalty.
Please note that “provided that they maintain their tax residence in Italy, employees may exercise the option, as for the special regime for repatriated workers, by submitting a written request to the employer, within 30 June of the year following the end of the first five-year period of benefit.”
In view of the legislation, the option in question cannot be exercised by:
The option for the tax benefit extension is reserved for those who have acquired Italian tax residence before 30 April 2019, provided that on 31 December 2019 they are beneficiaries of the favourable regime.
The Inland Revenue considers that the option in question may be exercised by “expat workers” who availed themselves of the option under Article 16, paragraph 4, of Legislative Decree no. 147/2015, and have benefited from the special regime for repatriated workers from 2016 or 2017 and until 2020. This is the regime version prior to the Growth Decree amendments. The extension is accessible for those meeting the requirements of Article 2, paragraph 1 of Law no. 238/2010 who benefited from the pre-Growth Decree repatriated workers regime under paragraph 4 of Article 16 of Legislative Decree no. 147/2015.
(i) those who have not been registered with AIRE and (ii) non-EU citizens, even if beneficiaries of the special regime for repatriated workers are excluded from exercising the option.
Applicability to “expat workers”
The Inland Revenue considers that “expat workers” registered with AIRE, who benefited from the special regime for repatriated workers as of 31 December 2019, may exercise the option under Article 1, paragraph 50, of Law no. 176 of 2020 and, have access to the measure provided for by Article 5, paragraph 2-bis, of the Growth Decree.
Given her registration with AIRE during her stay abroad, the tax authority considers that the applicant worker can benefit from the special regime for repatriated workers for a further five tax periods, as she meets the requirements set out in the above article.
Law of 5 November 2021 no. 162, published in the Official Gazette no. 275 of 18 November, has been in force since 3 December 2021. It contains provisions on equal opportunities between men and women in employment.
The following are the changes introduced by the law under review.
Amendments to the Equal Opportunities Code
The new provision introduces important amendments to the “Equal Opportunities Code” (Legislative Decree no. 198/2006). These include a modification of art. 46, which requires companies with more than 100 employees to draw up a biannual report covering the treatment of men and women in the company. With the changes introduced by this law, the obligation to draw up the biannual report is extended to companies with more than 50 employees. For companies with up to 50 employees, the report submission is voluntary.
This biannual report must then be submitted electronically using the form made available on the Ministry of Labour’s portal. The regional councillor for equality must process the data and transmit the results to the National Labour Inspectorate regional offices, the national councillor for equality, the Ministry of Labour and Social Policies, the Department for Equal Opportunities of the Presidency of the Council of Ministers, the Institute of Statistics and the National Council for Economy and Labour.
The first report must be submitted by 30 June of the year following the year the law entered into force i.e. by 30 June 2022.
The Ministry of Labour and Social Policies in agreement with the Delegated Minister for Equal Opportunities must issue a decree on the biennial report within 60 days from the Law issuance defining:
Failure to submit the biannual report will result in an administrative sanction ranging from €103 to €516, and if the failure extends beyond 12 months, the company’s contribution benefits will be suspended for 12 months.
If the biannual report is untruthful or incomplete, an administrative sanction between €1,000 and €5,000 shall be applied.
Gender equality certification
Law no. 162/2021 introduced the “Gender equality Certification” with effect from 1 January 2022. This certifies the policies and measures adopted by companies to reduce the gap between men and women “for company growth opportunities, equal pay for equal tasks, policies for managing gender differences and maternity protection.”
It will be up to the President of the Council of Ministers to issue Prime Ministerial Decrees to define:
For 2022, the possession of the gender equality certification guarantees private enterprises an exemption from the payment of social security contributions by the employer, up to € 50 million. The exemption will be determined at a rate not exceeding one per cent and up to € 50,000 annually for each company, recalculated and applied monthly, by decree of the Minister of Labour and Social Policy, in agreement with the Minister of the Economy and Finance and the Minister for Equal Opportunities, to be adopted by 31 January 2022.
Private companies which, on 31 December of the year preceding the reference year, possess the certification, will be awarded a “bonus score” for the evaluation by the authorities, holding national and regional European funds, of project proposals to obtain State co-financing of investments.
