With circular no. 2/E/2024, the Italian Revenue Agency clarified the implementation of Italian Legislative Decree of 30 December 2023, no. 216, i.e. the decree implementing the first phase of Italian personal income tax (imposte sul reddito delle persone fisiche, ‘IRPEF’) reform and other measures on income taxes.
Reform of the tax brackets
The Legislative Decree in question implements certain principles and directive criteria of Italian Law of 9 August 2023, no. 111, entitled “Delegation to the Government for tax reform”.
Article 1, paragraph 1 of the decree introduces significant changes in the field of personal income tax and, for the 2024 tax period only, applies new rates and income brackets for determining gross tax.
With respect to the framework contained in Article 11, paragraph 1, of Italian Presidential Decree no. 917/1986 (the Italian Income Tax Consolidation Act – Testo unico delle imposte sui redditi, ‘TUIR’), there is therefore a reduction from four to three income brackets and the corresponding rates; in particular, for 2024, the gross tax is calculated by applying the following rates:
Tax deductions and allowance
Moreover, for the year 2024, the deduction provided for by Article 13, paragraph 1, letter a) of TUIR has been raised from EUR 1,880 to EUR 1,955 for the recipients of employment income with the exclusion of pensions and/or similar allowances – referred to in Article 49, paragraph 1, of the TUIR – and certain assimilated income if its total value does not exceed EUR 15,000.
This provision, set out in paragraph 2 of the same Article 1, therefore increases the amount of income excluded from taxation (the “no tax area”) to EUR 8,500 for recipients of employment and assimilated income, bringing it into line with the provisions already in force for pensioners.
In this regard, the Italian Revenue Agency clarified that the amendment concerns only the first sentence of Article 13, paragraph 1, letter a) of the TUIR, and therefore the other provisions governed by the same article remains unaffected.
Article 1, paragraph 3, of the Decree amends, for the 2024 tax year, the prerequisite for the granting of allowance under Article 1, paragraph 1, of Italian Decree-Law no. 3/2020. It is provided that, for taxpayers with a total income of no more than EUR 15,000, the relief is granted on the condition that the gross tax is higher than any deduction due minus EUR 75 in relation to the period of work in the year.
Important changes have also been introduced for taxpayers with a total income of more than EUR 50,000, with respect to which Article 2 of the Decree provides for the reduction of EUR 260 in the amount of the deduction from the gross tax due for the year 2024.
On 1 January 2024 important changes were introduced to the relationship between Italy and Switzerland relating to the tax legislation applicable to cross-border workers, and to the guidelines relating to remote working.
Historically, cross-border work between Italy and Switzerland has been regulated by the Agreement signed in Rome in 1974 (‘1974 Rome Agreement’)and, also, by the Convention against double taxation of 1976 (the ‘1976 Convention’), still in force between the two countries.
These agreements establish that the wages, salaries and other elements forming part of the remuneration that a cross-border worker receives as consideration for an employed activity are taxable only in the State in which such activity is carried out. For these purposes cross-border worker is generally understood as an employed or self-employed worker who carries out his or her activity in a State other than the one in which he or she resides, and who returns to the State of residence, in principle, daily or at least once a week.
However, technological development and, above all, the Covid emergency have changed the traditional scenarios, requiring both Italy and Switzerland to deal with widespread remote work which, unlike in the past, it is no longer necessarily carried out at the company premises and, in as far as is relevant for these purposes, no longer involves daily cross-border travel.
On 1 January 2024, following the entry into force of Italian Law no. 83/2023 implementing the agreement of 23 December 2020, important changes were introduced to the relationship between Italy and Switzerland relating to the tax legislation applicable to cross-border workers, and to the guidelines relating to remote working as well.
The new tax measures applicable to cross-border workers
With the entry into force of Italian Law no. 83/2023, the process of reviewing the agreements between Italy and Switzerland concerning the cross-border work regime, started by the aforementioned protocol of 23 December 2020, was concluded. The new agreement, formalised by the aforementioned law, amends the 1974 Rome Agreement and the 1976 Convention to reflect the new terms reached between the two countries.
The new provisions agreed between Italy and Switzerland – which entered into force on 17 July 2023, but took effect from 1 January 2024 – concern the definition of cross-border work and the tax regime applicable to the work income earned by the persons concerned. The two countries have agreed that the agreement provisions are subject to review on a five-yearly basis.
In detail, the definition of cross-border worker has been revised by the new agreement and covers any worker resident in a contracting state who is domiciled for tax purposes in a municipality which is totally or partially in the 20 km area from the border with the other contracting State. The border areas covered by the agreement are, for Switzerland, the cantons of Grisons, Ticino and Valais, and, for Italy, the Lombardy, Piedmont and Valle d’Aosta regions and the autonomous province of Bolzano.
To be considered a cross-border worker, the worker must work in the above-mentioned border areas of the other State and return, in principle, to his or her main domicile in the State of residence on a daily basis. The worker retains this statusif he or she does not return to his or her home, for professional reasons, for a maximum of 45 days in a calendar year, excluding holidays and sick days.
For tax purposes, the new agreement provides a distinction between “old” and “new” cross-border workers. A worker is an “old” cross border worker if he or she was a cross-border worker on 17 July 2023 or carried out work in the border area in the period between 31 December 2018 and 17 July 2023. The rules of the previous version of the agreement, which provide for exclusive taxation in the country in which the work is carried out if the worker resides within 20 km of the border between the two States, continue to apply to “old” cross-border workers.
With respect to “new” cross-border workers (i.e. workers who are classified as cross-border workers starting from 17 July 2023), the shared taxation criterion applies.
Therefore, the State where the work is carried out will deduct withholding tax on the income earned by the individual, up to a maximum of 80% of the amount due based on the provisions on personal income taxes, including local taxes.
The worker’s State of residence will also subject the same income to taxation, guaranteeing the elimination of double taxation according to the rules established by the tax convention in force between the two countries (specifically, recognising a credit equal to the taxes paid in the State where the work is carried out or guaranteeing an exemption with respect to the income subject thereto).
Changes relating to remote working
As a result of the provisions which came into force on 1 January 2024, cross-border workers between Italy and Switzerland may carry out their work remotely at their home and up to the threshold of 25% of the working hours, without this having any impact on the relevant tax regime.
Read the full version in Norme e Tributi Plus Diritto of Il Sole 24 Ore.
On 31 January 2024, with circular no. 27/2024, the Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’) provided guidelines and instructions relating to the use of the exemption of 100% of the share of social security contributions payable by working mothers for the pay periods from 1 January 2024 to 31 December 2026, up to a maximum limit of EUR 3,000 per year, to be allocated pro rata on a monthly basis, introduced by the 2024 Italian Budget Law.
The exemption is granted to working mothers of three or more children – employed on a permanent contract – up to the month of the youngest child’s eighteenth birthday.
