The Court of Cassation, in ruling no. 11644 of 4 May 2021, stated that it is legitimate to dismiss an employee who unlawfully uses a company car and tries to “hide a real accident and report a false one.”
In this case, a medical director of a local health unit (“AUSL”) concealed an accident, which occurred on the evening of 11 January 2017, while driving his company car, to hide its improper use, by declaring in the company’s report that it had occurred the following morning, in different circumstances, when he was using the car for company purposes.
This constituted further violations of the company internal rules concerning the use of company vehicles and the requirement that they are used exclusively for office duties, a prohibition against keeping the car at a private home and the obligation to fill in the logbook, etc.
As a result of this conduct, the employer terminated the contract immediately. This was based not so much by the irregular use of the company car, but by the fact that the employee had kept the company in the dark about the accident, trying to conceal the facts by reporting a false accident.
On this point, the local court held that it was undisputed that the only accident involving the employee was that of the evening of 11 January, since it was unlikely that two accidents could have occurred on the same vehicle just 12 hours apart. Furthermore, this possibility was ruled out by an investigation.
Following the employee’s appeal against the second instance ruling, the Court of Cassation – in its examination of the facts analysed in the first two instances – noted that the “unlikely” statement used by the Court of Appeal could be interpreted in two ways. The Court could have held that it was impossible for the two accidents to have occurred, or that it was improbable that they had occurred.
“Since such an impossibility is not predictable” – the Supreme Court observed – “it is evident that the interpretation of the reasoning must be the other, namely that the Court considered it unlikely that the worker had two accidents with the same vehicle in such a short time frame.”
Such a probabilistic construction, however brief, cannot be said to be illogical, therefore “it goes without saying that there was no violation of the rules on the burden of proof, the Court having essentially considered it proven that the accident had been only that specific one, which had unquestionably occurred, on the previous day.”
As for the dismissal, the local Court held that the offence was not to be included among the cases of the disciplinary code referred to the mere “concealment by the director of facts and circumstances relating to the unlawful use, tampering, diversion or misappropriation of sums or assets pertaining to the administration or entrusted to him”, but to the more serious case that contemplates ” acts and conduct […], albeit unrelated to the work performance, carried out including against third parties, which are so serious as not to allow the continuation of the employment relationship under Article 2119 of the Italian Civil Code.
The Supreme Court noted that, “the mere concealment of vehicle damage” is one thing, while “disguising facts, reporting a false accident is much more serious.”
On this factual reconstruction – according to the Court of Cassation – the local Court has focused its assessment on the incident seriousness and proportionality compared to the penalty applied by the company. The employee conduct could damage the trust relationship.
The Court of Cassation rejected the appeal submitted by the employee, and ordered him to pay court costs.
Source: Sintesi
Answering to question no. 449/2021, the Inland Revenue expressed its opinion on the duties of a foreign entity without a permanent establishment in Italy as a withholding agent.
Answering the question, the Inland Revenue stated that elements such as an entity’s permanent establishment or fixed base in Italy, and its possible recourse to the tax representative and direct identification, have become important
The facts
The requesting company arrived in Italy in 2020 to carry out its business.
To quickly start its business, the organisation hired about 30 people under an occasional service contract and paid them through a bank current account opened by a company official. The requesting company declared that it paid agreed net fees, which, in most cases, did not exceed €5,000.
The foreign entity did not know that it had to appoint a person as an Italian tax representative. Given its intention to directly pay tax related to the service providers and settle any outstanding amounts, the company asked the Inland Revenue for instructions about fulfilling the tax obligations under Italian law.
Appointment of a tax representative and direct identification in Italy
The requesting company first suggested it retroactively appoint, “a tax representative in Italy (art. 17 of Italian Presidential Decree 633/72) who was the same person who opened the bank account, an individual of non-EU nationality with an Italian tax code but not resident in Italy, or assigning this office to another person resident in the country.”
As an alternative, the company identified the need to “identify itself directly in Italy by requesting a tax code as per Form AA5/6, a non-resident entity […] with tax domicile in the city of […] where it has carried out […], with the qualification of withholding agent […] limited to income paid by a permanent establishment or fixed base in Italy.”
In addition, the company stated that it planned to hire an employee in Italy in 2021. Therefore, the company asked whether the tax identification number obtained based on one of the two alternatives as mentioned above was sufficient to act as a withholding agent, allowing the correct performance of tax operations.
Inland Revenue conclusions
Given the above, the tax authority pointed out that the applicant does not appear to carry out any relevant activity for VAT purposes in Italy, and reference to Art. 17 of Presidential Decree no. 633 of 26 October 1972 ( the “VAT Decree”) is irrelevant, particularly, the tax representative (third paragraph of the above art. 17) and direct identification (art. 35-ter of the same Decree).
On this point, the tax authority said that non-EU parties intending to carry out VAT-relevant transactions in Italy, if they do not have a permanent establishment, fulfil the obligations and exercise the rights arising from the application of such tax, may identify themselves under Art. 35-ter of the VAT Decree only “if they carry out a business, art or profession in a third country where there are legal instruments governing mutual assistance in the field of indirect taxation.” Otherwise, they must appoint a tax representative resident in the country.