Decree Law no. 146/2021 ( “Tax Decree”) introduced several changes regarding health and safety in the workplace. The legislator intended to “tighten” the rules on illegal work, extend National Labour Inspectorate (‘INL’) powers and sanctions for non-compliant employers.
Business suspension
The Tax Decree gave the National Labour Inspectorate (“INL“) the power to suspend a company business if at the time of inspection more than 10 per cent of workers were employed “without prior employment establishment relationship notice“, i.e., illegally. The previous percentage, established by Art. 14 of Italian Legislative Decree no. 81/2008 ( “Consolidated Law on Safety at Work”), was 20 per cent.
The measure cannot be applied if there is only one employed worker. In this case, the inspectors will remove the illegal worker until they are legalised (Ministry of Labour and Social Policies, circular no. 33/2009).
INL’s business suspension powers can be applied if there are serious health and safety violations, even for the first offence. Violations are identified by a forthcoming ministerial decree. Pending the decree, the violations are specified in the new Annex I of the Consolidated Law on Safety at Work, namely:
Among the violations, listed in Annex I, that lead to suspension include the following:
The suspension for safety reasons is for those parts of the company’s activity affected by the violations or the activity carried out by workers who (i) have not received appropriate education and training or (ii) have not been provided with personal protective equipment to prevent falling.
Together with the suspension measure, INL may require “specific measures to eliminate the danger to the safety or health of workers during work.”
Suspension revocation
The suspension measure revocation – governed by art. 14, paragraphs 9 and 10 of the Consolidated Law on Safety at Work – can be ordered by the supervisory bodies if the following conditions are met:
Before the reinstatement of regular working conditions, it is necessary to pay (i) €2,500 for up to five illegal workers or €5,000 if more than five illegal workers are employed for suspensions for irregular work and (ii) a variable sum (€3,000, €2,500 or €300 for each worker) for suspensions for health and safety violations, depending on the violations.
If the same employer has been subject to a suspension measure in the previous five years, the amount is doubled.
Participation in public tenders
The Tax Decree states that the employer is prohibited from contracting with the public administration during business suspension due to non-compliance with occupational safety rules. So a company that employs illegal workers or commits violations of occupational safety may be blocked from participating in tenders.
In addition, an ad hoc report is made to the National Anti-Corruption Authority (“ANAC”) and the Ministry of Infrastructure. A suspended party who does not comply with the measure is punished with (a) up to six months jail for suspensions due to violations on health and safety in the workplace and (b) three to six months jail or a fine from €2,500 to €6,400 for suspensions due to illegal work.
With its answer to question no. 740/2021, the Inland Revenue has provided clarifications on the dematerialisation of expenses claims produced by employees on business trips.
The requesting company wanted to completely dematerialise expenses claims produced by its employees on secondment, which allows their “creation, control, accounting and storage in a fully digitalised format.”
The creation of an expenses claim and the compilation and sending of a report containing the reasons for the trip is the employee’s responsibility, who can either carry out the process independently or have a delegate do it on their behalf. Each employee is provided with a unique user account to access the corporate portal and the relevant services. Each of these user accounts is unique and associated with a password to be changed monthly. The administrative office then carries out the necessary checks, verifies compliance with tax rules for deductibility and approves the expenses claim, receipts and invoices relating to the business trip. The accounting procedure is automatic, and the documents are stored electronically.
Requesting company’s interpretation
The company considers that the procedure complies with the regulatory reference, allowing the travellers’ electronic management of expenses claims and their dematerialisation and electronic storage, together with the relevant receipts.
In the question, the company noted that the procedure ensures the unequivocal traceability of the employee to the expenses claims through secure and monitorable access. Since the expenses claim is an electronic document or unequivocally traceable to the employee, it does not require a paper document that is subsequently signed, or an electronic or digital signature (however, this will be affixed, together with the time stamp, by those in charge of storage later). This system would limit paper storage only to expenses incurred with suppliers residing in non-EU countries with which Italy does not provide mutual assistance in tax matters.
Answer
The Inland Revenue, recognised the procedure’s validity and said it was consistent with practice in which “any IT document with tax relevance – i.e. any electronic document containing the IT representation of acts, facts or data legally relevant for tax purposes […] – such as expenses claims which will be used for the deductibility of the relevant costs under Presidential Decree no. 917 of 22 December 1986 no. (TUIR), must be non-modifiable, complete and authentic.”
