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It is worth mentioning the recent legislative intervention[9] on withholding taxes in contracting and sub-contracting contracts, which has introduced significant requirements for all the actors involved in the supply chain (with a few exceptions that are specifically identified), with a strong impact on their operations, and which, in particular, has strengthened the responsibilities of the principal involved compared to what happens in the supply chain itself.
This is clearly a new piece of legislation that could also play a significant role in our industry and is therefore worth exploring further. In a nutshell, the set of new rules – which came into force on 1 January 2020 and exclusively concerns contracts for works and services with a total annual value of more than Euro 200.000, characterized by the prevalent use of manpower at the principal’s places of business and the use of capital goods owned by the latter or attributable to it – provides in first instance that contractors, subcontractors and assignees of works and services are required to pay withholding taxes on the income from employment (and similar) of workers employed in individual contracts with separate payment proxies (F24) for each principal.
On the other hand, the principal has the obligation to verify the payment of withholding tax, requesting, in order to ascertain the accuracy of the total amount paid, precise documentation that the companies in the supply chain are required to send within 5 working days after the deadline for payment of withholding tax.
In particular, the client may carry out the aforesaid verification, by examining a copy of the proxies for payment and a list of the names of all the workers employed in the previous month under the contract, containing: i) the details of the hours worked by each worker, ii) the amount of remuneration paid to the employee in relation to this activity, and iii) the details of the tax withheld from the worker in the previous month.
The provision also provides that, in the event of failure to provide such documents, or in the event of omitted or insufficient payment of withholding taxes by the companies in the supply chain, the principal shall: a) suspend payment of the fees accrued by the contracting or entrusted company until the non-fulfilment continues, and b) notify the competent local Revenue Agency (“Agenzia delle Entrate”) within 90 days.
In the event of failure to comply with the obligations incurred, the principal shall be obliged to pay a sum equal to the penalty imposed on the contracting or subcontracting company, without any possibility of compensation.
It is, therefore, a specific sanction directly imposed on the principal, rather than a hypothesis of joint and several liability, even if resulting from the failure of the above-mentioned companies to fulfil their obligations, which led to the imposition of the tax sanction for the violation of the obligations of correct determination and execution of withholding taxes, as well as their timely payment.
Such provision therefore burdens the position of the principal, adding to the joint and several liability already existing in the remuneration plan pursuant to article 29 of Legislative Decree No 276/2003, and to the relevant obligation for the principal, which made the payment to fulfil, where applicable, the obligations of the withholding agent pursuant to the provisions of Presidential Decree No. 600 of 29 September 1973, being able, however, in that circumstance, to bring an action for recourse against the joint and several liability in accordance with the general rules.
Finally, it should be noted that, according to the Revenue Office[10] , this new legislation would apply with reference to withholding taxes made as from January 2020 (and, therefore, with regard to payments made in February 2020), “also with regard to procurement contracts, awards or subcontracting contracts entered into before 1 January 2020”.
In light of all the above, it would seem appropriate (rectius: necessary) a new approach to the procurement contracts to be signed onwards, the revision of existing contracts and the review of its organizational models.
This article is for information purposes only and is not intended as a professional opinion.
For further information, please contact Michele Bignami.
[9] Law no. 157 of 19 December 2019, published in the Official Gazette no. 301 of 24 December 2019 (“Conversion Law”), converting into law, with amendments, Decree Law no. 124 of 26 October 2019 “Urgent provisions in tax matters and for unavoidable needs”.
[10] See Resolution No. 108 of 23 December 2019.
