The Labour Inspectorate, with note no. 1037 of 26 November 2020, intervened on an investigation of offences against an employing party in a “labour-intensive” contract.
Regulatory references
Art. 4 of the Decree Law 124/2019 (the “Fiscal Decree“) added to Legislative Decree 241/1997 the new art. 17bis, which imposes new obligations on employing parties in labour-intensive contracts.
Particularly, as of 1 January 2020, contracting companies must request their contractor and subcontractors, a copy of the payment authorisations relating to withholding taxes, which were withheld from workers directly employed in any work or service under the contract. The payment of withholding tax is made by the contractor and subcontractor, with separate powers of attorney for each employing party, without the possibility of compensation.
The same provision stated that if there were a violation of these obligations, payment of the fees accrued by the contractor could be suspended up to 20 per cent of the value of the work or service “or by an amount equal to the unpaid withholding tax according to the data resulting from the documentation sent.”
The Inspectorate’s clarifications
The Labour Inspectorate, in its note, referred to the Inland Revenue circular no. 1E of 12 February 2020 which pointed out that the explanatory report in art. 4 identifies the purpose of the obligations to counter the “phenomenon consisting in the omitted or insufficient payment, including through undue compensation, of withholding taxes on employees and similar income recipients.” This takes place through systems which charge the employing party involved with the “labour-intensive” contracts.
The violation of the employing party’s obligations is sanctioned by a pecuniary sum equal to that imposed on the contractor for the incorrect determination and execution of withholding taxes, or late payment, without the possibility of compensation.
The Inspectorate note stated that the Inland Revenue specified: “this sum is not due when: despite the employing party not having correctly fulfilled the obligations under paragraphs 1 to 3, the contractor or subcontractor correctly fulfilled the obligations, or availed itself of the voluntary correction of tax return under article 13 of Legislative Decree no. 472 of 18 December 1997, to remedy the violations committed prior to being contested by the control bodies”.
According to the Inspectorate, the employing party ‘s control obligations were aimed exclusively at making the tax obligations of entrusted companies effective. Their violation cannot be ascribed to labour and social legislation violations, for which the Inspectorate may have jurisdiction.
