With its answer to question no. 596/2021, the Inland Revenue has expressed its opinion on the recognition of the tax favourable regime for repatriated workers who come back to Italy from abroad as “smart workers.”
The facts
The applicant is an Italian citizen who moved abroad in 2013 and has been registered since 2019 in the Register of Italians residing abroad (AIRE), who:
The applicant specified that on 23 February 2021 the foreign employer granted him the right to work “remotely from Italy as an employee” for at least two years. The worker asked for clarification as to whether he can benefit from the special regime for repatriated workers, including the extension of five additional tax periods for having a minor child.
Legal requirements
Considering the question, the Inland Revenue analysed the main features of the legislation, in which Article 16 of Legislative Decree no. 147/2015 lists the subjective and objective requirements to define its scope of application.
The above provision has been subject to several amendments, made by Article 5 of Decree Law no. 34 effective from 1 May 2019, which apply to those who, as of 30 April 2019, transfer their residence to Italy under Article 2 of the Consolidated Law on Income Tax – TUIR.
The Inland Revenue highlighted that the worker needs to meet the following requirements to benefit from the favourable tax regime:
Under the same provision, 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:
Inland Revenue conclusions on the case
Considering the above regulatory provisions, the tax authority stated that specific clarifications were provided in Circular no. 33/E of 28 December 2020, about the tax benefit.
Paragraph 7.5 of the Circular clarifies that “the above Article 16, as amended by Article 5, paragraph 1, of Decree-Law no. 34 of 2019, does not require the activity to be carried out for a company operating in the country. Individuals who come to Italy to work for an employer based abroad, or whose principals (in case of self-employment or business) are foreigners (non-residents), can access the benefit.”
In this case, the Inland Revenue considered that the worker, if possessing the requirements, “can benefit from the favourable tax regime provided for in Article 16, paragraph 1, of Legislative Decree no. 147 of 2015 […] for employment income produced in Italy from the 2021 tax period, when they transfer their tax residence to Italy, and for the following four tax periods.”
Having a minor child will allow them to benefit from the favourable regime for a further five tax periods, with taxation of the income at a reduced rate of 50 per cent, under paragraph 3-bis of Article 16.
With its note no. 1363 of 14 September 2021, the National Labour Inspectorate (“INL“) has provided operating instructions on the amendment to regulations on the reasons to be included in fixed-term contracts.
Regulatory references
The rules on fixed-term employment contained in Legislative Decree no. 81/2015 – as amended by Italian Legislative Decree no. 87/2018, converted into Law 96/2018 – have been substantially changed following the enactment of Decree Law no. 73, converted with amendments, by Law no. 23 July 2021, no. 106.
Article 19 of Legislative Decree no. 81/2015 has been amended with the insertion of letter b-bis) to paragraph 1 and paragraph 1-bis.
The legislator has provided for the possibility of a new type of reason defined by fixed-term contracts in national, local or company collective agreements stipulated by comparatively more representative trade union associations at national level and company collective agreements stipulated by their company trade union representatives or the unitary trade union representative body. In addition, employers may enter into a first fixed-term contract lasting more than 12 months, but not exceeding 24 months, if there are specific needs provided for by collective labour agreements until 30 September 2022.
INPS clarifications
The INL stated that the reasons are required for contracts exceeding 12 months, and in the following cases:
The new legislation impacts each of the profiles identified above, since the reference contained in Article 21 paragraph 1 (the additional contract at the ITL falls within the regulations on the obligation to provide a reason, being qualified as a renewal) refers directly to Article 19, paragraph 1.
To be valid, the collective bargaining measure (“specific needs provided for by the collective agreements referred to in Article 51”) must meet two requirements:
If the application uncertainties on representation remain unchanged, it is worth paying attention to the need for agreements to “specify needs” since there are no certain indices of measurement. The ITL correctly considered that collective bargaining must identify practical cases, without using general formulations, for example the well-known “technical, organisational, and production reasons.”
The above is a useful support in agreements signed based on the new delegation, and as an interpretative key for referring to provisions generally contained in national collective bargaining. Even in the absence of an express delegation of powers, national collective bargaining has previously identified the reasons for using fixed-term contracts and the new legislation removes any doubts as to the legitimacy of such contractual provisions. The absence of these provisions could have played a role in detailing/supplementing the reasons during litigation without being “legally binding.”
Compared to proximity bargaining, under Article 8, Decree Law no. 138/2011 – which can be exploited in derogation from the mandatory system of reasons – the bargaining under Article 51, Legislative Decree no. 81/2015 does not require the purposes outlined in Article 8 and does not need trade union majority mechanisms.
According to the new regulations “the time limit exceeding 12 months, but not exceeding 24 months, referred to in paragraph 1 of this Article, may be applied to employment contracts which meet the specific needs provided for by the collective labour agreements referred to in Article 51, under letter b-bis) of the same paragraph 1, until 30 September 2022”.
As the INL pointed out, the provisional nature of the regulations is for specific cases where it is necessary to provide reasons, i.e. when a first contract duration exceeds 12 months.