The tax authority stated that “where such features are present […] there is nothing to prevent paper documents from being replaced electronically and the procedure from being entirely dematerialised.”
Based on the information provided by the requesting company, the Inland Revenue defines the procedure as similar to those described in answers no. 403 and no. 417 of 2019. Therefore, in its opinion, nothing prevents the adoption of the process requested by the company if the dematerialised documents are non-modifiable, complete and authentic (a condition which cannot be verified as part of the answer).
According to the Inland Revenue, “the expenses claim is generated directly by the traveller by accessing the corporate network, and produced by a delegate, who acts on behalf of the delegating party, […] which can be tracked by the system. Expenditure evidence, even if dematerialised, must meet the requirements (such as relevance, relevant dates and congruity) that allow the deductibility of costs and the attribution of income to employees who are reimbursed for the expenditure.”
With its answer to question no. 596/2021, the Inland Revenue has expressed its opinion on the recognition of the tax favourable regime for repatriated workers who come back to Italy from abroad as “smart workers.”
The facts
The applicant is an Italian citizen who moved abroad in 2013 and has been registered since 2019 in the Register of Italians residing abroad (AIRE), who:
The applicant specified that on 23 February 2021 the foreign employer granted him the right to work “remotely from Italy as an employee” for at least two years. The worker asked for clarification as to whether he can benefit from the special regime for repatriated workers, including the extension of five additional tax periods for having a minor child.
Legal requirements
Considering the question, the Inland Revenue analysed the main features of the legislation, in which Article 16 of Legislative Decree no. 147/2015 lists the subjective and objective requirements to define its scope of application.
The above provision has been subject to several amendments, made by Article 5 of Decree Law no. 34 effective from 1 May 2019, which apply to those who, as of 30 April 2019, transfer their residence to Italy under Article 2 of the Consolidated Law on Income Tax – TUIR.
The Inland Revenue highlighted that the worker needs to meet the following requirements to benefit from the favourable tax regime:
Under the same provision, the tax benefit is available to “EU citizens or non-EU if the country has an agreement against double taxation or on the exchange of information in tax matters, who:
Inland Revenue conclusions on the case
Considering the above regulatory provisions, the tax authority stated that specific clarifications were provided in Circular no. 33/E of 28 December 2020, about the tax benefit.
Paragraph 7.5 of the Circular clarifies that “the above Article 16, as amended by Article 5, paragraph 1, of Decree-Law no. 34 of 2019, does not require the activity to be carried out for a company operating in the country. Individuals who come to Italy to work for an employer based abroad, or whose principals (in case of self-employment or business) are foreigners (non-residents), can access the benefit.”
In this case, the Inland Revenue considered that the worker, if possessing the requirements, “can benefit from the favourable tax regime provided for in Article 16, paragraph 1, of Legislative Decree no. 147 of 2015 […] for employment income produced in Italy from the 2021 tax period, when they transfer their tax residence to Italy, and for the following four tax periods.”
Having a minor child will allow them to benefit from the favourable regime for a further five tax periods, with taxation of the income at a reduced rate of 50 per cent, under paragraph 3-bis of Article 16.
With its note no. 1363 of 14 September 2021, the National Labour Inspectorate (“INL“) has provided operating instructions on the amendment to regulations on the reasons to be included in fixed-term contracts.
Regulatory references
The rules on fixed-term employment contained in Legislative Decree no. 81/2015 – as amended by Italian Legislative Decree no. 87/2018, converted into Law 96/2018 – have been substantially changed following the enactment of Decree Law no. 73, converted with amendments, by Law no. 23 July 2021, no. 106.
Article 19 of Legislative Decree no. 81/2015 has been amended with the insertion of letter b-bis) to paragraph 1 and paragraph 1-bis.
The legislator has provided for the possibility of a new type of reason defined by fixed-term contracts in national, local or company collective agreements stipulated by comparatively more representative trade union associations at national level and company collective agreements stipulated by their company trade union representatives or the unitary trade union representative body. In addition, employers may enter into a first fixed-term contract lasting more than 12 months, but not exceeding 24 months, if there are specific needs provided for by collective labour agreements until 30 September 2022.
