Tax decree: novelty in the field of procurement and administrative liability of entities

On 26 October 2019, Official Journal no. 252 published Legislative Decree 124/2019 containing “Urgent measures in the field of taxation and for non-deferrable requirements” (i.e., the Tax Decree). The Decree, which is linked to the 2020 Budget Law, contains, among other things, major innovations for customers in the field of procurement and in terms of the administrative liability of entities.

Let’s go into detail

Contracts

Article 4 of the Tax Decree provides that, as of 1 January 2020 , companies commissioning service or work contracts will be required to pay withholding taxes made by contractors and subcontractors, during the term of the contract, on the salaries paid to staff directly employed under the contract.

To this end:

• each customer must have a dedicated current account and must be responsible for disclosing the details of said account to the contractors and subcontractors;
• each contractor and subcontractor will be obliged,  no later than 5 days before the payment deadline, to: (i) inform each customer of the list of names of employees employed under the contract, specifying their tax codes; (ii) the salary data and working hours of all employees employed under the contract; (iii) the details for filling in the payment instructions; (iv) the details of the payment made;
• each customer must make the payment under the legal terms and must inform, by certified email, each contractor and subcontractor, that the payment has been made.

The customer shall therefore be held liable for the payment of withholdings made by contractors and subcontractors within the limit of the sum of the amount of transfers received, unless the latter have failed to disclose the details of the bank or postal account to which payments must be made. In this case, the decree provides for the full and absolute liability of the customer.

Only contractors and subcontractors with the following requirements (to be certified by the Italian Revenue Agency and to be communicated to the customer) may pay withholding taxes directly:

1. having been in business for at least five years or having made total payments, within the previous two years, for an amount exceeding €2 million;
2. not having any official registration or enforceable investigations relating to taxes or social security contributions for amounts exceeding €50,000.00.

The scope of application of the provision is not limited to tenders, given that, as stated in the Explanatory Report, “contracts that have not been appointed or combined contracts, as well as subcontracts, logistics, shipping and transport contracts, in which the purpose of the contract is, in any case, the undertaking of an obligation by the contractor, are also understood to be included in the expression used”.

Administrative liability of entities

Article 39 of the Tax Decree introduces into the list of offences underlying the administrative liability of entities pursuant to Legislative Decree  231/2001 “the crime of fraudulent tax returns through the use of invoices or other documents for non-existent transactions” (i.e., tax offence, Article 25-quinquedecies), previously subject to increased penalties for individuals. Specifically, it has been provided that, in the event of the commission, in the interest or to the advantage of the entity, of this type of offence by a senior management representative or submitted to it, a financial penalty is applied to said entity, which may amount to up to 500 shares, corresponding to €774,500. This is unless the entity is able to prove that it has adopted and effectively implemented an Organisation, Management and Control Model. This new legislation is expected to apply as of the date of publication of the conversion law in the Official Journal.

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The Tax Decree is now being examined by Parliament for its conversion into law, where corrections may be made to the relevant text.