To access the exemption in question, the circular specifies that female workers must send their employer a declaration containing the number of children and their tax codes. Alternatively, INPS provides a special application form that the worker can fill in and send directly to it.
The contribution exemption also applies to working mothers of two children, up to the month of the youngest child’s tenth birthday, limited to pay periods from 1 January 2024 to 31 December 2024.
Finally, the circular specifies that the mother is eligible for the exemption at the time of the birth of the third child (or, only for 2024, of the second). Moreover, if one of the children leaves the family unit or does not live with the mother or is in the sole custody of the father, there is no forfeiture of the right to benefit from the contribution reduction in question.
At our last Team Meeting, among other topics, we explored the complex issue of tax and social security treatment applicable to shares granted to employees and the quantification of their value for the purposes of calculating employment income.
If you want to learn more about this topic, request our slides here.
HR Capital has always worked with the aim of offering a workplace where people can develop their talent: we believe in the sharing of skills and constant training, fundamental drivers for the employees’ growth.
For this reason, we decided to participate in the 2023 survey by Great Place to Work® Institute Italia to assess our Company business environment and obtain the Great Place to Work® certification.
We are proud of this certification which provides further confirmation of the path taken in promoting the well-being of our workplace and in the constant development of our people.
Here are some of the reasons why HR Capital is a Great Place To Work®, in the words of our employees:
“Great attention is paid to both the needs and growth of individuals and the continuous improvement of processes. In addition, every idea or initiative can be discussed, shared and implemented”.
“We work as a team, for real, not just on paper. This value is always defended by our manager, regardless of the situation. It’s something that comes first here and means that there is always a great atmosphere among colleagues”.
Click here to visit our firm’s profile on the Great Place to Work website.
On 30 December 2023, Italian Law no. 213/2023, entitled “State budget for the financial year 2024 and multi-year budget for the three-year period 2024-2026” (so-called “2024 Budget Law”), approved by the Council of Ministers on 16 October 2023 and by Parliament on 29 December 2023 was published in the Italian Official Gazette.
Cutting the “tax wedge”
Among the main innovations in the employment field is the extension for 2024 of the cut in the “tax wedge” (“cuneo fiscale”) already introduced by Italian Decree-Law no. 48/2023 (the so-called “Employment Decree”). Therefore, the reduction of the partial contribution exemption of the old-age/survivor’s pension (indennità vecchiaia e superstiti, ‘IVS’) rate for employees in the public and private sectors, with the exception of domestic workers, is confirmed. Specifically, this reduction is 6% if a worker’s monthly social security taxable amount is less than EUR 2,692, or 7% for a social security taxable amount less than EUR 1,923.
For 2024, however, this measure will not apply to the thirteenth month’s salary, consequently the additional monthly payment relating to 2023 will have an exemption rate of 2% while that relating to 2024 will be subject to the ordinary contribution rate.
Fringe benefits exemption
The 2024 Budget Law also provided for the raising of the exemption limit for fringe benefits, derogating from the provisions of Article 51, paragraph 3, of the Italian Income Tax Consolidation Act (Italian Presidential Decree No 917/1986, Testo unico delle imposte sui redditi, ‘TUIR’). The provision sets out that, under the conditions set out therein, fringe benefits are excluded from the calculation of employment income and, moreover, remain excluded from the payment of employer contributions. The tax and social security exemption applies to fringe benefits as long as they have an overall value of less than EUR 258.23 in the tax period in which they were received. If this threshold is exceeded, then the entire value of the sums received must be considered fully taxable.
The aforementioned Employment Decree had provided, for 2023 only and only for workers with dependent children for tax purposes, for an increase in this exemption limit to EUR 3,000, which remained unchanged for all other workers.
In this regard, Article 1, paragraph 16, of the 2024 Budget Law established that, limited to the 2024 tax period, and within the overall limit of EUR 1,000, the value of the goods sold and services provided, as well as the sums paid or reimbursed to the same workers by employers for the payment of domestic water utilities, electricity and natural gas, the costs of renting the first home or interest on the mortgage relating to the first home, do not contribute to the calculation of income.
This limit is raised to EUR 2,000 for workers with dependent children, including recognised children born out of wedlock, adopted or foster children. In this regard, in line with what is already required in 2023, in order to benefit from the increase in the exemption limit, it will be necessary for the worker to provide the employer with a specific self-certification relating to the dependent children for tax purposes.
Parental leave allowance
The 2024 Budget Law changes the allowance due during the period of parental leave (so-called “optional”). In particular, in addition to the increase of up to 80% of the allowance for the first month used, introduced by the 2023 Budget Law, there is also an increase to 60% of the allowance for the second month of parental leave.
The legislation also specifies that, for 2024 only, this allowance is raised to 80% also for the second month, it being understood that the allowance for the following months remains 30% of salary.
To benefit from the increase described above, the original conditions remain valid, i.e. (i) the parental leave must be used during the first six year of the child’s life (or entry into the family) and (ii) the mandatory leave must end after 31 December 2023.
Reduction of contributions for working mothers
Finally, the Budget Law introduces, limited to 2024-2026, for female permanent employees with three or more children, a 100% reduction in IVS contributions up to when the youngest child is 18 (within the annual limit of EUR 3,000 apportioned on a monthly basis).
For 2024, that provision is extended, on an experimental basis, to working mothers of two children, until the youngest child is 10. The exemptions do not apply to domestic work relationships.
The Italian National Labour Inspectorate (Ispettorato Nazionale del Lavoro, ‘INL’), with note no. 2401/2023, provided clarification on the retention of documents relating to transnational postings to simplify the administrative burdens on service providers who intend to post their staff to EU countries other than their country of origin.
Reference legislation
Transnational posting is governed by Italian Legislative Decree no. 136/2016, implementing Directive 2014/67/EU, and refers to cases where a company based in an EU Member State or in a non-EU State posts one or more workers to another Member State to another company.
A posted worker is therefore a person who, although he or she appears to be habitually employed in one Member State, carries out his or her work in another State for a limited period.
The legislation provides that, for the entire duration of the posting, the existing employment relationship between the posted worker and the posting company continues to exist. The work carried out in the other State is of limited duration and is carried out in the interest and on behalf of the posting company, which continues to be subject to the standard employer obligations (e.g. responsibilities in terms of recruitment, relationship management, salary and social security obligations, as well as disciplinary and dismissal powers).
Article 10 of Italian Legislative Decree no. 136/2016 provides for the obligation, on the part of posting employers, to communicate the posting in advance by means of the appropriate “UNI_Distacco_UE” form.
Paragraph 3 of the same article also contains two additional administrative burdens: first of all, the posting company must designate a contact person with address for service in Italy in charge of sending and receiving deeds and documents on its behalf. Otherwise, the registered office of the posting company will be considered as the place where the recipient of the provision of services has its registered office or resides.