INPS clarifications
The INL stated that the reasons are required for contracts exceeding 12 months, and in the following cases:
The new legislation impacts each of the profiles identified above, since the reference contained in Article 21 paragraph 1 (the additional contract at the ITL falls within the regulations on the obligation to provide a reason, being qualified as a renewal) refers directly to Article 19, paragraph 1.
To be valid, the collective bargaining measure (“specific needs provided for by the collective agreements referred to in Article 51”) must meet two requirements:
If the application uncertainties on representation remain unchanged, it is worth paying attention to the need for agreements to “specify needs” since there are no certain indices of measurement. The ITL correctly considered that collective bargaining must identify practical cases, without using general formulations, for example the well-known “technical, organisational, and production reasons.”
The above is a useful support in agreements signed based on the new delegation, and as an interpretative key for referring to provisions generally contained in national collective bargaining. Even in the absence of an express delegation of powers, national collective bargaining has previously identified the reasons for using fixed-term contracts and the new legislation removes any doubts as to the legitimacy of such contractual provisions. The absence of these provisions could have played a role in detailing/supplementing the reasons during litigation without being “legally binding.”
Compared to proximity bargaining, under Article 8, Decree Law no. 138/2011 – which can be exploited in derogation from the mandatory system of reasons – the bargaining under Article 51, Legislative Decree no. 81/2015 does not require the purposes outlined in Article 8 and does not need trade union majority mechanisms.
According to the new regulations “the time limit exceeding 12 months, but not exceeding 24 months, referred to in paragraph 1 of this Article, may be applied to employment contracts which meet the specific needs provided for by the collective labour agreements referred to in Article 51, under letter b-bis) of the same paragraph 1, until 30 September 2022”.
As the INL pointed out, the provisional nature of the regulations is for specific cases where it is necessary to provide reasons, i.e. when a first contract duration exceeds 12 months.
There are two consequences:
The Court of Cassation, in ruling no. 32234 of 23 April 2021, held that the sanctions regime laid down by Italian Law no. 300/1970, concerning the remote control of workers caused by video surveillance systems, has been maintained following the enactment of the Jobs Act.
In particular, in the case in question an employer set up a video surveillance system in his store. As can be seen from the Supreme Court ruling, the installation of such a system implied the company’s control of the “activities carried out by its sales staff in the store”.
Following an inspection visit to the store, a report was drawn up stating that there was a video surveillance system in the store that did not comply with the statutory requirements.
On this point, it should be recalled that Article 4 of Italian Law no. 300/1970 requires a trade union agreement or a specific authorisation from the Labour Inspectorate to install video-surveillance systems at work “which also imply the possibility of the remote control of workers’ activities”.
In additions, these systems “may only be used for organisational and production needs, for safety at work and for the protection of company assets”.
Initially, the first instance judge acquitted the employer as regards the violation of this provision, since it was held that “as a result of the entry into force of Italian Legislative Decree no. 196/2003, the conduct in question is no longer regarded by law as an offence”.
The Public Prosecutor of the Court of Appeal of Campobasso appealed against that ruling, arguing that, contrary to the view of the Court of First Instance, the provision that had been allegedly infringed by the employer had not been repealed.
The appeal was upheld by the Court of Cassation, which held that it was well-founded, noting that “even after the repeal of Arts. 4 and 38 of Italian Law no. 300/1970, the use of audiovisual systems and other equipment for the remote control of workers’ activities is an offence, since there is legislative continuity between the repealed offence and the one currently provided for by Art. 171 in relation to Art. 114 of Italian Legislative Decree no. 196/2003, as reshaped by Art. 23 of Italian Legislative Decree no. 151/2015, for the new law has kept unaltered the sanctions regime for the infringement of the said Article 4”.
The Supreme Court thus stressed that the sanctions regime for the violation in question had not been repealed; on the contrary, it had been maintained by the Jobs Act. In particular, this regime establishes that any violations of the said Article 4 are punished with a “fine of Italian Lira 300,000 to Italian Lira 3,000,000 or with imprisonment from 15 days to one year”, with joint application “in the most serious cases”, to the employer.
