On 18 November 2022, Italian Decree-law No 176/2022 (the ‘Aiutiquater [LT1] Decree’) containing additional measures to support the energy sector and relating to employment and public finance, was published in the Italian Official Gazette.

With reference to the new initiatives in the employment sphere, the Aiuti-quater Decree provided for a further increase in the tax and social security exemption limit of employees’fringe benefits. In particular, Article 3, paragraph 10 of the new decree extended the exemption threshold from EUR 600 to 3,000. Therefore, up to the overall limit of EUR 3,000, the value of the goods and the services provided to employees, as well as the sums paid or reimbursed to them by employers for the payment of domestic utilities, do not form part of income.

This exemption is, at the moment, ‘limited to the 2022 tax period’. Therefore, to benefit from it, employers have little time to adopt an assistance plan for their employees, evaluate the economic resources to be used, and identify and make these benefits available to workers.

Lastly, the Italian Revenue Agency, with circular No 35 of 4 November 2022, clarified that if the exemption limit is exceeded, the entire amount, and not just the portion exceeding the limit, will fall within employee income.

Other related insights:

On 13 January 2020, on the occasion of the Forum of accountants and accounting experts held in Milan, the Italian Tax Authority responded to some doubts closely related to the concrete application of the Tax Decree.

First of all, it has been affirmed that employment agencies as governed by Chapter I of Title II of Legislative Decree 276/2003 are also covered by the new rules.

It was also noted that the amount of 200,000 Euros is to be understood in reference to the annual amount entrusted to an individual business. If one and the same client has entrusted several works, the totality of the works and services entrusted by it must be added together. If, on an annual basis, the result leads to the threshold under examination being exceeded, a copy of the payment proxies relating to the payment of withholding tax on the salaries of directly employed employees must be requested from the contractors/subcontractors/trusted agents.

In essence, the coordinating rule described applies indiscriminately to all works entrusted by the same client.

Paragraph 5 of art. 4 of the Tax Decree provides for a system of exemption from reporting obligations under certain conditions. These conditions, in the opinion of the Italian Tax Authority, must be met jointly.

In order to verify the fulfilment of the payments made in the tax period to which the tax returns submitted in the last three years refer, account must be taken of payments made for amounts in excess of 10% of the amount of income or remuneration as resulting from the returns.

The Italian Tax Authority also observed that the payments to be taken into account in the tax account, when a company finds itself in a condition of tax loss for which (according to the law) it is not required to pay tax, do not only concern income tax but also VAT.

Finally, the Italian Tax Authority claims that in order to allow the client to verify that the withholding tax has been paid by the contractor/subcontractor/trusted agent, copies of the payment proxies relating to the payment of withholding tax relating to an individual worker may be cumulative. In order to carry out the checks imposed, in fact, it is sufficient to verify the existence of a correlation between the payment proxies, which may therefore concern all the workers employed by the same client, and the list of the names of all the workers sent to it by the contractor or subcontractor.

The above is subsequent to Resolution 108/2019 with which the Italian Tax Authority again has clarified that:

  • the quantification of the separate payments for each customer must be carried out on the basis of objective parameters (e.g. the number of hours spent in the execution of the specific job order) and
  • the regulatory provision applies with reference to withholdings made as from January 2020, also with regard to procurement/subcontracting/tender contracts concluded before 1 January 2020.