Personnel posted/seconded to Italy - obligations for foreign companies

Are you considering sending personnel on secondment to Italy? If so, this will require the fulfilment of certain legal, tax and social security requirements. In an increasingly interconnected world, it frequently becomes necessary for companies within international groups to send one or more employees to work for other corporations belonging to the same group. When employees are transferred to a company based outside their home country, this is referred to as international posting of employees. 

Below is a brief overview of the obligations linked to the posting of personnel from a foreign company to an Italian company, with the understanding that the various peculiarities of each country do require the support of experts on the subject. 


1.     The contractual forms of posting

A posting is a relationship involving three parties: the employer (the foreign posting company), who, in its own interest, places one of its employees for a specific period of time at the disposal of another company; the host (or receiving company) located in Italy, which is the final recipient of the worker's services; and the posted party (employee/worker), who will work for the benefit of the host, while remaining an employee of the posting company. 

The aforementioned three-way relationship is formalised through the drafting of a letter of posting between the companies involved and the worker, regulating the main terms of the posting itself.

Subsequently, in order to define the "economic" relationship between the posting company and the host, a specific intercompany agreement will have to be drawn up concerning the recharging of costs linked to the posting, a rather complex matter due to its implications in terms of VAT treatment and the deductibility of such costs. 


2.     The remuneration package

Among the most relevant aspects to be considered in the case of a posting/secondment are the needs of the employee, which must be factored in and matched with the company's internal policies, taking into account the costs involved in a posting. 

In common practice, the posted employee is guaranteed various benefits and allowances in kind in addition to monetary compensation, such as, by way of example, housing, a company car, children's schooling, tax assistance, etc.

The identification and assessment of these benefits is a priority task to allow a correct definition of the cost of the posting and benefit from any tax relief provided by law.


3.     Fiscal neutrality policy

Different countries, different customs! 

This saying applies equally well to taxation. Each country has a different tax system, more or less burdensome than the country of origin. This is why it is highly advisable for seconding companies to implement tax-neutral policies, i.e. policies that ensure that the seconded employee does not suffer any tax disadvantage.

Depending on requirements, the company may opt for tax equalization (no advantage/disadvantage), tax protection (no disadvantage) or guaranteed net.


4.     Notification of posting start and possible immigration procedures

Every international posting/secondment must be carefully thought out and planned as well as promptly communicated to the competent local authorities. Legislative Decree No. 136 of 17 July 2016, which transposed the provisions contained in Directive 2014/67/EU, has in fact introduced a specific prior declaration of posting (UNI - Posting), to be sent within 24 hours before the start of the secondment, through a specific portal made available by the Italian Ministry of Labour and Social Policies.

In addition to the obligation of prior notification, the posting company is under the obligation to prepare the supporting labour-related documentation necessary to verify the working and economic conditions guaranteed to the employee and to translate it into Italian.

The regulation provides for the appointment a contact person electively domiciled in Italy in charge of representing the foreign company both in the event of access and inspection by the authorities and for the submission of the communication itself, as well as the storage of documents.

The aforementioned notification is not due in the case of posting of non-EU employees, considering that all necessary migration procedures are activated to allow the employee to work legally in Italy. Employees with a nationality other than Italian and EU (including UK) need to obtain work permits without which, the work period cannot even begin. 


5.     Social security aspects

From the point of view of social security obligations, it should be considered that social security contributions are paid, in most cases, at the place of performance of the work activity. 

Notwithstanding the general principle just outlined, European regulations and social security treaties signed by Italy with non-European countries allow exemption from the payment of contributions in the country of posting (in Italy) for a limited period of time - from a minimum of 12 months to a maximum of 48 - depending on the country of origin and subject to extensions for exceptional events.  Exemption is granted by obtaining social security coverage certificates (such as Model A1) issued by the social security authorities of the employee's country of origin.

On the contrary, for non-European countries not linked to Italy by a social security treaty or only linked by a partial social security treaty, the contribution is due both in the country of origin and in Italy: in this case, the foreign employer will be required to register with the Italian social security authorities in order to then pay the relevant contributions in Italy. 


6.     Fiscal Aspects

The employee posted to Italy will generally be required to file a personal tax return: depending on his/her status as a tax resident or non-resident, the employee will be required to declare his/her income wherever it is produced or only his/her income produced in Italy, in accordance with Italian law, and to pay the relevant taxes in Italy. 

In the case of Italian tax residence, the employee will also be liable for tax monitoring and wealth tax on foreign financial and real estate investments.

A relocation to Italy by an employee could bring considerable tax advantages, where the employee may benefit from the so-called Regime Impatriati (a tax relief for workers relocating to Italy), which as of 1 January 2024 will allow those who meet all the requirements to submit only 50% of their taxable income to Italian taxation. In the event of application of the tax equalization/protection/guaranteed net agreements, such tax relief will benefit the company.


7.     Obligations of the posting and/or receiving company

Lastly, we wish to point out that the foreign employer has no income tax withholding obligations in Italy, whereas the Italian host/receiving company will instead have to operate withholding taxes in relation to any cash compensation or benefits in kind paid to the posted employee. In the latter hypothesis, the posting company will therefore be obliged to prepare a monthly pay slip and pay withholding taxes on behalf of the employee only on the value of the remuneration issued to the employee (and not on the entire remuneration usually paid by the foreign employer). 


These are just some of the questions answered in this article. If you are planning to send personnel on secondment to Italy, it is important to look more closely at the specific requirements and regulations.

Would you like to know more about various steps involved in sending personnel on secondment to Italy? Feel free to contact us, we will gladly offer our support.

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