The first instance judgment, with which the employer was acquitted, was thus annulled, and the necessary review by the competent court was ordered.
The Court of Cassation, in ruling no. 21793 of 29 July 2021, stated that self-employed but continuous journalistic activity and under certain conditions implies the existence of an employment relationship.
The facts of the case involved a self-employed woman taking legal action to obtain verification of the existence of an open-ended employment relationship with a publishing group. She requested the employer be ordered to pay the difference in salary due under the NCLA following the conversion.
Initially, the Trieste Court of Appeal partially accepted the appeal filed by the employee, overturned the relevant court’s ruling by ascertaining the existence of an open-ended employment relationship in the period from January 2010 to March 2013. However, the request for payment of salary differences was declared null and void.
The court established that during the period in question the employee had followed the local news continuously, and was responsible for an information sector, and had ensured coverage during her employment.
The publishing company, opposed the second instance ruling, and appealed to the Court of Cassation claiming the non-existence of a permanent relationship between the parties, since it had not been demonstrated that she had been asked to be available between her journalistic services during employment.
The employer considered that the relationship between the parties did not show the typical general and specific elements of journalistic subordination. The employee worked discontinuously and with a limited commitment. She never had to guarantee her presence between work assignments. She did not have to ensure on call availability, and she could not ask for holidays. In the employer’s view, she was not subject to any management, organisational or disciplinary powers.
After examining the appeal lodged by the publisher, Court of Cassation noted that “as part of journalistic work of a permanent self-employed person, continuity is important, which is normally limited to offering services related to a specific area of expertise.” Based on case law, the Supreme Court stated that “work continuity” means the performance of non-occasional work, “aimed at ensuring the training and information needs of a specific sector”, which is accompanied by “responsibility for a service, which implies the systematic writing of articles on specific topics or columns” and the “subordination, as a result of which the employee’s commitment to place their work available to the employer continues even in the intervals between one service and another.”
The Court of Cassation stated that the continuity of service is when the permanent employee, ensures “a non-occasional service, aimed at meeting the training or information needs related to a specific area of expertise” under an assignment, although not providing their work daily.
In addition, there is subordination in cases where “the permanent self-employed person’s commitment to make their work available does not cease between one service and another in relation to timetable obligations, linked to service and production needs, and circumstances deriving from the assignment.”
Finally, responsibility for a service exists where the permanent self-employed person is entrusted with the task of writing “articles on subjects or compiling columns normally and continuously.”
In the light of these considerations, the Court of Cassation said that in the second instance it was established that the employee’s services were provided “continuously and not occasionally.” The number of articles written may have varied, but the service was daily, except on Sundays.
It was found that the employee was responsible for covering a sector and suggested stories for that round.
It was found that the employee was part of the company organisation and subject to the directives of the heads of service whose cuts and emphasis on news items she had to follow. Ultimately, it was found that the way the service was carried out revealed the availability of the employee during the intervals she was not working.
The Court of Cassation rejected the employer’s appeal and ordered it to pay costs.
Italian Legislative Decree no. 136/2016 (the “Decree“), implementing the European Directive 2014/67/EU, regulates transnational posting of workers as part of service provision.
Article 10 of the Decree places several administrative obligations on the foreign company (“the Posting Company“) that intends to post one or more workers to a company based in Italy (“the Host Company“).
The legislation provides for three different types of posting:
Whenever one of the above cases occurs, the Posting Company is required to:
Art. 1, paragraph 1, letter d), of Legislative Decree. 122/2020, transposing EU Directive 2018/957, introduced into the Decree art. 4-bis, having as its object “long-term posting.” It states that “if the posting duration exceeds 12 months, working and employment conditions provided for in Italy by regulatory provisions and national and local collective agreements entered into by workers’ and employers’ organisations that are comparatively more representative at national level shall apply to the posted workers if more favourable […], except for those concerning:
[…]
If one or more posted workers performing the same tasks in the same place are replaced, the duration of the posting, to calculate the period referred to in paragraph 1, shall be determined by total work periods performed by the individual workers. Identifying duties performed in the same place is assessed based on the nature of the service provided, work performed and job location.”
