With Circular No. 1/E of 12 February 2020, the Italian Revenue Agency provided further clarifications regarding the new provisions introduced by article 17-bis of the 2019 Tax Decree (Law No. 157 of 19 December 2019) on procurement contracts.

Let us go into the details of the most important clarifications.

Subjective sphere

The Italian Revenue Agency, first of all, focuses on the definition of “client”. Specifically, it considers that this definition refers both to the original client and to the subcontractor, since, in relationships where there are customers, contractors and subcontractors (so-called “chain” relationships) each of them could individually play the role of client and thus fall within the sphere of application of the rules.

Objective sphere

The Italian Revenue Agency shall then provide clarifications as to the conditions under which a company must comply with the new obligations and the grounds for exemption.

In particular, the new obligations apply in the case of entrusting a company with the execution of one or more projects or services for a total annual amount of more than €200,000, within the framework of a tender contract, subcontract, entrusting to consortium members or trading relationships in any case known as prevalent use of labour.

On this point, the Italian Revenue Agency clarifies that it is not the legal namethat the parties attribute to the relationship but the actual prevalence of labour at the client’s premises that is important.

The reference to a “company” leads to the exclusion of art or profession practitioners from the mandated entities. Conversely, work contracts entered into with companies are included, provided that they use workers with the right to receive income from employment or similar for the execution of the work/service commissioned.

The determination of the €200,000 threshold refers to the individual contracts outstanding in the (calendar) year of reference (1 January to 31 December), any changes that have occurred and all contracts entered into during the year by each company.

If the contract is on an annual or multi-annual basis with a predetermined price, the calculation must be set according to a pro-rata-temporis mechanism.

If, on the other hand, contracts are signed without a predetermined price or expiry date, a cash basis will be followed and the obligations will commence with regard to income from employment and the like when the specified amount is exceeded and until the contract expires.

Furthermore, the services must be carried out at “the client’s places of business“, which include the registered and operational offices, representative offices and any other place attributable to the client and which is intended to carry out the activity through the use of “fixed assets owned by the client or attributable to it in any form“. If the use of fixed assets is occasional or in any case not indispensable for the performance of the assignment, this condition shall not be deemed to exist.

Supply contracts pursuant to Article 30 of Legislative Decree No. 81/2015 do not fall within the scope of application of this rule, since the supply agency “makes one or more employees available to a user who, throughout the duration of the mission, carry out their activities in the interest and under the direction and control of the user”. However, the illegal supply of labour is included in the scope of application.

As mentioned above, the client is relieved from fulfilling the new obligations if:

  • they have been in business for at least three years;
  • they are in compliance with its declaratory obligations;
  • they have made the payments and recorded in the tax account an amount not less than 10% of the amount of the revenues or remuneration resulting from the declarations; and
  • they have no entry in the taxpayers list [to pay tax arrears and fines] or enforceable assessments or debit notices relating to income tax, regional tax on productive activities, withholding taxes and social security contributions for amounts in excess of €50,000.00.

In order to prove the presence of the above mentioned requirements, it is necessary to attach a certification made available to the company or its representative, starting from the third working day of each month, by the territorially competent Provincial Directorate of the Italian Revenue Agency. The certificate shall be valid for a period of four months from the date of issue, after which the aforementioned companies must acquire a new certificate. If the client is a Public Administrator, the existence of the requirements must be self-certified.


The Italian Revenue Agency clarifies that contractors, mandated entities or subcontractors are obliged to pay withholding taxes of the workers, with separate payment proxies for each client, without any possibility of offsetting.

However, it adds that by harmonising the prohibition with the other provisions of the Italian legal system, the withholding agents covered by that prohibition accrue credits which may be used as offsets solely by means of the F24 model for the purposes of payment of withholding tax charged to recipients.

On this point, the Italian Revenue Agency, by way of example, cites the credits that the withholding agents accrue for having advanced sums of money to employees on behalf of the State, such as refunds paid as a result of tax assistance, year-end adjustment or termination of employment, or credits arising from excess withholding tax payments.

According to the Italian Revenue Agency, the companies in question cannot, on the other hand, make use of the institution of compensation for the payment of social security and welfare contributions and compulsory insurance premiums accrued in relation to employees directly employed in the performance of works and services.

It is possible to prepare separate F24 models for each client or a cumulative F24 model for all contributions and premiums owed by the company. In the latter case, it will be the taxpayers’ responsibility to reconstruct the calculation methods used during the audit.

Mandated entities are obliged to issue to the client:

  • a list of the names of all workers, identified by tax code, employed in the previous month directly in the execution of work/services entrusted by the client. If salaries are paid in the month following the reference month of the ‘pay slip’, reference should be made to the second preceding month;
  • the detail of the hours worked by each recipient;
  • the amount of remuneration paid to the employee (taxable for tax purposes as shown on the ‘pay slip’); and
  • details of the tax withholdings made in the previous month, with separate indication of those relating to the service entrusted by the client.

The client, on the other hand, is obliged to suspend the payment of the fees accrued by the contractor if within five working days: (i) either the right to receive payments from the contractor or mandated entity has accrued but the latter has not forwarded to the client the payment proxies and the information relating to the employees referred to in paragraph two or (ii) the withholding tax has been omitted or insufficiently paid with respect to the data emerging from the documentation forwarded.

If the new obligations should fall on the contractor, the latter alone shall be entitled to suspend payments to subcontractors until they have fulfilled their obligations.


In the event of a breach of the obligations examined, a non-fiscal administrative penalty has been imposed on the client. Should the latter fail to make correct payments of withholding tax or do so late without the possibility of offsetting, they shall pay a sum equal to the penalty imposed on the contractor, mandated entity or subcontractor.

However, the penalty shall not be due if the contractor, mandated entity or subcontractor proves that it has correctly fulfilled its obligations or has resorted to effective remedial action, thereby remedying the breaches committed before the supervisory bodies proceed with a complaint.

In any case, and in any event until 30 April 2020, the contractor will not be charged with any infringement provided that the necessary documentation required by law is provided.