The second burden requires that during the period of posting and up to two years from its termination, the employer must keep and prepare a copy in Italian of the employment contract or other document containing information on the employment relationship, pay slips, slips indicating the start, the end and duration of the daily working time, documentation proving the payment of wages or equivalent documents, the public notice of the establishment of the employment relationship or equivalent documentation and the certificate relating to the applicable social security legislation (“PD A1”).
With regard to this last aspect, the Labour Inspectorate clarified, with the note under discussion, that the foreign company that posts workers to Italy fulfils the obligation to keep the work documentation by simply showing it to the supervisory bodies if requested: without the need, therefore, to keep such documentation for the entire period of posting (as appears to be required by the legislative provision).
However, it should be clarified that it remains necessary to allow the inspection staff immediate access to check the correct establishment of the employment relationship which, as indicated in National Labour Inspectorate circular no. 1/2023, can be demonstrated through a certificate of the request for the posting document to the Social Security Authority of the Member State of origin made by the posting company.
In addition, the note clarified that the contact person designated by the posting company, in order to interact with the competent authorities, does not necessarily have to be physically present in Italy: an address for service in Italy will be sufficient together with reference contact details for service of documents or specific communications if necessary.
Among the most important changes governed by Italian Legislative Decree no. 216/2023, which came into force on 1 January 2024, is a revision of the main income tax, IRPEF (imposta sul reddito delle persone fisiche). For 2024, in fact, three tax brackets are expected to be applied, replacing the four in force until 2023. In this regard, Article 1 of the decree, entitled “Revision of the personal income tax regulation”, provides for the application of a rate of 23% for income up to EUR 28,000, 35% for income between EUR 28,000 and EUR 50,000 and 43% for income of EUR 50,000 and over. In essence, the second IRPEF bracket of 25%, which applied to incomes between EUR 15,000 and EUR 28,000, has been abolished.Article 1, paragraph 2, also provides that, for 2024 only, the tax-free amount for employed taxpayers whose income is less than EUR 15,000 is raised to EUR 1,955, compared to the previous EUR 1,880. With regard to corporate taxation, relief has been introduced for new recruitment: specifically, the cost of newly hired personnel with a permanent employment contract is increased, for the purposes of determining business income, by an amount equal to 20% of the cost attributable to the increase in employment. This relief is only available to entities that have carried out their activities for at least 365 days in the tax period in progress as of 31 December 2023. Companies and entities in ordinary liquidation, subject to judicial liquidation or other liquidation procedures related to the business crisis are not eligible for this relief. Finally, the decree specifies that employment increases are relevant provided that the number of permanent employees at the end of the tax period following the one in progress as of 31 December 2023 is higher than the number of permanent employees employed on average in the previous tax period.
On 16 October 2023, the Italian Council of Ministers approved Italian Legislative Decree no. 152/2023, which implements EU Directive 2021/1883 on the conditions of entry and residence of third-country nationals (or stateless persons) for the purpose of highly qualified employment. The Decree, published in the Italian Official Gazette on 2 November 2023, amends Article 27 quater of Italian Legislative Decree no. 286/1998 (the so-called “Consolidated Immigration Law”), introducing important changes on the entry and residence of highly qualified foreign citizens.
In particular, the Decree:
In message no. 4178 of 24 November 2023, the Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’) provided some clarification on when the contribution benefit for the recruitment of young people “Under 30”, introduced by Italian Law no. 205/2017 (2018 Budget Law), and “Under 36”, introduced on an experimental basis for 2021-2022 by Italian Law no. 178/2020 (2021 Budget Law), extended also for 2023 by Italian Law no. 197/2022 (2023 Budget Law) does not apply.
INPS recalled that the exemption applies to the recruitment and conversion of fixed-term contracts to permanent contracts for individuals who, on the date of the first subsidised employment, are under 30 or under 36, and have not been employed on a permanent contract with the same or with another employer.
In this message INPS has reiterated the clarification it has provided in its previous circulars on this contribution incentive (most recently circular no. 57/ 2023, relating to the exemption for youth employment referred to in the 2023 Budget Law). INPS has also recalled the provisions for the three-year exemption, set out by Italian Law no. 190/2014, included in the Italian Ministry of Labour and Social Policies’ Ruling no. 2/2016, which clarified that the above-mentioned contribution exemptions provided for the hiring of young people “Under 30” and “Under 36”, do not apply “if, following an inspection, a self-employment relationship, with or without a VAT number, or a para-subordinate relationship is reclassified as a permanent subordinate employment relationship”.
In fact, as set out in the above-mentioned Ministry of Labour and Social Policies Ruling no. 2/2016, it is not possible to benefit from contribution relief if the permanent employment relationship has been established not voluntarily by the employer but following an inspection.
The ministerial ruling is specifically intended to incentivise the voluntary recruitment of personnel by rewarding those employers that contribute to increased and stable employment with the exemption, consequently excluding employers that, conversely, break the law.
Therefore, with the message in question, the INPS has again clarified that the contribution in question must be returned if the employer who has benefited from it has been subject to an inspection following which the “subsidised” employment relationship has resulted from a previous reclassified employment relationship.
The position is not the same for an employer that benefits from contributions relief provided for the recruitment of young persons and that is different from the employer under the reclassified employment relationship. In this case, the employer is lawfully entitled to the contributions exemption since it can be presumed that the subsidised recruitment was in good faith, taking into account that at the time of the establishment of the employment relationship the employer was not aware of the previous reclassification of the relationship.
The right of employees who are parents with children under 14 and of “vulnerable” employees to work remotely is soon to be extended. The Senate Budget Committee has approved an amendment to the bill to convert Italian Decree-Law No. 145/2023, which extends this right to 31 March 2024.
As is well known, remote working was introduced by Italian Law No. 81/2017 and is defined by Article 18 as “a different way of performing the employment relationship characterised by the absence of specific time or place constraints”. The work is performed partly inside the company premises and partly outside without a fixed location, within the limits of the maximum daily and weekly working hours.
The ordinary legislative framework for remote working requires that the worker can work remotely provided that both parties agree by means of a written agreement.
This legislation, however, does not establish any obligation on the employer to guarantee the employee the opportunity to carry out their work remotely. In this regard, Italian Law no. 197/2022 (also known as the “2023 Budget Law”) as subsequently amended, provided that for so-called “vulnerable workers” the employer must ensure, until 31 December 2023, the possibility of performing work remotely without the need to sign the related agreement and provided, however, that remote working is compatible with the work performed.
A worker is defined as “vulnerable” on the basis of an assessment by an occupational doctor. They are considered to be “vulnerable” as they are more exposed to the risk of infection by the SARS-CoV-2 virus, due to their age or risks deriving from immunodepression, from oncological diseases or from undergoing lifesaving treatment or in any case from comorbidities that may give rise to greater risk, as ascertained by the occupational doctor.
