tax and social security in italy for directors
tax and social security in italy for directors and C.E.O. non- resident
Community regulation. Legislation applicable to subjects registered in the separate administration. Clarification on the contribution obligations for coordinated and continuous collaboration activities carried out by non-residents
A recent INPS circular no. 102 of 16 October 2018, provided important clarifications concerning the contribution obligations due from the coordinated and continuous collaboration activities (the famous co.co.co.) carried out by non-resident subjects. These clarifications became obligatory, in light of recent legislative interventions regarding the registration of the separate INPS Management (Article 2, paragraph 26 of Law 335/1995).
In particular, indications are given on the correct application of the rules on applicable legislation, as per Regulation (EC) no. 883/2004 and the related Implementing Regulation (CE) n. 987/2009, to the subjects enrolled in the INPS separate management. we analyze in greater detail when the worker must be subject to Italian legislation and when instead to the foreign one.
How to apply the rules of social legislation in the E.U. Community
According to a general principle, incomes are subject to taxation, for the purposes of direct taxes, in the country in which they are produced, regardless of the tax residence of the recipient subject in the same country. Exceptions to this principle are foreseen under specific circumstances by the international double taxation conventions. This principle is enshrined in our tax system by Article 3 of Presidential Decree no. 917/86, according to which:the income tax of natural persons applies to the total income of the subject, formed for residents from all income earned and for non-residents (fiscally), only those produced in the territory of the StateTherefore the prerequisite for the taxation of the fees received by a subject is the verification of the tax residence in our country. Pursuant to Article 2, paragraph 2 of Presidential Decree no. 917/86, are considered fiscally resident in Italy (even if foreign citizens) subjects who, for most of the tax period (183 days a year also non-continuous):They are registered in the registers of the resident population;
In the territory of the State they have the domicile of article 43 of the civil code: “the center of their business and interests”;
In the territory of the State they have the residence pursuant to article 43 of the civil code: “their habitual abode”.
These three criteria are alternative to each other, therefore, it is sufficient to satisfy only one of these criteria to be considered fiscally resident in Italy, and be required to declare in our country all income, wherever they have been perceived.
So, ultimately we can summarize the methods of taxation as indicated below:
tax and soacial security in italy for directors
In detail
In general, the “principle of uniqueness” stipulates that even if a worker is employed in two or more Member States, the legislation of only one Member State applies.
In this regard it is the art. 13 of the Regulation (EC) no. 883/2004 to establish the criteria for determining the legislation to be applied, distinguishing the subordinate worker from the autonomous worker.
In particular, as regards the employed person working in two or more Member States, he is subject to the legislation of the Member State of residence, if he exercises a substantial part of his activity in that Member State.
Otherwise, the worker is subject alternatively:
to the legislation of the Member State in which it has its registered office or domicile, the undertaking or the employer, if it is employed by an undertaking or an employer;
to the legislation of the Member State in which it has its registered office or domicile, the undertaking or the employer, if it is employed by two or more undertakings or employers having its registered office or domicile in only one Member State;
the legislation of the Member State in which the undertaking or the employer has its registered office or domicile other than the Member State of residence, if it is employed by two or more undertakings or employers having its registered office or his domicile in two Member States, of which one is the Member State of residence;
the legislation of the Member State of residence if he is employed by two or more undertakings or employers, at least two of whom have their registered office or domicile in Member States other than the Member State of residence.
Social security contributions I.N.P.S. sepatized management
The fees deriving from the activity of the director are subject to social security contributions to the Separate Management of INPS, and we analyze what the regulations envisage in the event that there are compensations for directors of companies received abroad.
The Law n. 335/95, article 2, paragraph 26, defines who are the subjects required to register for the INPS separate management, making reference to the recipients of coordinated and continuous collaboration income, as defined by Presidential Decree no. 917/86. Ministerial Decree no. 281/1996 established, in article 1, that the social security contribution must be applied on the amount of the compensation determined according to article 54, paragraph 8, of the Tuir.
