On the 23rd March the so called “Support Decree” entered in force and introduced additional measures to support businesses following the protracted epidemiological emergency COVID-19.
In particular, the wage subsidies have been extended for additional 13 weeks for the so called CIGO (applied, for example, to companies of industrial sector) covering the reduction or suspension of the business for the period from 1st April to 30th June 2021.
On the other hand, as regards the FIS and CIGD wage subsidies (applied, for example, to companies of trade sector), additional 28 weeks of subsidy have been introduced to cover the period from 1st April to 31st December 2021.
No additional INPS contributions in charge of the employer are due for the new weeks of wage subsidies provided by the new Decree.
INPS applications to access to the above subsidies must be submitted by the end of the month following the one in which the suspension or reduction of business began.
The Court of Rome, in its 26 February 2021 order, stated that the prohibition of dismissal on financial grounds, introduced by the emergency legislation, applies to executives.
Facts of the case
The facts of the case concern a worker, classified as an executive under the National Collective Agreement for Executives in the Tertiary Sector, who was dismissed on 23 July 2020 for justified objective reasons due to a company reorganisation resulting from a drop in business caused by the Covid-19 health emergency.
The Executive challenged the dismissal invoking the violation of art. 46 of Decree Law 18/2020, converted into Law 27/2020, and art. 81 of Decree Law 34/2020, converted into Law 77/2020, which prevented the dismissal for justified objective reasons under art. 3 of Law 604/1966, as of 23 February 2020.
The Court’s decision
In upholding the Executive’s appeal, The Court of Rome stated that the reason behind prohibiting dismissals under the emergency legislation was for “public order” and “social solidarity.” It consists of “temporarily preventing the pandemic’s economic consequences from resulting in the loss of jobs”, thus preventing the damage caused by the pandemic from being borne by workers. The protection need was “common to executives who were more exposed to that risk given the greater flexibility of their contractual-collective arrangements for protection against arbitrary dismissal (‘justifiability’) than those laid down by Art. 3 of Law No. 604/66.”
According to the judge, extending this prohibition was based primarily on the principle of “no unequal treatment”: excluding executives from the emergency protection introduced by legislation during the pandemic would be unreasonable as in open contrast with Article 3 of the Constitution according to which “all citizens have equal social dignity and are equal before the law.”
The judge based their ruling on the concept of “justified objective reason” under Art. 3 of Law No. 604/66, which, in their opinion, must be understood as including the notion of “objective justifiability” (related to executives), which “substantially shares its nature” with the dismissal for a justified objective reason. According to the Court, that makes it possible to consider that the reference made by the legislation on dismissal prohibition in Art. 3 of Law No. 604/66 “is intended to identify the nature of the impassible reason for termination, and not to delimit the subjective scope of application of the prohibition.”
On these grounds, the Court of Rome declared the Executive’s dismissal null and void, ordering
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The order concluded that the dismissal prohibition rules for justified objective reasons introduced by the legislator during the Covid-19 health emergency applied to executives even if they do not fall within the scope of application of Law 604/66 referred to by the emergency legislation.
In circular no. 32 of 22 February 2021, INPS provided the first clarifications on using the contribution exemption, introduced by the 2021 Budget Law, to recruit female workers carried out in the two years 2021-2022.
Regulatory framework
Article 1, paragraph 16, of Law 178 of 30 December 2020 (the “2021 Budget Law“) states that the contribution exemption for hiring women workers in the 2021-2022 period under Article 4, paragraphs 9 to 11, of Law no. 92 of 28 June 2012 (the Fornero Reform), is 100 per cent up to €6,000 yearly.
Paragraph 17 of the same article specifies that the exemption application is subject to the requirement of a net increase in the employer’s employment, calculated based on the difference between the number of workers employed in each month and the average number of workers employed in the previous 12 months.
According to the EU law conventional criterion, to identify the employment increase, the number of employees is calculated in Annual Work Units (AWU).
The circular does not provide any operational instruction since the benefit application is subject to the European Commission authorisation. After this authorisation, a new message will be issued concerning the compilation of the contribution declarations by employers who intend to access the benefit.
Employers entitled to the benefit
All private employers, including non-entrepreneurs and employers in the agricultural sector, are eligible for the benefit.
The exemption from social security contributions does not apply to Public Administrations, which can be identified by referring to Article 1, paragraph 2, of Legislative Decree of 30 March 2001 no. 165.
Workers entitled to the exemption
An express reference made by the 2021 Budget Law indicates that the incentive is a natural extension of the Fornero Reform regulations.
The concept of “disadvantaged women“, for whom the exemption is applicable if hired, includes the following categories:
To receive the benefit, either a long-term state of unemployment (more than 12 months) or compliance with the inactivity requirement (the woman must be “unemployed“) is required, along with other conditions.