The same right was then also extended to so-called “super vulnerable” workers, as defined by Italian Ministerial Decree of 4 February 2022, and also to workers with children under 14 years of age.
It should be clarified that employers are required to ensure that “super vulnerable” workers work remotely, even if this means assigning them to tasks other than those of the same category or area of classification without any change to pay.
In conclusion, the right to work remotely, although arising under different legal provisions, concerns the following categories:
In relation to the most recent extension, although the amendment only refers to workers with children under 14, the effect of the extension of the deadline, as formulated, should also apply to vulnerable workers as certified by the occupational doctor. In fact, the provision that has been extended (namely Article 90, paragraph 1, of Italian Decree-Law no. 34/2020) refers to both categories.
The conditions to which this right is subject remain unchanged:
Finally, it should be noted that, at the date of writing “super vulnerable” workers remain excluded from the extension. For this category of people, in fact, the amendment that provided for the extension of the right to work remotely until 30 June 2024 was not approved.
However, it is still possible that the provision will also be extended for this category of workers. Moreover, these workers already have reinforced protection (compared to working parents and the “vulnerable”): they can ask for and obtain the right to work remotely, including through the assignment to other tasks included in the same category or area of classification, without any reduction in pay. In contrast, for other categories, the right is conditional on the work being provided being compatible with remote working. In any event, the mandatory communication of agile work on the ClicLavoro ministerial portal is due within ordinary deadlines, i.e., within five days from the start of working remotely.
The Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’), with circular no. 88/2023, provided guidance for the management of social security obligations related to the new regulations concerning amateur and professional workers in the sports sector, which came into effect on 1 July 2023.
Italian Legislative Decree of 28 February 2021, no. 36, as amended by Italian Legislative Decree of 5 October 2022, no. 163, and by the Italian Decree-Law of 29 December 2022, no. 198 (the so-called “Milleproroghe Decree”), and most recently amended by Italian Legislative Decree of 29 August 2023, no. 120, (also called “Corrective bis”), implemented Italian Law of 8 August 2019, no. 86, containing “Delegations to the Government and other provisions on sports law, sports professions and simplification”.
The main guiding criteria listed in the enacting law include:
The INPS, therefore, in its circular summarised the main contents of the enabling law for the reform of sport, paying particular attention to the definition of sports workers and the contribution regime applied to each category of them.
With this reform of work in the sports sector, the social security and contribution regimes to be applied to the sports employment relationship have been set out, which depend mainly on the type of contract with which the same employment relationship is regulated, whether they are professional and amateur employees, self-employed, professional coordinated and continuous collaborations, or self-employed, amateur coordinated and continuous collaborations and administrative-management coordinated and continuous collaborations.
One of the key objectives of the reform of employment law in the sports sector, therefore, concerned the elimination of the existing gap between the protections provided for “professional” sports workers compared to those provided for workers belonging to the amateur sector. For this purpose, in fact, specific protections have been granted to the latter in terms of social security, welfare and insurance.
The circular specified that, in addition, under Article 35, paragraph 1, of Italian Legislative Decree no. 36/2021, the following categories of workers must be enrolled in the Sports Workers’ Pension Fund (Fondo Pensione dei Lavoratori Sportivi or “FPSP”) (i.e. the “old” Professional Sports Pension Fund):
Therefore, because of this provision, from 1 July 2023 the regulations on social security matters referred to in Italian Legislative Decree of 30 April 1997, no. 166, which already apply to the professional sector, are extended to workers in the amateur sector and enrolled in the FPSP. In this case, the contributions will be due based on the actual salary received and in compliance with the minimum contribution and the INPS ceiling if applicable.
It is also provided that the same protections in the field of (i) financial sickness insurance and (ii) financial maternity insurance apply to employees in the sports sector enrolled in the Pension Fund, regardless of their professional qualification.
As for the remaining group of sports workers, i.e., coordinated and self-employed collaborators in the amateur sector, as of 1 July 2023, it is envisaged that the principals will be obliged to contribute to the separate INPS national insurance and pension scheme and will therefore also have to provide the consequent individual Uniemens reports, according to codes and methods established by the same circular.
Lastly, it should be noted that regarding coordinated and continuous collaborators, the ordinary allocation of the contribution burden applies, i.e., 2/3 borne by the principal and 1/3 borne by the collaborator.
In contrast, for self-employed workers, it is possible to charge 4% to the same principal.
The Italian Council of Ministers has published in the Italian Official Gazette no. 256 of 2 November 2023, Italian Legislative Decree no. 152 of 18 October 2023, which implements Directive (EU) 2021/1883 of the European Parliament and of the Council of 20 October 2021, relating to the new conditions of entry and residence of citizens of third-country nationals for the purpose of highly qualified employment and obtain the issue of the EU Blue Card.
With Italian Legislative Decree no. 152/2023, the Italian Council of Ministers has made changes to Article 27-quater of Italian Legislative Decree no. 286/1998, “Consolidated law regulating immigration and rules on the status of foreign nationals”, the so-called Consolidated Immigration Law.
Italian Legislative Decree no. 152/2023 redefines the requirements which the worker must meet to be considered highly qualified and obtain the release of the EU Blue Card: he or she must, alternatively:
The changes introduced regarding the documentation that the employer must produce when submitting the application for authorisation, under penalty of its rejection, are of particular interest. It is no longer necessary for the offer of an employment contract, or the binding job offer for the performance of a work activity that requires the possession of a higher professional qualification to last at least one year, but it is sufficient that it be biannual.
On the other hand, the documents that must be produced by the employer when submitting the authorisation request are reiterated, namely the educational qualification, the higher professional qualification or the requirements under Italian Legislative Decree No. 206/2007 related to regulated professions, the amount of annual salary that cannot be less than that provided for in the applicable national collective bargaining agreement (contratto collettivo nazionale di lavoro – CCNL) based on the level of classification envisaged for the recruitment of the highly qualified worker.
The procedure for an application for an EU Blue Card by a third country national, who already holds another residence permit issued to carry out a highly qualified job is further simplified: in these cases, it will no longer be necessary for the employer to produce the above documentation, since it has already been checked when issuing the previously issued residence permit.
In addition, again with the aim of simplifying and facilitating the recruitment of highly qualified foreign nationals, it has been provided that the employer is no longer required to check with the Job Centre the availability of a worker already in Italy and, while waiting for the residence permit to be issued by the Police Headquarters (Questura) (normally within 30 days of the request), the foreign national will still be able to work.
Finally, the period during which the EU Blue Card worker must perform only the highly skilled activity for which his or her entry into Italy was requested is reduced from two years to 12 months.