Inps, in turn, with the publication of Circular no. 164 of December 21, 2004, redefined the conditions for recurring the obligation to register and contribute to the Separate Account with respect to the directors of companies and coordinated and continuous collaborators residing fiscally abroad. With this circular, the INPS definitively clarified that the principles governing the social security of income received by non-residents “can only be those valid for the same subjects, for the purpose of imposing the IRPEF”.
More specifically, INPS has specified that the obligation to register and contribute to the Separate Management occurs in all cases where:
The activity of the non-resident administrator is carried out in Italy;
or, where the activity is not carried out in Italy;
The related remuneration is paid by a person resident in Italy, or by permanent organizations of non-resident persons operating in Italy.
Therefore, we can clarify that they must be subject to contributions due to the separate Inps Management (with the consequent obligation to register the recipient), unless the specific applicable double taxation agreement does not deviate from the OECD model (and this must always be verified in each individual case), the following cases:
The directors’ emoluments of Italian companies received from non-residents, as they are always taxed in Italy should always be subject to the contribution of the separate management;
The directors’ emoluments received by non-resident persons paid by Italian companies, or by permanent organizations operating in Italy of non-residents in Italy, will be subject to the contribution of the separate Inps management (and taxed also in Italy with use of the tax credit ) if the activity is carried out in Italy, not subject to the contribution of the separate INPS management (and taxed only abroad) if the activity is carried out abroad.
These forecasts deriving from national legislation must be compared and appropriately coordinated with the international social security regulation, and in particular with Regulation no. 883/2004 in force since 2010 in relations between EU countries. This legislation is based on some fundamental principles, including that of the uniqueness of the legislation applicable to the same subject, which identifies the legislation applicable in cases where an employed person is already subject to the social security legislation of another member country, or work at the same time in two or more Member States.
In this regard, the Community Regulation establishes as a general principle in the field of applicable legislation, both for employed persons and for self-employed persons, that of Territoriality, according to which workers employed in the territory of a Member State are subject to the legislation of that State. In application of the principles of Uniqueness and Territoriality, Articles 12 and 13 of the Regulation provide that if the employed or self-employed person carries out his activity in several States, the social security legislation applicable to him will be that of the State of residence, if he exercises usually a substantial part of its activity in that State. Otherwise, the worker will be subject to the legislation of the Member State in which the employer has his registered office or residence.
In conclusion, as previously described, the obligation to register for the Separate Account must be: primarily, verified in light of the general principle of territoriality, as applicable in the Italian legal order and in the International Social Security Conventions applicable to the specific case (detail attention must therefore be paid to the verification of the place where the activity is carried out) and only afterwards, and limited to the activities for which the contribution obligation is verified, the contribution will be applied to the income of these activities, as shown in the article 50 of Presidential Decree n. 917/86
Now let’s see what the Inps circular of 16/10 says.
1. Premise
The Community rules on applicable legislation are contained in Title II (Articles 11 to 16) of Regulation (EC) no. 883/2004 and in Title II (Articles 14 to 21) of the relative Application Regulation (CE) n. 987/2009.
These provisions identify the criteria for determining the legislation to be applied to the worker on the basis of two general principles: the principle of uniqueness and the principle of territoriality of the applicable legislation.
The general principle of the uniqueness of the applicable legislation (Article 11 (1) of Regulation (EC) No 883/2004) provides that the recipients of Community legislation are subject to the legislation of a single Member State even in the case where they work in two or more Member States. With reference to this last hypothesis, the criteria for determining the legislation to be applied are reported in Article 13 of Regulation (EC) no. 883/2004, entitled “Operation in two or more states”.
As regards, in particular, the determination of the legislation applicable to the interested party in the situation of the exercise of activities in several States, the procedure established by Article 16 of Regulation (EC) no. 987/2009, containing the modalities of application of the regulation (CE) n. 883/2004 (see paragraph 19 of circular No. 83/2010). In particular, according to this rule, the institution designated by the competent authority of the Member State of residence of the person who carries out activities in two or more States, at the request of the person or if informed of the situation by another institution concerned, determines the legislation applicable to the interested party.