The late submission of the compulsory electronic communications relating to the establishment and modification of an employment or staff leasing agency relationship entails the loss of a part of the incentive related to the period between the relationship’s starting date and late communication date.
Types of incentivised employment relationships and exemption duration
The incentive is available for:
As for its duration, INPS specified that the incentive would be available for
The incentive can be suspended when there is a compulsory absence from work due to maternity, allowing for a period of temporal deferment.
Incentive requirements
The right to benefit from the incentive is subject to a net increase in employment and compliance with incentives’ general principles established by Article 31 of Legislative Decree no. 150/2015, under the following conditions laid down in Article 1 paragraph 1175 of Law no. 296/2006, namely:
Under Article 2 paragraph 32, of Regulation (EU) no. 651/2014, the net increase in employment is “the net increase in the number of employees in the establishment compared to the average for a reference period. Jobs eliminated during that period are to be deducted, and the number of workers employed full-time, part-time or seasonally is to be calculated, taking into account fractions of annual work units.”
As already clarified in question no. 34/2014 of the Ministry of Labour and Social Policies, the employer must verify the actual workforce present in the 12 months following the facilitated hiring and not “estimated” employment.
If the employer should find a net increase in employment in terms of Annual Work Units at the end of the year following the hiring, the monthly quotas of the incentive already received are “consolidated.” Otherwise, the incentive cannot be legitimately applied, and the employer must return the individual quotas of the incentive already received in the absence of compliance with requirements through the relevant procedures.
Under Article 32, paragraph 3, of Regulation (EU) no. 651/2014, is applicable if the net employment increase is not realised because the previously available job(s) became vacant due to:
Combination with other incentives
The exemption can be combined with other exemptions within the limits of the social security contribution, and if there is no express prohibition to combine with different schemes for additional exemptions.
If the exemption can be combined with another benefit, for applying the second benefit it is necessary to refer to the “due” contribution or “due” residual contribution because of the first exemption applied.
The sequence which allows combinations of exemptions under the rules approved, in chronological order, on the assumption that the last exemption introduced in the system is combined with the previous on the residual “due” contributions.
The Italian Tax Authority, in its answer to question no. 42 of 18 January 2021 provided guidance on the special regime’s applicability for repatriated workers under Art. 16 of Legislative Decree no. 147/2015, “Internationalisation Decree”, particularly returning from posting abroad.
By introducing an ad hoc tax regime, the decree provided self-employed workers and employees with an incentive to return to the country and allowed them to benefit from a significant reduction in their taxable income following the transfer of residence to Italy under art. 2 of the Consolidated Income Tax Law (TUIR) varies according to the date of transfer and the applicable regulations.
To benefit from this regime, considering the various changes that have taken place over the years, under paragraph 1 of art. 16 of the decree, it is necessary that the worker (i) transfers the residence to Italy under art. 2 of the Consolidated Income Tax Law (TUIR), (ii) has not been resident in Italy in the two tax periods preceding the transfer, undertaking to reside in Italy for at least two years, and (iii) carries out the work mainly in Italy.
Under paragraph 2 below, the tax benefit is available to a European Union or non-EU country citizen with which a double taxation convention or agreement on the exchange of information on tax matters is in force, who (i) have a university degree and have been “continuously” employed, self-employed or engaged in a business outside Italy for at least 24 months or (ii) have been “continuously” studying outside Italy for at least 24 months, obtaining a university degree or a postgraduate degree.
The case involved an Italian worker, who was a graduate and employed with a permanent contract by an Italian company since 2013. Since 15 February 2016, the worker was seconded to an international group company, based in the People’s Republic of China (“PRC”), under a local employment contract, regulated by the foreign country’s legislation.
In his application, the worker declared he had been employed again – as of 1 January 2021 – by the same Italian company, with a permanent contract, and that he registered on the Register of Italians Resident Abroad (AIRE) in June 2016, given his financial and personal interests in the PRC.
The applicant asked whether he could benefit from the special regime for repatriated workers under Article 16, paragraph 2, of Legislative Decree no. 147/2015, as from the 2021 tax year.
After examining the application received, the Inland Revenue first provided a general overview of the rule, defining its scope and conditions. In detail, the tax authority explained that the tax benefit is available to taxpayers for five years starting from the tax period in which they transfer their tax residence to Italy and for the following four tax periods (under Article 16, paragraph 3 of Legislative Decree no. 147/2015). To access the special regime, the above art. 16 presumes that the person has not been resident in Italy for two tax periods preceding the re-entry.
