New requirements apply to outsourcing agreements in Italy with immediate effect from the beginning of 2020.
The so-called Tax Decree introduced new regulatory requirements in Italy for services agreements that will have an impact on outsourcing, and IT contracts as well as on those contracts where a considerable amount of manpower is utilized (e.g., logistics, maintenance services, etc.). Below is an outline of the requirements by my colleague Alessandro Ferrari.
The new requirements applicable to outsourcing agreements in Italy
The new rules apply as of January 1, 2020, and require (i) immediate attention due to the sanctions potentially applicable as well as (ii) changes to contracts (including those currently in place) and (iii) adoption of new internal procedures.
The Tax Decree provides that in case of services agreements or contracts for works with
- a yearly consideration higher than 200,000 Euro;
- intensive labor activities at the customer’s premises/facilities; and
- use of equipment/tools (e.g., computers) owned by or available/referable to the customer
providers (and subcontractors) have to provide the instructing parties with evidence of payment of the social security contributions relating to the employees employed for the performance of the services/works.
Within five working days following the deadline for the payment of contributions, providers are required to send to their customers the proof mentioned above of payment as well as the list of the relevant employees (identified by their tax number) employed for the performance of the services/works in the previous month, including a detail of the number of working hours spent by each employee for the services/works, the amount and quota of their salary attributable to the services/works, and the amounts of the social security contributions paid by the provider.
Applicable sanctions in case of lack of compliance
If a provider either does not comply with the obligation mentioned above or does not pay the contributions in full or in part, the customer is required to suspend the payment of the provider’s invoices up to the 20% of the contract value or the amount of the contributions not paid by the provider, as well as to inform the Tax Authority.
If the customer does not do that, it is subject to the payment of a fine equal to the sanction applicable to the provider. It is to note that this is in addition to the joint liability regime applicable to customers and providers for the payment of the providers’ employees’ social security contributions. But, certain exceptions apply, in particular, where the provider can show that it meets specific parameters and delivers to the customer a special certification issued by the Tax Authority.
My view on the new obligation
The new requirements applicable to outsourcing and IT agreements in Italy oblige an immediate review of existing contracts and the implementation of procedures to ensure that the obligation referred above is met.
The review is broader than initially expected and, for instance, will also involve the privacy information notices entered with suppliers that shall include the reference to the processing of employees’ personal data included in proofs of payment of social contributions, together with the relevant legal basis of processing.