The reasons that justify the refusal to issue a residence permit for the performance of highly qualified work – the EU Blue Card – or, if it has been granted, its revocation, include, in the alternative, when the foreign national no longer:
or
or
The new provisions introduced by Italian Legislative Decree no. 152/2023 provide, if the requirements are met, for the conversion of the EU Blue Card into a residence permit for:
Moreover, if the conditions for family reunification are met and the complete application is submitted at the same time as the EU Blue Card application, the residence permit of the family member and that of the highly qualified worker will be issued at the same time.
Another change concerns a foreign national who holds a valid EU Blue Card issued by another Member State: in this regard, it is possible to enter and reside in Italy to carry out a professional activity for a maximum period of 90 days within a period of 180 days. If the residence period to carry out the highly qualified activity is longer than 90 days, it is necessary to apply for an authorisation, but not for an entry visa.
Finally, a foreign national who loses his or her job will be able to make a declaration of immediate availability without the need to register with the employment lists.
Not everyone knows that international companies can hire employees in Italy even if they do not have a legal entity or presence there.
Once the limited number of required documents and information are gathered, the procedure takes only a couple of weeks.
We have created a guide that develops these issues:
The Italian Revenue Agency, in its answer to a request for ruling no. 428 of 12 September 2023, provided some clarification on the tax treatment applicable to remuneration paid to a worker posted abroad, in light of the provisions of Article 51, paragraph 8-bis of Italian Presidential Decree no. 917/1986 (Italian Income Tax Consolidation Act, Testo unico delle imposte sui redditi, ‘TUIR’).
Reference legislation
The reference legislation applicable to the case in question which identifies the criteria for determining income from employment produced abroad is Article 51, paragraph 8-bis of the TUIR which, derogating from the provisions of the previous paragraphs of the same Article 51, provides that “income from employment, performed abroad on a continuous basis and as the exclusive purpose of the relationship by employees who over a period of 12 months stay in the foreign state for a period exceeding 183 days, is calculated on the basis of the remuneration agreed by convention identified annually by the decree of the Ministry of Labour and Social Policy referred to in Article 4, paragraph 1, of [Italian] Decree-Law no. 317 of 31 July 1987, converted by [Italian] Law no. 398 of 3 October 1987”.
That remuneration is fixed annually by 31 January of each year and is determined with reference to, and in any case not less than, the minimum salary provided for by the national collective agreements grouped by comparable sectors.
Applicant’s request for ruling
In the case examined by the Italian Revenue Agency, the applicant is a commercial business that, from 1 January 2022 and until 31 December 2023, has posted one of its employees, in charge of carrying out CEO functions, to its German subsidiary to ensure better coordination between the various operational activities. The employee was considered to be tax resident in Italy for the 2022 tax period as he/she had maintained his/her family and, therefore, his or her centre of interest in Italy.
In light of the managerial nature of the tasks entrusted to the employee and the consequent responsibilities, he/she, as also specified in the international posting letter, is to carry out the work activities on a continuous basis and as the exclusive purpose of the relationship with the German subsidiary for the entire duration of the posting; although the main place of work is identified at the secondee company, in addition, the worker makes occasional trips to various countries other than Germany, including Italy.
The applicant, therefore, asked whether, as a result of the trips made to Italy, the requirements of exclusivity and continuity of the employment relationship carried out abroad were no longer met and therefore raised interpretative doubts about the application of the rules for calculating the taxable base of income from employment using remuneration agreed by convention(retribuzioni convenzionali).
Italian Revenue Agency’s Opinion
In response to the applicant’s request, the tax authority specified that the criterion for calculating income for those workers who, while working abroad, continue to be classified as tax residents in Italy under Article 2, paragraph 2, of the TUIR, means that the income deriving from employment performed abroad is subject to taxation taking as the taxable base the remuneration agreed by convention fixed by the aforementioned decree of the Ministry of Labour and Social Policy, without taking into account the remuneration actually received by the worker.
On the basis of the conditions set out in the aforementioned legislation, therefore, the tax regime referred to in Article 51, paragraph 8-bis of the TUIR applies provided that:
It should be noted that, in relation to the first condition, it is necessary that the person who works abroad is classified in one of the categories for which the decree of the Minister of Labour and Social Policy, in agreement with the Ministry of Economy and Finance, sets remuneration agreed by convention. If the financial sector in which the employee carries out the work activity does not fall within the decree, then the specific regime does not apply.
The second[ED3] condition provided by the legislator is that the work carried out abroad is the exclusive purpose of the employment relationship and, as clarified by the circular of the Ministry of Finance no. 207/2000, it is necessary that a specific contract is entered into that provides that the work must be carried out abroad. As clarified by the Italian Revenue Agency with resolution no. 245/E/2007, “the work must be carried out entirely abroad” in order to exclude cases in which continuity and exclusivity of the work abroad is lacking.
With regard to the calculation of the days of actual stay of the worker abroad, as clarified in circular no. 207/2000, the period to be considered does not necessarily have to be continuous: it is in fact sufficient that the worker works abroad for more than 183 days in a 12 month period. The Italian Revenue Agency has clarified that in using the latter expression, the legislator is not referring to the tax period, but to the worker’s stay abroad established in the employment contract, which may also provide for a period of two calendar years. Circular no. 7/E/2001 specified that if the contract provides for a stay abroad of more than 183 days, the withholding agent is required to apply the taxation provided for in Article 51, paragraph 8-bis of the TUIR starting from the first salary paid.
Response of the Italian Revenue Agency to the specific case
As referred to above, in the case presented by the applicant, the worker, within the framework of the employment contract governing his/her work on his/her posting to the subsidiary in Germany, makes occasional business trips to countries other than Germany, including Italy, for business needs and in the exclusive interest of the subsidiary: this fact, according to the tax authority, is not sufficient to remove the exclusivity and continuity of the employment relationship with the foreign subsidiary.
Therefore, subject to performing the work abroad for a period of more than 183 days per year and assuming that, as stated by the applicant, all the other conditions provided for in the provision under discussion are met, it is believed that, in the present case, the income can be calculated in accordance with Article 51, paragraph 8-bis of the TUIR, i.e., according to the so-called remuneration agreed by convention.
In Circular no. 82 of 22 September 2023, the Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’) provided practice notes on the incentive to postpone retirement, introduced by Article 1, paragraph 286, of Italian Law no. 197 of 29 December 2022, (hereinafter, also the “2023 Budget Law”) for employees who meet the conditions to access “flexible early retirement” (so-called “Quota 103”). These conditions require that the employee is at least 62 and has a minimum contribution period of 41 years. The implementation procedures for the incentive were established by decree of the Ministry of Labour and Social Policy of 21 March 2023 (hereinafter, “Implementing Decree”), published in the Italian Official Gazette no. 110 of 12 May 2023.