For taxpayers returning following a posting abroad, the Inland Revenue cites the recent Circular 33/E of 28 December 2020 (paragraph 7.1), which specifies, that “the tax benefit is not applicable to the posting abroad with subsequent return, if there is the same contract, with the same employer. On the contrary, if the work carried out by the repatriated constitutes a “new” work activity, after signing a new employment contract, different from the one in place in Italy before the posting, and assuming a different business role, they can access the benefit from the tax period in which they transferred their tax residence to Italy. The benefit does not apply when the subject, although in the presence of a “new” recruitment contract for a “new” company role at the time of repatriation, falls into a situation of “continuity” with the previous work position held in the country before the expatriation.
This happens when, regardless of the “new” company role and related remuneration, the contract terms and conditions remain unchanged upon return to the employer under agreements of a different nature, such as the signing of clauses included in secondment letters, or agreements where a new company role is conferred where it is clear the original contractual conditions in force before the expatriation continue to apply.”
This circular lists some examples of “substantial continuity”:
On the contrary, “where the new contract objective conditions (work, term, remuneration) require a new obligatory relationship to replace the previous, with new and autonomous legal situations followed by a substantial change in the service subject and relationship title, the repatriated may access the tax benefit.”
In this case, the tax authority held that the applicant worker could benefit from the favourable regime “only if the “new” work was not in continuity with the previous position, as defined in the circular. This circumstance cannot be verified as part of the question and is not subject to control here, and provided that all other legal requirements are met.”
The Inland Revenue, in its answer to question no. 123 of 22 February 2021, clarified the tax and social security payment for meal vouchers received by smart working employees.
The tax authority expressed a favourable opinion on exempting meal vouchers for employees working remotely.
The question addressed
A bilateral organisation asked the Inland Revenue to clarify whether the meal vouchers provided as canteen replacement service to its smart working employees counted as employee income, for direct taxation purposes under Article 51, paragraph 2, letter c), of the TUIR (Consolidated Law on Income Tax).
The organisation has made a general use of smart working because of the pandemic and the new requirements related to the containment of the COVID-19 epidemiological emergency that have prompted the legislature to encourage this employment method to stem the spread of the virus and limit contagion within the workplace and companies.
The organisation asked the Inland Revenue whether, as withholding agent, it is required “to withhold IRPEF on the canteen replacement service value using meal vouchers to its employees under smart working”, under Article 23 of Presidential Decree no. 600/1973.
The applicant suggested the following interpretation
The applicant, suggested that for contribution purposes, Article 6, paragraph 3, of the Decree-Law no. 333/1992 “excludes meal vouchers from representing a part of the employee’s remuneration, unless collective agreements and contracts, including company agreements, provide otherwise.”
Without a contractual provision classifying meal vouchers as an element of remuneration, the applicant considers that, “regardless of the way work is carried out (in presence or smart working), meal vouchers fall within the scope of canteen replacement services, for direct taxation purposes and are partially exempt from being considered part of employee income under Article 51, paragraph 2, letter c), of the TUIR.”
Ultimately, the applicant suggested that, for the periods when employees are smart working “no IRPEF withholding tax should be applied to the allocated meal vouchers.”
The Inland Revenue’s opinion
In its answer, the Inland Revenue stated that as an exception to the all-inclusiveness principle that governs employee income, Article 51, paragraph 2, letter c) of the TUIR, “the provision of food by the employer including canteens organised directly by the employer or managed by third parties; services replacing meals up to a total daily amount of €4, increased to €8 if they are provided electronically; allowances replacing meals paid to workers on construction sites, other temporary work facilities or production units located in areas where there are no catering facilities or services up to a total daily amount of €5.29” do not count as part of the employee’s income.
The logic behind this favourable tax regime is inspired by the legislator’s desire to exempt payments to employees that are linked to the employer’s need to “provide for the food requirements of staff who have to eat a meal during working hours.”
The tax authority goes on to examine the rule and related practice, highlighting how Article 4 of the Ministry of Economic Development Decree no. 122/2017 states that meal vouchers:
The provision contained in the ministerial decree “considers that work is increasingly characterised by flexibility” while it noted that tax law does not provide “a definition of canteen replacement services, but gives a general description as not being part of income within the limits described.”
Since there are no provisions which limit employer disbursement of meal vouchers in favour of its employees, the Inland Revenue confirms that for such canteen replacement services the partial taxation regime of letter c) of paragraph 2 of Article 51 of the TUIR is applicable, regardless of the working time and method.
Conclusions
In this case, the Inland Revenue established that meal vouchers granted to employees – regardless of the working method – do not count as employee income, under Article 51, paragraph 2, letter c), of the TUIR. Based on the above, employers will not be required “to apply the IRPEF withholding tax to smart working employees, under Article 23 of Presidential Decree no. 60/1973, on the meal vouchers value up to € 4, if paper, or € 8, if electronic.”
Source: Agendadigitale.eu