Italy: Joint Liability Of The Customer And The Contractor For Tax Debts, Withholdings And Social Security Contribution

Last Updated: 18 October 2012
Article by Batini Colombo Saottinis' Tax Team

1. INTRODUCTION

Article 13-ter of the Law Decree nr. 83 dated June 22nd 2012, converted into the Law nr. 134 dated August 7th 2012, has modified again the tax discipline of the joint liability between customer, contractor and subcontractor originally set by article 35 of the Law Decree nr. 233 dated June 7th 2006.

While article 4 paragraph 31 of the Law nr. 92 dated June 28th 2012, has made additional changes to the joint liability between the customer, the contractor and the subcontractor for what concerns salaries and wages and pension and social security contribution payments, originally ruled by article 29 of the Legislative Decree nr. 276 dated 10.09.2003.

2 THE NEW DISCIPLINE OF THE JOINT LIABILITY BETWEEN THE CUSTOMER, THE CONTRACTOR AND THE SUBCONTRACTOR FOR TAX PAYMENTS

Under the effect of the new discipline introduced by the Law Decree 83/2012 converted into the Law 134/2012, the contractor is liable together with the subcontractor toward the Italian Tax Authority for:

  • withholding taxes due on salaries and wages;
  • VAT due by the subcontractor for services rendered under a subcontracting agreement.

Particular duties and liabilities are foreseen also for the customer.

Former discipline

We'd like to remind that the former discipline was introduced by article 2 paragraph 5-bis of the Law Decree nr. 16 dated March 2nd 2012 converted into the Law nr. 44 dated April 22nd 2012.

Official clarifications

With its Circular Message nr. 40 dated October 8th 2012, the Italian Tax Agency has issued important clarifications on the new discipline introduced by art. 13-ter of the Law Decree nr. 83/2012 converted into the Law 134/2012, regarding:

  • the effective date for these new rules:
  • the set of documents required to certify the correct payment of withholding taxes on salaries and of the VAT, in order to exclude the liability of the contractor and the final customer.

Here below you can find said discipline and last clarifications.

2.1 Area of Enforcement

Said rules for liability of the contractor and the customer becomes applicable with relation to contracting and subcontracting agreements for services signed by:

  • entities signing those agreement being a VAT subject;
  • entities subject to corporate income tax (IRES) ;
  • Italian State and Public Institutions.

Exclusions

The so called "Contracting Stations" set by article 3 paragraph 33 of the Legislative Decree nr. 163 dated April 12th 2006 are excluded from the above mentioned rules.

They are:

  • Public Customers Administrations:
    • State Administrations;
    • Local Public Institutions;
    • Other Non-economic Public Entities;
    • Associations, Unions and Consortium made by the above mentioned;
  • Other subjects foreseen by art. 32 of the Legislative Decree 163/2006:
    • Public Works dealers that are not awarded administrations;
    • Public Companies that are not considered public institutions.

2.1.1 Effective Date

With relation to the effective date of this new rules, the Italian Tax Agency has clarified that they have to be applied to contracting/subcontracting agreements signed starting from August 12th 2012.

2.1.2 Joint Liability Between the Contrcator And The Subcontractor

Under the effects of the new discipline set by art. 13-ter of the Law Decree 83/2012, the contractor is jointly liable with its subcontractor for the payment to the Italian Tax Authority of:

  • All withholding taxes on salaries and wages;
  • The VAT due by the subcontractor for services rendered under the subcontracting agreement.

2.2 Limitations To The Joint Liability Of The Contractor

Said liability is applied within the limit of the amount due by the contractor to the subcontractor. With respect to the former discipline the time limit of two years has been abolished.

2.3 Exclusion Of The Joint Liability Of The Contrcator

The joint liability fails if the contractor verifies:

  • that the above mentioned payments, already expired, have been properly made by the subcontractor, obtaining the relevant documentation;
  • before paying the subcontractor.

2.4 Release Of A Specific Certification

The confirmation of the correct payments can also be released through a certification issued by an Italian Chartered Accountant .

2.5 Suspension Of Payments Due To The Subcontractor

The contractor can hold payments due to the subcontractor until this last one hasn't produced all the required documentation.

2.5.1 Verifications By The Contractor – Effective Date

The Tax Agency has clarified that, since the new rule introduces new fulfilments for the contractor, they become effective starting from the 60° day following the enforcing date. Therefore all documents relating payments made by the subcontractors must be verified with relations payments made to subcontractors starting from October 11th 2012, with relations to contracts signed from August 12th 2012.

2.5.2 Notifications From The Authorities

All notification from authorities regarding the subcontractor within the term of decadence are made also to the person or company jointly liable for the above mentioned payments.

2.6 Obligations For The Customer

The customer can pay the agreed amount to the contractor only after obtaining from this last one the proofs of payments related to taxes, withholdings and VAT, already expired, done by the same and by its subcontractors.

2.7 Suspension Of Payments Due To The Contractor

The customer can suspend the payment of amounts due until the contractor exhibits all the documents mentioned above.

2.7.1 Enforcement Of Obligations For The Customer

The Tax Agency has clarified that, since the new rule introduces new fulfilments for the contractor, they become effective starting from the 60° day following the enforcing date.

Therefore all documents relating payments made by the subcontractors must be verified with relations payments made to subcontractors starting from October 11th 2012, with relations to contracts signed from August 12th 2012.

2.8 Fines Applicable To The Customer

The customer is subject to an administrative fine from Euro 5.000,00 to Euro 200.000,00 if:

  • hasn't fulfilled the above mentioned obligations in terms of verifications before paying the contractor;
  • payments due by the contractor and its subcontractors are not correctly made at the due dates.

Therefore, under the effects of the new discipline, the customer is not subject to a true joint fiscal liability with the contractor and its subcontractors, but is addressed with a specific administrative fine of a relevant amount if he pays the agreed amounts without making the needed verifications on correct payments.

2.9 Notifications From The Authorities

All notification from authorities regarding the contractor within the term of decadence are made also to the person or company jointly liable for the above mentioned payments.

3 DOCUMENTS PROVING THE PAYMENTS MADE BY THE CONTRCATOR AND SUBCONTRACTORS

The Tax Agency has clarified that the contractor/subcontractor has to demonstrate the regular payment of withholdings and VAT in order to avoid the charge of the above mentioned liabilities.

3.1 Release Of A Specific Certification By A Chartered Accountant

The new rules foresee that the proof of correct fulfilment of all duties can be substituted by a certification issued by an Italian Chartered Accountant or an HR Professional Consultant.

3.2 Release Of A Specific Subsitutive Declaration By The Contractor And By The Subcontractor

The Italian Tax Agency has clarified that the above mentioned certification can be substituted by a self declaration issued by the contractor/subcontractor:

  • declaring that all duties (payments) have been correctly and timely fulfilled;
  • under terms and conditions of the Republic Presidential Decree nr. 445 dated December 28th 2000.

3.2.1 Substitutive declaration's contents

Under the clarifications by the Tax Agency, the above mentioned substitutive declaration has to include:

  • the period when the VAT concerning the works' execution has been calculated and if some particular regimen has been applied (i.e. reverse charge);
  • the period when withholding taxes on salaries have been paid and if they have been off-set with tax credits;
  • F24 (payment forms) details;
  • The confirmation that VAT and withholdings include the ones referable the same contract agreement.

3.2.2 Criminal Penalties

The release of false declarations involves also criminal law and related penalties liabilities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Batini Colombo Saottinis' Tax Team
 
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