This initial determination, which is provisional, must be communicated to the Institution of the country or countries in which the other or the other activities are carried out. From the date of this communication, the two-month deadline within which the other institutions concerned may challenge said determination. Only at the end of the two months without any communication received from the other institutions, the determination becomes definitive. Otherwise the competent authorities or the Institutions designated by them will seek an agreement based on the provisions of the aforementioned Article 16 of Regulation (EC) no. 987/2009.
The general principle of the lex loci laboris – principle of territoriality of the applicable legislation – establishes, instead, that the worker is subject to the legislation of the State in whose territory he carries out his working activity. This principle also applies in cases where the employees are resident in a State other than the State of employment or when the business or employer from whom they depend, have their registered office or place of business in one State other than that in which the workers are employed. An exception to this principle is provided for in Article 12 of Regulation (EC) no. 883/2004, which regulates the posting of workers.
2. Legislation applicable to the subjects registered for the separate management
Community regulations include provisions for the determination of the legislation applicable to employees or self-employed and nothing provides, however, for the new figures of workers governed by national legislation. In particular, no specific EU legislation is directly applicable to the categories of workers registered for the separate management referred to in Article 2, paragraph 26 of Law no. 335/95. However, as specified in circular no. 83 of 1 July 2010, Article 1 of Regulation (EC) no. 883/2004 defines as activities subordinate or autonomous also the activities that are assimilated to them according to the legislation of the Member State in which these activities are carried out.
Therefore, these categories of workers are assimilated, from the point of view of social security, to employees or self-employed workers, also on the basis of the principle of law enunciated by the Court of Justice of the European Communities in sentence no. 221/95.
The Supreme Court has clarified that the nature of the activity exercised in each State must be assessed according to the social security provisions of the Member State in whose territory the activity is carried out and not according to the notion that is given according to the labor law provisions. . The Court observes that “the concepts of employed and self-employed workers referred to in the regulation refer therefore to the definitions given by the social security legislation of the Member States and do not consider the nature of the work carried out under the law of labor” .
Having said that, with the circular n. 83 of 1 July 2010, for the purpose of determining the applicable legislation according to the Community legislation, with reference to the activities entailing the registration to the management separated Inps ( social contribution)
- research doctorate, grant, scholarship granted by MUIR;
- coordinated and continuous collaboration (with project contract / work program phase of it);
- occasional collaboration (Article 61, paragraph 2, Legislative Decree No. 276/2003);
- coordinated and continuous collaboration of old-age or Ultrasessant-five-year pension holders;
- coordinated and continuous collaboration with the Public Administration;
- doctor in specialized training (see circular No. 37/2007);
- associated in participation with contribution of work only;
civil service volunteer. - From the point of view of social security, the subjects holding the following types of relationship are treated as equivalent to:administrator, auditor, auditor of companies, associations and other entities with or without legal personality, liquidator of companies;
- newspaper contributor, magazines, encyclopedia and the like;
- participant in colleges and commissions;
- door-to-door salesman;
- autonomous occasional report (as per Law No. 326/2003);
- all freelancers for whom there is no mandatory social security fund.
With effect from 1 January 2016, Article 52 of Legislative Decree n. 81 of 2015 provided for the definitive and immediate repeal of the rules relating to the project contract as per articles 61 to 69-bis of Legislative Decree n. 276/2003. In particular, article 2, paragraph 1, of the aforementioned legislative decree provides that “from 1 January 2016 the discipline of the employment relationship applies also to the relationships of collaboration that are embodied in exclusively personal work services , continuative and whose execution methods are organized by the client also with reference to the times and places of work “.
Furthermore, the legislative decree on the subject, in article 53, provided for the association to be exceeded with participation by work, modifying article 2549 of the civil code. In particular, paragraph 3 of the aforementioned provision has been repealed and in paragraph 2 the prohibition to activate, for an associated physical person, a service with the contribution of work only.