Compulsory communication – UNI_Distacco_UE Form
The UNI-Distacco_UE form is made up of several sections in which the following data must be reported:
The Ministry of Labour and Social Policies, implementing the changes introduced by Legislative Decree no. 122/2020, on 6 August 2021, published its Decree no. 170. This sets new standards and rules for the electronic transmission of communications from service providers to the Ministry for workers under long-term posting in Italy.
In addition to confirming the need to enter the data listed above, the decree introduces two new sections in the UNI_Distacco_UE mandatory communication.
The renewed UNI_Distacco_UE form will be operational on the institutional website of the Ministry of Labour and Social Policies once the Ministerial Decree in question is registered by the Court of Auditors and subsequently published.
In the European Court of Justice’s 15 July 2021 ruling on two separate proceedings, it has observed that the rules concerning the country’s minimum wage by which the posted worker habitually carried out their activities could not be derogated from by agreement.
Case C–152/20
Two workers sued their employer before the relevant Romanian court to pay the difference between their wages and the minimum wages. In their view, they were entitled to the minimum wages under the Italian legislation set out in the collective sector agreement.
The workers considered that the Italian legislation on the minimum wage was applicable to them under Article 8 of the “Roma I” Regulation. Although the contracts were stipulated in Romania, they carried out their duties in Italy. They argued that the place from which they carried out their missions, received instructions, and returned was Italy, where most of the transport activities were carried out.
In objecting, the employer observed that:
Case C–218/20
The main proceedings in Case C-218/20 concern the law applicable to the remuneration of a Romanian lorry driver employed by a Romanian company who worked exclusively in Germany.
Two clauses were attached to the employment contract
The employment contract did not expressly mention the place where the worker was to carry out his work. He argued that the location from which he carried out his work and received instructions was Germany. In addition, he argued that the lorries used were parked in Germany, and the transport missions carried out took place within the country borders.
By an action brought before the referring court, the Romanian trade union of which the worker was a member requested that the employer be ordered to pay him the difference between the wage received and the minimum wage to which he would have been entitled under German law.
According to the union, the German legislation on the minimum wage applied to the employment relationship under Article 8 of the “Roma I” Regulation. Although the contract was stipulated in Romania, the worker habitually carried out his duties Germany and was entitled to the minimum wage under German law.
However, according to the employer, it was explicitly agreed that the individual employment contract would be governed by Romanian labour law.
The European Court of Justice opinion
As a preliminary point, the Court found that, in both cases, it was not clear whether the lorry drivers were posted workers as a provision of services or workers who, although not having this status, habitually carried out their work in a country other than that in which the employer was established.
The Court noted that Article 8 of the “Roma I” Regulation lays down special conflict-of-law rules on individual employment contracts. These rules apply where, during contract performance, the work is carried out in at least one country other than that of the chosen law. Paragraph 1 of that Article states that:
“If those provisions give the worker better protection than those provided by the chosen law,” the Court observed, “they prevail over the latter, whereas […] the chosen law remains applicable to the remainder of the contractual relationship.”
Article 8 para. 2 of the “Roma I” Regulation refers to the law of the country worker habitually works under the employment contract.
The regulation “thus seeks to ensure compliance with provisions guaranteeing the worker protection laid down by the law of the country where they carry out professional activities.”
The correct application of this regulation implies that the national court:
In this case, the referring court considered that, due to the places where the drivers habitually carried out their work, specific provisions of Italian and German law on the minimum wage could apply instead of the Romanian law chosen by the parties, under Article 8 paragraph 1 of the “Roma I” Regulation.
As for the issue of whether those rules constitute provisions from which it is impossible to derogate by agreement under that article, the Court noted that “From the wording of that provision, that issue must be assessed under the law which would have been applied in the absence of a choice. The referring court will interpret the national rule in question.”
According to the Court, the rules on the minimum wage of the country where the worker habitually works may, in principle, be classified as “provisions from which it is not permitted to derogate by agreement” under the law which, in the absence of a choice, would have been applicable”, under Article 8 paragraph 1 of the “Roma I” Regulation.
Considering the above, for both proceedings, the Court held that Article 8 paragraph 1 of the “Roma I” Regulation “must be interpreted as meaning that, the law governing the individual employment contract has been chosen by the parties to that contract and is different from the applicable law […. ], the application of the latter is to be excluded, except for “provisions from which it is impossible to derogate by agreement” under Article 8 paragraph 1 of that regulation, which may include minimum wage rules.”
