The Court of Cassation, in its order no. 1759 of 27 January 2021, clarified the double contribution to be paid by those who are, simultaneously, partners and directors of limited liability companies having a corporate purpose classifiable under the tertiary sector.
According to INPS practice and the prevailing case law since 2011, the managing partner must pay contributions twice: (i) to the INPS Retailer Management scheme, as partner, for the business income produced by the company and (ii) INPS Separate Management Scheme for the income deriving from any remuneration received for the director’s office.
Under its order, the Supreme Court did not deny the general principle of the managing partner double registration in the above INPS management schemes but assumed the partner’s registration in the Retail Management scheme can be excluded.
Judicial Appeal to the payment notice served by INPS
The Court of Appeal of Bologna upheld the judgement of the Court of first instance upholding the opposition brought by the chairman of the board of directors and partner of a limited liability company against an INPS payment notice. This tax payment concerned contributions due to the Retailer Management Scheme for the activity carried out by the chairman of the board of directors as a partner who, as a remunerated director, was registered under the INPS Separate Management scheme.
The Court of Appeal held that the double registration was admissible and stated that for INPS Retailer Management Scheme registration purposes, the activity carried out as a partner had to be different and distinct from that of director.
In this case, supervision, and the position of contact person for customers and suppliers or hiring an employee by the chairman of the board of directors, fell within the director’s duties.
INPS appealed to the Court of Cassation against the second instance ruling, relying on a single detailed ground of appeal.
Unlawfulness of INPS’s actions according to the Court of Cassation
The Supreme Court noted that Article 1 paragraph 208 of Law 662/1996 did not introduce any principle of alternation between registration in the Retailer Management Scheme and the Separate Management Scheme under Article 2, paragraph 26 of Italian Law 335/95.
The Court reiterated that, following the authentic interpretation of this rule made by Article 12, paragraph 11, of Decree Law 78/2010, converted into Law 122/2010, the legislator excluded the single scheme registration rule. A single scheme registration “is possible (and for the prevailing activity) only for self-employed work exercised by retailers, craftsmen and farmers.”
The Court pointed out that “for the case of business carried out by retailers, artisans or farmers simultaneously with the self-employed work for which enrolment in the separate social security management scheme is mandatory, as provided for by art. 2, paragraph 26 of Law 335/1995, the unification of contributions based on the prevalent activity parameter, as provided for by art. 1, paragraph 208 of Italian Law 662 of 1996.”
According to the Court of Cassation, the above principle of double contribution, referred to in the case law, has led to the INPS practice of automatically registering the managing partner of a limited liability company: (i) in the INPS Retailer Management Scheme, for the business income produced as partner and (ii) at the INPS Separate Management Scheme for the income deriving from the remuneration received for the director’s office.
In their order, the judges did not question the principle of double contribution, but rather the social security institution practice. The judges ruled that “the performance […] of the sole activity of director, without participating in the company’s material and executive activity” cannot be sufficient to justify the registration to the Retailer Management Scheme, and that “nor the status of partner of a joint stock company (with liability limited to the subscribed capital and with participation in the achievement of the corporate purpose exclusively through the contribution of such capital) per se, can mean the exercise of direct commercial activity in the company.”
Director’s duties include carrying out supervisory activities, being the contact person for customers and suppliers or hiring an employee. These are not a partner’s duties.
Based on these considerations, the Court of Cassation rejected INPS’s appeal, confirming the unlawfulness of the automatic registration of the managing partner in the Retailer Management Scheme since the social security institution had not proved the “direct participation in the company’s material and executive activity” to register the partner in the above Scheme.
With its order, the Supreme Court questioned the automatic registration of the managing partner of a limited liability company in the Retailer Management Scheme. According to the Court of Cassation, it is INPS’s responsibility to demonstrate direct participation in the company’s material and executive activity that will generate the obligation to register the managing partner of a limited liability company in the Retailer Management Scheme.
This direct participation of the partner in the company’s activity can be demonstrated by the institute in cases where the company carries out business with a corporate purpose classifiable in the tertiary sector without the use of employees or contracted personnel.