In particular, in its circular, the Entity provides the operating instructions for the use of the incentive for the postponement of retirement by employees enrolled in the Compulsory General Insurance (Assicurazione Generale Obbligatoria, “AGO”), or other substitute and exclusive forms thereof, who, having accrued the right to flexible early retirement, choose to continue their employment, waiving the contribution credit of their portion of social security contributions for disability, old age and surviving partners (invalidità, vecchiaia e superstiti), ‘IVS’ share to be paid by them.
The waiver of the contribution credit, which is the prerequisite for the application of the incentive in question, on the one hand, relieves the employer of the obligation to pay contributions to be paid by the employee, without prejudice to the employer’s obligation to pay contributions of the IVS share; on the other hand, it increases the worker’s salary, given that the amounts corresponding to the share of contributions to be paid by the employer – which the employer should have paid to the social security institution – are paid directly to the employee as remuneration, taxable for tax purposes but not for contribution purposes.
Waiver of contribution credit and workers’ eligibility for the incentive
The waiver of the contribution credit can be exercised by the employee only once during working life and not after obtaining a direct pension, nor after reaching the age requirement for the old-age pension – 67 years – nor, if lower, for the old-age pension provided for by the pension scheme to which he or she belongs.
The waiver only applies to contributions due for periods of work carried out from the date of the first effective date of the flexible early retirement, in the case of an application submitted before that date, or from the month following the month in which the application for waiver is submitted, if the same is submitted at the same time as or after the first effective date of the flexible early retirement.
In addition, the waiver, which applies to all employment relationships held by the employee may also be revoked, under Article 1, paragraph 6, of the Implementing Decree, only once during the course of the worker’s working life. In the event of revocation, it takes effect on the first day of the pay month following the date on which it is exercised.
The incentive in question applies to all employment relationships and only to the portion of IVS contributions payable by workers who, despite having met the requirements for access to flexible early retirement, choose to postpone retirement and continue to work.
From the point of view of qualifying for the incentive, an employee must meet all the following personal requirements:
Duration of the incentive and conditions for right to the exemption
The incentive in question ceases to have effect if one of the following situations occurs:
The incentive in question consists of the total reduction of the contribution due by the worker and, therefore, because it is not a recruitment incentive the general principles on employment incentives do not apply (Article 31, Italian Legislative Decree no. 150/2015). Furthermore, as the incentive applies only to the IVS portion payable by the worker and does not give rise to benefits for the employer, it is not subject to the employer holding a Certificate of Contributions’ Compliance (Documento Unico di Regolarità Contributiva, ‘DURC’) (Article 1, paragraph 1175, Italian Law no. 296/2006).
Effects on pension benefits
The periods during which the worker profits from the benefit in question reduce the rate of financing and calculation referred to in Article 1, paragraph 8, of Italian Law no. 335 of 8 August 1995, and therefore do not affect pensionable remuneration.
In that regard, the INPS states that the use of the benefit in question does not alter the determination of the amount of the pension portions calculated through the remuneration system, which are determined on the basis of pensionable remuneration.
On the other hand, with reference to the contributory pension portion the exemption affects the individual contribution amount, which will be determined by applying the employer’s calculation rate percentage to the taxable base, for the periods covered by the incentive.
Compatibility with State aid rules and coordination with other incentives
With reference to the European Community rules on State aid, the incentive in question is classified as a general intervention that does not give rise an advantage for specific companies or industry sectors or geographical areas of the national territory. Moreover, since the incentive in question applies only to the worker’s portion of the contribution, the measure does not fall within the concept of State aid, since it is a relief enjoyed by natural persons who do not fall within the definition of an undertaking and, therefore, does not affect the principle of competition. Therefore, the application of the above-mentioned relief measure is not subject to the authorisation of the European Commission and registration in the National State Aid Register.
Application for incentive and accreditation procedure
Workers who intend to take advantage of the incentive to postpone retirement must notify INPS, submitting a specific application for accreditation, following which the Entity will check compliance with the eligibility conditions for the incentive and that the worker meets the minimum pension requirements for access to flexible early retirement.
Subsequently, INPS will notify the worker of the outcome of the checks and, through the “Two-way communication” service, also notify the employer of the acceptance of his/her application, if any, who will then be responsible for complying with the formalities, i.e. not paying the contribution portion to be paid by the worker. If the incentive takes effect during periods for which contributions have already been paid, the employer must proceed with the UniEmens flow to recover the sums previously paid.
With judgment no. 16811 of 13 June 2023, the Italian Court of Cassation affirmed that the taxable base for the payment of the Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’) social security contributions for artisans and traders excludes sums received as dividends by the shareholders of corporations. This judgment affirms the ruling of the Court of Reggio nell’Emilia, confirmed by the Bologna Court of Appeal with judgment no. 57/2017.
In these circumstances and as part of its reasoning, the Court of Appeal had reaffirmed that, in accordance with Article 3-bis of Italian Decree-Law no. 384/1992, converted with amendments into Italian Law no. 438/1992, starting from 1993, the amount of the annual social security contributions due from the parties indicated by Italian Law no. 233/1990, Article 1 (i.e. “persons registered for social security contributions and benefits for artisans and traders’ activities”), related to total business income. The concept of total business income is drawn from Article 55 of the Italian Income Tax Consolidation Act (Testo unico delle imposte sui redditi, ‘TUIR’), and is the total business income reported for personal income tax purposes for the year to which the contributions refer. Consequently, income derived from capital, as defined under Article 44 of the TUIR, deriving purely from shareholdings in capital of companies could not be considered to be included in taxable income.
The INPS appealed to the Italian Court of Cassation against the decision of the Court of Appeal on one ground only, relating to the misapplication of Italian Law no. 438/1992. According to the INPS’ lawyers, the Court of Appeal judges’ decision was based on an erroneous legislative interpretation. This interpretation implies that the law distinguishes between the sums included within the determination of the tax base for contribution and tax purposes, in order to include, in line with the solidarity management of the system, all of the sums received by a party in determining the contribution for pension purposes.
This regulatory interpretation, however, had already been dealt with by the Court of Cassation in previous decisions, thus constituting consolidated precedent which the judges decided to reaffirm (Italian Court of Cassation no. 21540 of 2019; Italian Court of Cassation no. 23790 of 2019; Italian Court of Cassation no. 24096 of 2019; Italian Court of Cassation no. 29779 of 2017; Italian Court of Cassation no. 26958 of 2019; Italian Court of Cassation no. 18822 of 2021).
The current legislation on the subject, namely the above-mentioned Italian Law no. 438/1992, establishes that the amount of the annual contribution due from parties registered for social security contributions and benefits for artisans and traders’ activities “relates to total business income reported for personal income tax purposes for the year to which the contributions themselves refer”. Consequently, to define what is meant by “business income” for contribution purposes, it is necessary to refer to tax regulations – therefore, first and foremost, to the TUIR.
