Since 1 January 2020, the new mechanism for monitoring the payment of withholding taxes on contracts and subcontracts has been in force

Law 157/2019 converting, with amendments, Decree Law 124/2019 was published in Official Journal 301 dated 24 December 2019. “Tax Decree“). Therefore, as of 1 January 2020, companies that entrust one or more works or one or more services for a total annual amount of more than €200.00 to a company – through “a contract of tender, subcontracting, entrusting to consortium members or negotiating relationships, however denominated, characterised by the prevalent use of labour at the headquarters of the client with the use of capital goods owned by the latter or traceable to it in any form” – must request the same copy of the payment proxies relating to the payment of withholding tax for employees directly employed in the execution of the work/service. The payment of withholding tax is made, with separate powers of attorney for each client, without the possibility of remuneration. In order to allow the client to acknowledge the total amount of the sums paid, the companies, within 5 working days after the due date of payment of the withholding tax, are required to send it: (a) the payment proxies and (b) a list of the employees directly employed in the execution of the work/service in the previous month, identified by means of a Tax Code, with details of the hours worked by each employee involved, the amount of remuneration paid to the same and details of withholding taxes made in the previous month, with a separate indication of those relating to the service entrusted by the client. In the event of non-transfer by the undertakings or if it is established that withholding tax has not been paid or is insufficient, the client shall suspend, for as long as the default persists, the payment of the fees accrued. This is up to 20% of the total value of the work/service or for an amount equal to the withholding tax not paid but resulting from the documentation submitted. The client is also required to notify the relevant Italian Revenue Agency within 90 days. If the client fails to comply with the obligations in question, it shall incur a penalty equal to the penalty imposed upon the contractor/subcontractor. These obligations do not apply if the companies have informed the client, attaching the relevant certification, of the existence, on the last day of the month preceding the expiry date, of the following requirements: (i) that they have been in business for at least 3 years, in compliance with their declaration obligations and that they have made, during the tax periods to which the tax returns submitted in the last three years refer, total payments recorded in the tax account for an amount of no less than 10% of the amount of revenues and income or remuneration resulting from such returns; (ii) that they have no entries or executive assessments or debit notices entrusted to collection agents relating to income tax, IRAP (Corporate Income Tax), withholding tax and social security contributions for amounts in excess of €50,000, for which the payment deadlines have expired and payments are still due or no suspension measures are in place.