In circular no. 115 of 2 August 2021, INPS has provided the first practical operating instructions for employers benefiting from the contribution exemption under the re-employment contract introduced by art. 41 of Decree Law 25 May 2021, no. 73, converted with amendments, by Law no. 23 July 2021, no. 10 ( “Support Decree-bis”). This Circular will be followed by a further provision explaining the procedures for requesting and using the benefit.
INPS replied that, on 28 June 2021, the Italian authorities notified the European Commission of this measure. Accordingly, in Decision C(2021) 5352 final of 14 July 2021, the Commission authorised the exemption applicability under the above legislation.
The re-employment contract has been established as an open-ended employment contract. Its formalisation entitles the employer to benefit from a contribution exemption of all social security contributions due at its own expense, excluding premiums and contributions due to INAIL, up to a maximum limit of €6,000 annually, prorated and applied monthly, for a maximum of six months. The calculation rate of pension benefits remains unchanged.
The exemption is available to private sector employers, excluding domestic and agricultural employers, who make open-ended recruitments with a re-employment contract between 1 July 2021 and 31 October 2021.
According to the legislator’s intention, this new type of contract and the related exemption meet the need to facilitate and promote the reinstatement of unemployed workers into the labour market and resume activities after the epidemiological emergency.
An employment condition to be hired under a re-employment contract is for an individual project to ensure the worker’s professional skills meet the new work situation. This is subject to the worker’s consent. The individual project lasts six months during which the sanctions on unlawful dismissal provided for by current legislation apply.
During reinstatement, only dismissal for just cause or justified reason is allowed; at the end of the project, ad nutum dismissal is permitted, as in an apprenticeship contract. If neither party terminates the contract, the relationship continues as ordinary open-ended employment. Please note that dismissal during or at the end of the reinstatement period entails forfeiture of the contribution exemption right.
The right to use the measure is subject to the following conditions at the date of recruitment:
The exemption will be forfeit, and the amount received will be refunded for employers who:
INPS clarified that the benefit involves “portability” which means the worker for whom the benefit has been partially used has the same exemption for the remaining months due in case of any new recruitment by the same or another employer.
INPS specified that the benefit for the residual period for subsequent re-employment by the same worker could be applied only to open-ended recruitments with a re-employment contract from 1 July 2021 to 31 October 2021.
If the employee resigns, the contribution exemption is applied for the actual employment relationship duration.
For the cumulation with other contributory benefits, the benefit can be used “in sequence.” Once the six-month exemption of the re-employment contract has ended, it will be possible for employers to benefit from further contributory exemptions. INPS clarified that the maximum duration of these exemptions must be calculated net of the contribution exemption period of use linked to the re-employment contract.
Source: Sintesi
Answering question no. 458/2021, the Inland Revenue expressed its opinion on tax on remuneration paid to employees posted to China who, due to the Covid-19 health emergency, continued to smart work from Italy.
The facts
In its capacity as a withholding agent, the Company requested clarification from the Inland Revenue about the correct tax payments to be applied to its employees originally seconded to China who returned to Italy in January 2020 due to the Covid-19 epidemic. The applicant specified that the same employees continued to smart work for the exclusive benefit of the Chinese host company.
The applicant asked whether:
Based on the provisions issued by the OECD on the subject with a note dated 3 April 2020 and subsequently updated on 21 January 2021, the applicant suggested not to consider the income produced in Italy by the workers as Italian income. This can be done by not considering the impact of returning to the country when defining the workers’ tax residence. The OECD recognised that each jurisdiction might adopt its unique guidelines to avoid double taxation during health emergencies.
Inland Revenue guidelines
On the first point, the Inland Revenue ruled that the analysis guidelines from OECD Secretary had been accepted by Italy based on administrative agreements interpreting the provisions contained in the Conventions to avoid double taxation with Austria, France and Switzerland. Based on those agreements, income is considered produced where the service would have been provided if the Covid-19 emergency had not happened.