In this regard, the Italian Court of Cassation has held, “since the social security legislation identifies, as the tax base on which to calculate contributions, total business income as defined by the tax regulations and considering that, according to Income Tax Consolidation Act, profits deriving purely from shareholdings in corporations, without the performance of work, are included among capital income, it follows that the latter do not contribute to constituting the tax base for contribution purposes”.
This solution is, according to judges of the Italian Court of Cassation, “completely consistent with the approach of the system as outlined by paragraph 2, Article 38 of the Italian Constitution, which provides that social security protection is due to workers, not to those who merely invest their capital for profit”.
Unlike corporations, the principle of tax transparency applies to partners in partnerships, which provides that – regardless of the source from which they derive and regardless of their corporate purpose – their income is considered business income and is determined on a single basis according to the rules on such income (Article 6, paragraph 3 of the TUIR).
This principle was affirmed by the Court itself in judgment no. 29779 of 2017, according to which, for the purpose of determining the contributions due by artisans and operators of commercial activities, the income received as a limited partner must also be counted, even though it is different from the income deriving from the employment relationship which is subject to social security contributions.
In conclusion, it was observed that the tendency to broaden the contribution base must “be kept within the limits delineated by the legislature, since it is not possible to extend the scope of the relevant provisions by analogy, among other things, as would be the case if the INPS’ argument were accepted, disregarding the intentional parallelism between tax and social security regulations”.
Consequently, in the light of the foregoing, the Italian Court of Cassation rejected the appeal filed by the INPS and declared the validity of the appeal decision, ordering payment of the costs of the proceedings, confirming that, in general, all sums deriving from work activities and constituting business income are subject to social security contributions; on the other hand, if they derive exclusively from financial activities and therefore fall within the definition of capital income, they will not be subject to social security contributions.
According to research by HR Capital, the lack of specific regulations and incentive policies are the main factors of uncertainty.
Despite the absence of a proper regulatory definition of corporate welfare from a labour law perspective, in Italy the instrument continues to stand out as one of the most relevant in the labour world, although some areas of uncertainty still remain that require the legislator to make a further effort and introduce specific regulatory provisions.
This was revealed by research by HR Capital – a subsidiary of De Luca & Partners and a leader in outsourced personnel management and administration services – on the dissemination and use of corporate welfare by Italian companies.
In a general context where corporate welfare is substantially regulated by tax literature and identified as a set of goods and services provided by companies to employees to improve their private and working life, the HR Capital study shows that – among the companies advised by the firm – 25% of the companies that have developed an optimal corporate welfare policy – with the introduction, for example, of direct support for families, work-life balance, training, professional updating and pension provision – are large structured companies.
The remaining 75% of the sample, on the other hand, includes small and medium-sized companies that yet have to establish adequate policies or that do not introduce support policies because they are held back by the possible additional costs to be borne and by the lack of knowledge of the welfare instruments available, thereby simply offering more flexible products or services with a more immediate impact, such as meal vouchers or petrol coupons.
“The picture given by HR Capital’s study shows that the issue of corporate welfare still has several problems to be resolved,” emphasises Leonardo Zaffiri, CEO of HR Capital.”First of all, a certain and well-established legal definition is still lacking: reference is often made solely to fiscal aspects to identify corporate welfare, yet its common meaning is – in actual fact – much broader and all-inclusive, encompassing non-monetary initiatives and services to support and meet the personal and social needs of workers, developing their well-being in the most diverse fields, from health care to child care, from access to credit to leisure time”.
While the labour-law definition of corporate welfare is crucial to the progressive development of this instrument, its dissemination – made even wider after the pandemic moment – also opens up scenarios that are currently being identified, according to Leonardo Zaffiri: “The legislator has intervened on several occasions, though mainly by incentivising the combination of corporate welfare and performance bonuses, introducing measures to facilitate employers with tax and contribution benefits. However, in structural terms, further steps must be taken to promote specific regulatory provisions both concerning the economic field – for example, by setting up a system of concessions to support employers’ choices – and to incentivise the development of more effective, flexible and sustainable corporate welfare programmes, such as the digitisation of welfare platform management systems”.
Rassegna release
AdnKronos/LabItalia
Italia Oggi Sette
The Italian National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’), with Message no. 2923 of 10 August 2023, provided important clarification relating to the cumulation of the ‘NEET’ (persons ‘Not in Education, Employment or Training’) incentive, connected to permanent recruitment carried out from 1 June to 31 December 2023, with other measures that exempt or reduce the funding contribution rates provided for by current legislation, limited to the period of application of the same.
Reference legislation
With Article 27 of Italian Law no. 85/2023, converting into law Italian Decree-Law no. 48/2023 (the Employment Decree), a new financial incentive was introduced for the permanent recruitment, between 1 June to 31 December 2023, of young people under 30 who are not in education, employment or training.
The above-mentioned incentive was introduced to support youth employment. The rule, in fact, grants the employer the right to an incentive, for a duration of 12 months, in the amount of 60% of the gross monthly salary taxable for social security purposes paid to the worker for permanent recruitment within the above-mentioned period of time of persons falling within the category of so-called NEETs.
In particular, the incentive is granted for the recruitment of young people who, on the date of recruitment, meet the following requirements:
The incentive applies, on application to be submitted on the INPS website, for permanent recruitment, including through agencies and under professional apprenticeships.
Cumulation with other tax relief
With specific regard to the possibility of cumulation with another tax relief, the same article specifies that in this case the incentive is granted in the amount of 20% of the gross monthly salary taxable for social security purposes.
The Message under consideration has clarified, in particular, that the reduction of the incentive to 20% in the event of cumulation with other reliefs must be understood not in an objective sense, but in a subjective sense, i.e., it is limited only to cumulation with other measures that entail a benefit for the employer who intends to proceed or who has proceeded with the recruitment.
Consequently, therefore, the aforementioned reduction cannot be applied in cases where, for the same worker, there is an exemption from the share of social security contributions for disability, old age and surviving partners (invalidità, la vecchiaia e i superstiti, ‘IVS’)(under Article 1, paragraph 281, of the 2023 Budget Law, as supplemented by Article 39 of Italian Decree-Law no. 48/2023).
In light of this interpretation, therefore, where the parties interested in the recognition of the incentive have already forwarded to the Entity a specific on-line request for the reservation of resources, stating that they wish to take advantage of the incentive in combination with other reliefs, thus referring to the partial exemption of the employee’s share of IVS social security contributions, they may now cancel this request.
The technical procedures for using the incentive
The INPS has also provided indications regarding the procedure for cancelling the request sent, after which it is necessary to submit a new application in which the option of using the incentive in question “exclusively” must be indicated. This procedure will result in the grant, without prejudice to compliance with all legitimate requirements, of the incentive under discussion in an amount equal to 60% of the taxable salary.