It follows that, in light of the legislative changes referred to above, with effect from 1 January 2016, for the purpose of determining the applicable legislation on the basis of Community legislation, with reference to the figures entered in the Separate Management, they are assimilated, from the point of view of social security , to employees the subjects holding the following types of relationship:
- research doctorate, grant, scholarship granted by MUIR;
- doctor in specialized training (see circular No. 37/2007);
- coordinated and continuous collaboration whose execution methods are organized by the client both in time and place of work (organized hetero);
- In addition, from the point of view of social security, the persons holding the following types of relationship are similar to the self-employed workers:
- administrator, statutory auditor, auditor of companies, associations and other entities with or without legal personality, liquidator of companies;
- newspaper contributor, magazines, encyclopedia and the like;
- participant in colleges and commissions;
- Door-to-door salesman;
- autonomous occasional report (as per Law No. 326/2003);
- coordinated and continuous collaboration in cases where the relationship is not organized hetero;
- all freelancers for whom there is no mandatory social security fund.
In the cases in which the workers registered in the Separate Management are to apply the community provisions in the field of applicable legislation, the evaluations must be carried out, respecting the above classifications, according to the time period in which the work activity takes place. .
3. The uniqueness of the applicable legislation, the exercise of an employed and self-employed activity in two or more Member States: Regulation (EEC) n. 1408/71 and Regulation (CE) n. 883/2004
In the previous regulatory regime, based on Article 14-quater, letter a), of Regulation (EEC) no. 1408/71, in the event of the simultaneous exercise of a subordinate and self-employed activity in the territory of several Member States, the person was subject to the legislation of the State in which he carried out his work as a subordinate, as if he exercised all his work in territory of that State.
However, in the cases listed exhaustively in Annex VII of the aforementioned Regulation, pursuant to Article 14-quater, letter b), the simultaneous submission of the worker to the legislation of two States was permitted.
The new Community legislation, on the other hand, does not contain rules that explicitly derogate from the general principle of the uniqueness of the applicable legislation. Article 13, paragraph 3, of Regulation (EC) no. 883/2004 provides that in the case of work described above the worker is subject only to the legislation of the State where the employment is exercised.
It is possible to derogate from the regulatory provision referred to in the aforementioned Article 13 only by entering into an exempted Agreement, pursuant to Article 16 of Regulation (EC) no. 883/2004, which allows – with the consent of all the competent authorities of the States concerned – the simultaneous application of the legislation of two States.
In this case the contribution to be paid to the Separate Account is calculated on the basis of the rate set for persons enrolled in another pension scheme, as provided for in paragraph 4 of circular no. 88/2008.
Temporary time law
As specified in paragraph 26 of circular no. 83/2010, based on the transitional provisions contained in article 87, paragraph 8, of the Regulation (EC) no. 883/2004, in all cases in which the legislation to be applied pursuant to Regulation (EEC) no. 1408/71, the new regulation has no effect.
Therefore, if all the conditions that have determined the legislation to be applied according to the previous rules remain unchanged, the decision already taken with regard to the applicable legislation will not change and such legislation may be maintained for a maximum period of ten years (30 April 2020).
For what has been specified above, with reference to the situation of workers registered or registered in the Separate Management, who carry out an independent activity and a subordinate activity in two or more States, the following specific cases can be verified, due to the hypotheses envisaged by the aforementioned Article 14-quater, letter b) of Regulation (EEC) no. 1408/71.
1) Citizens of third countries in relations with the United Kingdom
As specified in circular no. 51/2011, the United Kingdom did not take part in the adoption of Regulation (EU) no. 1231/2010, which extended, with effect from 1 January 2011, the application of Regulations (CE) no. 883/2004 and n. 987/2009 to third-country nationals legally residing in the territory of the member states.
Therefore, in relations with the United Kingdom, the provisions contained in Regulations (EEC) no. 1408/71 and n. 574/72.