The tax authority observed that it is necessary to refer to the Agreement between the Government of the Italian Republic and the Government of the People’s Republic of China signed on 31 October 1986 and ratified by Law no. 376/1989.
Based on the combined provisions of Article 15 of the above Italy-China Agreement and Art. 23 of the Consolidated Income Tax Law (TUIR), according to the Inland Revenue, those who have spent less than 183 (184 in a leap year) days in Italy are subject to taxation for income earned while working in Italy even though they are not resident.
Under the Convention, the resulting double taxation is resolved by recognising a tax credit by China, the country of employees’ tax residence.
On the second question, the Inland Revenue recalled that “for individual tax residence identification purposes, based on domestic law and without a regulatory provision which considers the COVID emergency, reference should be made to the criteria set out in Article 2 of the TUIR, which applies regardless of whether an individual’s stay in our country is dictated by the pandemic. Under Article 2, paragraph 2, of the TUIR, persons who for most of the tax period are registered in the registers of the resident population or have their domicile or residence in the country under the Civil Code are considered to be residents”.
On this point, the Inland Revenue confirmed the need to consider the days of physical presence in Italy and the conditions provided for by the treaty signed with China. The treaty mentions the “tie-breaker rules” in paragraph 2 to settle possible conflicts of residence between the contracting States. These rules give precedence to the “permanent residence” criterion followed, in hierarchical order, by the centre of vital interests, habitual residence and nationality.
The Inland Revenue agreed that to identify a smart worker tax residence following their return to Italy from where they were posted, without prejudice to any provisions in ad hoc bilateral agreements, reference should be made to Article 2 of the TUIR without considering the Covid-19 pandemic’s impact.
Following the withdrawal of the United Kingdom and Northern Ireland from the European Union and applying the Trade and Cooperation Agreement (TCA) and the Protocol on Social Security Coordination (PSSC), with circular no. 98 dated 8 July 2021, INPS has provided operating instructions on social security and how to exchange information between social security institutions.
Clarifications were provided on the applicability of the Withdrawal Agreement (WA) referred to in INPS circular no. 16 of 4 February 2020.
The legislation development
This circular explains the development of the complex regulatory situation, most recently described by the Institute in Circular no. 53 of 6 April 2021.
The United Kingdom’s withdrawal from the European Union was achieved in a first phase by an agreement, called Withdrawal Agreement or “WA”, signed on 24 January 2020 and entered into force the following 1 February.
The WA provided for a transitional period during which EU social security law continued to apply to the UK. The regulatory and operational features of this transitional period, which ended on 31 December 2020, were described by INPS in Circular no. 16 of 4 February 2020.
At the end of the transitional period, on 24 December 2020, the parties signed a Trade and Cooperation Agreement (“TCA”) supplemented by the Protocol on social security coordination (“PSSC”).
It is worth noting that – in addition to what is stated in Circular no. 16/2020 – INPS specified that “the WA continues to protect those falling within its scope, even after 31 December 2020. The WA continues to apply to EU citizens resident in the United Kingdom by 31 December 2020 and to UK citizens resident in a Member State by the same date. As a result, the TCA and PSSC, which is part of it, generally apply to situations not covered by the WA.”
The TCA thus constitutes the legal basis on which future cooperation between the European Union, the United Kingdom and Northern Ireland will be based, once the legal effects of the WA have been exhausted.
The Protocol on Social Security Coordination (“PSSC”)
The PSSC is relevant to the social security issue. On this point, INPS recalled that, as already stated in the above Circular no. 53/2021, the provisions on international aggregation for the assessment of entitlement and the calculation of benefits continue to be applied under the Protocol’s scope, under article SSC.7, entitled “Aggregation of periods.”
This applies to “insurance periods, facts or situations after 31 December 2020”.
The Circular clarifies that the above aggregation of insurance periods accrued in the United Kingdom and Italy can apply to sickness and maternity/paternity benefits, confirming the specific provisions of Title III of EC Regulation 883/2004.
Finally, it is specified that the PSCC does not include family benefits. In relations between Italy and the United Kingdom, these benefits find application in Article 2, paragraph 6-bis, of decree-law no. 69 of 13 March 1988, converted into Law no. 153, in relation to non-EU countries that have not entered into bilateral conventions or agreements with Italy on family benefits.