There are two consequences:
The Court of Cassation, in ruling no. 32234 of 23 April 2021, held that the sanctions regime laid down by Italian Law no. 300/1970, concerning the remote control of workers caused by video surveillance systems, has been maintained following the enactment of the Jobs Act.
In particular, in the case in question an employer set up a video surveillance system in his store. As can be seen from the Supreme Court ruling, the installation of such a system implied the company’s control of the “activities carried out by its sales staff in the store”.
Following an inspection visit to the store, a report was drawn up stating that there was a video surveillance system in the store that did not comply with the statutory requirements.
On this point, it should be recalled that Article 4 of Italian Law no. 300/1970 requires a trade union agreement or a specific authorisation from the Labour Inspectorate to install video-surveillance systems at work “which also imply the possibility of the remote control of workers’ activities”.
In additions, these systems “may only be used for organisational and production needs, for safety at work and for the protection of company assets”.
Initially, the first instance judge acquitted the employer as regards the violation of this provision, since it was held that “as a result of the entry into force of Italian Legislative Decree no. 196/2003, the conduct in question is no longer regarded by law as an offence”.
The Public Prosecutor of the Court of Appeal of Campobasso appealed against that ruling, arguing that, contrary to the view of the Court of First Instance, the provision that had been allegedly infringed by the employer had not been repealed.
The appeal was upheld by the Court of Cassation, which held that it was well-founded, noting that “even after the repeal of Arts. 4 and 38 of Italian Law no. 300/1970, the use of audiovisual systems and other equipment for the remote control of workers’ activities is an offence, since there is legislative continuity between the repealed offence and the one currently provided for by Art. 171 in relation to Art. 114 of Italian Legislative Decree no. 196/2003, as reshaped by Art. 23 of Italian Legislative Decree no. 151/2015, for the new law has kept unaltered the sanctions regime for the infringement of the said Article 4”.
The Supreme Court thus stressed that the sanctions regime for the violation in question had not been repealed; on the contrary, it had been maintained by the Jobs Act. In particular, this regime establishes that any violations of the said Article 4 are punished with a “fine of Italian Lira 300,000 to Italian Lira 3,000,000 or with imprisonment from 15 days to one year”, with joint application “in the most serious cases”, to the employer.
The first instance judgment, with which the employer was acquitted, was thus annulled, and the necessary review by the competent court was ordered.
The Court of Cassation, in ruling no. 21793 of 29 July 2021, stated that self-employed but continuous journalistic activity and under certain conditions implies the existence of an employment relationship.
The facts of the case involved a self-employed woman taking legal action to obtain verification of the existence of an open-ended employment relationship with a publishing group. She requested the employer be ordered to pay the difference in salary due under the NCLA following the conversion.
Initially, the Trieste Court of Appeal partially accepted the appeal filed by the employee, overturned the relevant court’s ruling by ascertaining the existence of an open-ended employment relationship in the period from January 2010 to March 2013. However, the request for payment of salary differences was declared null and void.
The court established that during the period in question the employee had followed the local news continuously, and was responsible for an information sector, and had ensured coverage during her employment.
The publishing company, opposed the second instance ruling, and appealed to the Court of Cassation claiming the non-existence of a permanent relationship between the parties, since it had not been demonstrated that she had been asked to be available between her journalistic services during employment.
The employer considered that the relationship between the parties did not show the typical general and specific elements of journalistic subordination. The employee worked discontinuously and with a limited commitment. She never had to guarantee her presence between work assignments. She did not have to ensure on call availability, and she could not ask for holidays. In the employer’s view, she was not subject to any management, organisational or disciplinary powers.
After examining the appeal lodged by the publisher, Court of Cassation noted that “as part of journalistic work of a permanent self-employed person, continuity is important, which is normally limited to offering services related to a specific area of expertise.” Based on case law, the Supreme Court stated that “work continuity” means the performance of non-occasional work, “aimed at ensuring the training and information needs of a specific sector”, which is accompanied by “responsibility for a service, which implies the systematic writing of articles on specific topics or columns” and the “subordination, as a result of which the employee’s commitment to place their work available to the employer continues even in the intervals between one service and another.”
The Court of Cassation stated that the continuity of service is when the permanent employee, ensures “a non-occasional service, aimed at meeting the training or information needs related to a specific area of expertise” under an assignment, although not providing their work daily.
In addition, there is subordination in cases where “the permanent self-employed person’s commitment to make their work available does not cease between one service and another in relation to timetable obligations, linked to service and production needs, and circumstances deriving from the assignment.”
Finally, responsibility for a service exists where the permanent self-employed person is entrusted with the task of writing “articles on subjects or compiling columns normally and continuously.”
In the light of these considerations, the Court of Cassation said that in the second instance it was established that the employee’s services were provided “continuously and not occasionally.” The number of articles written may have varied, but the service was daily, except on Sundays.
It was found that the employee was responsible for covering a sector and suggested stories for that round.
It was found that the employee was part of the company organisation and subject to the directives of the heads of service whose cuts and emphasis on news items she had to follow. Ultimately, it was found that the way the service was carried out revealed the availability of the employee during the intervals she was not working.
The Court of Cassation rejected the employer’s appeal and ordered it to pay costs.