Finally, as already provided for by Circular no. 68/2023, the INPS has confirmed that requests received in the 15 days following the release of the on-line incentive request form will be subject to a one-off delay in cumulative processing, which will be carried out in September 2023. Otherwise, requests relating to permanent recruitment carried out between 1 June 2023 and 30 July 2023 (i.e. the day before the on-line form was released) and received within 15 days following the release of the on-line forms (i.e. by 15 August 2023) will be processed according to the chronological order of the date of recruitment.
Requests concerning recruitment starting from the day the on-line form was released (31 July 2023) will be processed according to the general criterion, represented by the chronological order in which the application was submitted.
Until the date of processing, the requests can be cancelled by the same interested party; if a party wants to amend the content, it is necessary to cancel the request in question and then submit a new one.
With Circular no. 25/E of 18 August 2023, the Italian Revenue Agency provided interpretative clarification and operating instructions on the tax aspects of remote work.
In particular, with the Circular in question, the Revenue Agency focused on remote working and on the application of tax relief for individuals who transfer their tax residence to Italy to carry out a work activity mainly within Italy, governed by Article 16 of Italian Legislative Decree no. 147/2015 (so-called “special scheme for impatriate workers”), and by Article 44 of Italian Decree-Law no. 78/2010 converted into law, with amendments, by Italian Law no. 122/2010 (“special scheme for teachers and researchers”).
In its Circular, the Agency reviewed developments in recent years with respect to the constant increase in the use of forms of work characterised by services provided remotely, defined as ‘agile’. These services are provided without the need for physical presence on premises made available by the employer or, in any case, in a fixed location, and are better known as remote working or agile work: they have been favoured by technological progress and strongly accelerated by the Covid-19 pandemic emergency, which has forced most sectors to redefine working methods.
Therefore, in the face of significant organisational changes within companies, the Revenue Agency’s Circular has defined, based on internal legislation and the methods of performing work, the criteria and the application of tax rules and the determination of residence for tax purposes.
Residence in accordance with Article 2 of the TUIR
The concept of “tax residence” is regulated by Article 2, paragraph 2, of the Italian Income Tax Consolidation Act (Testo unico delle imposte sui redditi, ‘TUIR’) approved by Italian Presidential Decree no. 917/1986. Under this provision a person will be considered to be tax resident in Italy if, for most of the tax period (i.e. 183 days in a year, or 184 days in the case of a leap year) he/she:
These conditions are in the alternative, so that the existence of only one of them is sufficient to anchor a person’s residence in Italy.
The concepts mentioned above relating to Article 2 of the TUIR must be interpreted, by express regulatory provision, in accordance with the rules contained in the Italian Civil Code, which defines domicile as the place where a person has established the main location of his/her business and interests and defines his/her usual residence as his/her place of residence.
In particular, as already clarified in Ministerial Circular no. 304/1197, continuity or permanence of usual residence is not necessary to constitute residence, with the consequence that even prolonged periods of absence do not exclude the establishment of residence in Italy. As regards domicile, it is also necessary to take into account relationships of a non-pecuniary nature, such as personal and emotional ones, to establish whether the centre of business and interests are located in Italy.
In this regard, as already clarified by the Revenue Agency with Circular 9/E/2016, assessment of the conditions for establishing residence, other than the formal registry data, requires a factual verification to be carried out on a case-by-case basis, in order to actually weigh the information establishing the place of domicile or residence as defined under civil law.
Fictitious transfers of residence abroad
The need to provide interpretative clarification in relation to cases characterised by the performance of work activities remotely is closely connected to the need to combat cases of non-genuine residence abroad. In this regard, in fact, Article 2, paragraph 2-bis of the TUIR introduced a relative presumption of tax residence, according to which, unless evidence to the contrary is provided by the taxpayer, persons deleted from the registry of the population resident in Italy and transferred to states or territories with a privileged tax regime as identified in the decree of the Minister of Finance of 4 May 1999 are considered residents of Italy.
The above-mentioned paragraph 2-bis was introduced specifically to counter frequent fictitious migration to countries with privileged taxation. Therefore, even following the formal registration in the Registry of Italians residing abroad, with respect to citizens transferred to countries or territories with privileged taxation, there continues to be a (relative) presumption of tax residence in Italy as a result of the aforementioned paragraph 2-bis.
The residence of remote workers under the domestic legal system
Therefore, it is evident that the Agency, in its Circular, has confirmed that, even in the face of the significant organisational changes within companies, no changes have been made to internal legislation that have affected the rules for determining residence for tax purposes. Consequently, the criteria for establishing the tax residence of individuals remain those provided for in Article 2 of the TUIR (as set out in the previous paragraph) which remain unchanged for those who work remotely.
In other words, the methods of performing work do not affect the criteria for determining tax residence, which remain anchored to fulfilment of at least one of the above-mentioned conditions set out in Article 2 of the TUIR.
Special schemes applicable when working in Italy
Therefore, on the basis of the clarification provided by the Revenue Agency and referred to in the previous points, the Agency has confirmed that the criteria for establishing the tax residence of individuals remain those provided for in Article 2 of the TUIR and that this issue is also relevant for the purpose of applying tax relief for individuals who transfer their tax residence to Italy to carry out a work activity mainly within Italy, governed by the above-mentioned Article 16 of Italian Legislative Decree no. 147/2015 and Article 44 of Italian Decree-Law no. 78/2010 converted into law, with amendments, by Italian Law no. 122/2010.
Ultimately, a person who transfers his/her residence to Italy can access the “special regime for impatriate workers”, while continuing to work remotely for a foreign employer, starting from the tax period in which the transfer to Italy takes place.
In contrast, a person who, having moved to work in Italy, subsequently moves abroad while continuing to carry out his/her work remotely from the new location for the same Italian employer, will not be able to continue to benefit from the tax relief in question, since in this case the income is considered to be produced outside Italy.
The position on the application of the tax relief in question to the “special regime for teachers and researchers” differs. For the purpose of applying this tax relief, in fact, there must be a link between the transfer of the teacher’s or researcher’s residence to Italy and the performance of the activity producing the income subject to tax relief.
As already clarified by the Revenue Agency with Circular no. 17/E/2017, establishing the above-mentioned connection corresponds to the rationale of the rule to facilitate all residents abroad, both Italians and foreigners, who, due to their particular scientific knowledge, may favour the development of research and the dissemination of knowledge in Italy, through their acquisition of know-how from their work activities carried out abroad.
Therefore, in contrast to the provisions of the impatriate regime, a teacher or researcher who has moved to Italy who has an employment relationship with an institution or university located in a foreign country, for which he/she carries out his/her teaching or research activity remotely, will not be able to benefit from the tax relief for the related income because there is no connection between moving to Italy and carrying out a teaching and/or research activity in Italy.