In this case, should it be necessary to acquire a VAT position in Italy, the tax representative could not be the person who opened the Italian bank account as that person was not resident in Italy, as reported by the requesting company.
According to the Inland Revenue, the remuneration paid to approximately 30 people hired under an “occasional services” contract constitute occasional self-employment income for the recipients, which is taxable under Article 67, paragraph 1, letter l) TUIR -Consolidated Law on Income Tax.
The permanent establishment requirement
For withholding tax purposes to be levied on such remuneration, it was clarified that non-residents in the country might be a withholding agent, limited to the income paid by a permanent establishment or fixed base in Italy. In the absence of this requirement, the above obligation does not apply.
“only where the foreign entity has set up a permanent establishment or a fixed base in Italy will be required to apply for the tax code and fulfil the consequent obligations as a withholding agent, “consisting of making and paying withholding taxes, certifying payments and submitting Form 770.
To fulfil these obligations, the Inland Revenue has referred to the instructions for the compilation of Form AA5/6 – “Application for assigning a tax code, communication of data changes, merger, concentration, transformation, closure (parties other than natural persons)” – with attention to the instructions for non-resident entities.
Suppose the foreign entity does not have a permanent establishment in Italy, it may fulfil the necessary tax obligations for the remuneration paid only after having become a withholding agent. Failing that, it will be the responsibility of the staff hired under an “occasional service” contract to independently make the appropriate tax return in Italy.
In its answer to question no. 447/2021, the Inland Revenue examined the question raised by an Italian football club playing in the top league, which asked for clarifications on the requirements and application scope of the special regime for repatriated workers applied to professional sportsmen.
The company hires its players under employment contracts governed by Law 91/1981, which regulates the relationship between clubs and professional sportsmen.
At the same time, the club acts as a withholding agent, for tax on the remuneration it pays to the players.
Players who meet the requirements request the application of the repatriated workers regime (art. 16, paragraph 5-quater, Legislative Decree no. 147/2015), withholdings are made on 50 per cent of the taxable income.
According to the requesting company, to access the repatriated workers regime by nationals of non-EU countries, it is sufficient to meet the requirements of the first paragraph of Art. 16 of Italian Legislative Decree no. 147/2015, since it is not necessary to meet further requirements set out in the second paragraph of that article.
Regulatory references
Under Legislative Decree no. 147/2015, employment income, similar income and self-employment income produced in Italy by workers who transfer their residence to the country under Art. 2 of Presidential Decree no. 917/1986, is included in the total income limited to 30 per cent under certain conditions.
Workers must not have been resident in Italy in the two tax periods preceding the transfer and must agree to reside in Italy for at least two years.
At the same time, work must be carried out mainly in Italy.
This provision was subject to regulatory changes made by art. 5 of Decree Law no. 34 of 30 April 2019 (converted into Law no. 58 of 28 June 2019), in force since 1 May 2019.
To obtain the benefit referred to in the above art. 16, in force from 1 May 2020, the worker must
The tax benefit is available to EU citizens or non-EU if the country has an agreement against double taxation or on the exchange of information in tax matters, who:
Taxpayers may benefit from this relief for five years, starting from the tax period in which they transfer their tax residence to Italy.
Paragraph 5-quater – introduced in Art. 16 following the amendments made to Art. 5 of Decree Law no. 34 of 2019 when it was converted – extended the range of benefit beneficiaries to professional sportsmen, providing that they contribute to the creation of income limited to 50 per cent of their taxable amount.
In circular no. 33/E of 28 December 2020, the Inland Revenue clarified that the regime applies to workers who have transferred their tax residence in Italy as of 30 April 2019, under legal conditions.
Later, the Inland Revenue Director’s order of 3 March 2021, established that to access the benefit, it is necessary to pay an amount equal to 5 or 10 per cent of the income received in the previous year. Professional sports workers, whose income is 50 per cent tax-free and provided they pay a contribution of 0.5% of their taxable income, intended for the development of youth sectors, are excluded.
Using tax leverage is an aspect that is not overlooked by other European countries. Art. 16 reflects a process that has been underway for years in several EU countries.
Similar tax regulations in favour of repatriated workers have been established in France, Spain, the Netherlands and Portugal, not to mention the “remittance basis” system in place in Ireland and the United Kingdom.
The question’s answer
Based on the clarifications provided and the above regulatory developments, the Inland Revenue, in its answer to the question, clarified that a worker who transferred their tax residence in Italy in 2020 might benefit from the tax relief for repatriated workers for the employment income produced in Italy starting from the 2020 tax year (and the four subsequent periods). This is because it is sufficient to meet the requirements set out in the first paragraph of Art. 16 of the above Legislative Decree, i.e. that the person has not been resident in Italy in the two previous tax periods, that they agree to reside in Italy for at least two years and the work is carried out mainly in the country.