2) Situations to which the aforementioned transitory provision of the Article 87, paragraph 8, of the Regulation (EC) no. 883/2004
In both cases, if an activity is carried out in Italy that entails entry to the Separate Account, the contribution to be paid to such Management must be calculated on the basis of the rate set for persons enrolled in another pension scheme.
5. Situations for the exercise of activities in several States that are relevant for the purpose of determining the obligation to register for the separate management, pursuant to Regulation (EC) no. 883/2004
With effect from 1 May 2010, the date of entry into force of the new community regulations pursuant to Regulation (EC) no. 883/2004, as specified in the introduction, the worker who carries out activities in several States must be subject to the legislation of a single Member State.
A) In cases where, in application of the Community rules on applicable legislation (Article 13 of Regulation (EC) No. 883/2004 and Article 16 of Regulation (EC) No. 987/2009), the worker must being subject to Italian legislation (this situation is certified with the portable document A1), for the exercise of activities that entail the registration to the separate management, the following specific cases can be verified.
1) Worker who carries out a subordinate activity in Italy, for which he is insured in Italy, and who simultaneously carries out another activity in one or more Member States which is considered as an independent activity in the foreign pension scheme. In this case, if the activity carried out abroad is part of the activities that in Italy entails the registration to the separate management (for example, the director of companies abroad), the worker is obliged to register for such management. The registration to the Separate Management must be carried out directly by the worker using the telematic channel. On the other hand, the contributory obligation falls to the client company, which must proceed as follows:
request the tax code from the Revenue Agency for social security purposes only;
make the payment of the contribution, via electronic F24, by the 16th of the month following the month in which the payment was actually paid;
send the Uniemens flow, related to the worker’s data, by the end of the month in which the payment of the contribution has occurred.
2) Worker who in Italy exercises both a subordinate activity and an independent activity and at the same time carries out an independent activity in one or more Member States. This is the case, for example, of the frequent occurrence of those in Italy who are registered as employees and simultaneously performs an activity as an administrator both in Italy, and for the exercise of which is registered in the separate management, and in other Member States. In this case, the contribution for the business of an overseas director will be due to the separate management. With regards to the obligations, both of the worker and of the client, reference is made to what has been specified in the previous point.
3) Worker who in Italy exercises both a subordinate activity and an independent activity and at the same time exercises the activity of director in a Member State. In the case in which the activity of the director abroad is considered, from the point of view of social security, a subordinate activity, the worker must in any case be insured in Italy, as also in Italy he carries out a subordinate employment activity. Also in these cases the contributory obligations must be referred to the separate management and follow the criteria already listed in point 1.
4) Worker who in Italy exercises both a subordinate activity and a professional activity, for which he is enrolled in the separate management, and at the same time he carries out a professional activity in a Member State. The worker must in any case be insured in Italy, as in Italy he also carries out the employment activity. In such cases, the subject already registered for the separate management must make the income deriving from the professional activity carried out abroad subject to the social security contribution.
5) Worker who pursues a subordinate activity in Italy and at the same time a professional activity in a Member State. The worker must in any case be insured in Italy, as in Italy he carries out the employment activity. He must enroll in the Separate Management as a freelancer and calculate the contributions due to the same management on the income produced by the professional activity abroad.
B) With reference to the cases in which, in application of the Community rules on applicable legislation (Article 13 of Regulation (EC) No. 883/2004 and Article 16 of Regulation (EC) No. 987/2009), the worker must be subject to the legislation of another State (this situation is certified with the portable document A1), even if an activity is carried out that in Italy entails registration to the Separate Management, the worker must be subjected only to the legislation of the State abroad. Therefore there is no obligation to pay contributions in Italy.
The following cases could occur:
1) an employed person in a Member State who carries out a freelance activity at the same time as a member of the separate administration in Italy. In this case the worker must be subject only to the legislation of the foreign State in which the subordinate activity is exercised. In the case in which contributions have already been paid to the separate administration, the instructions indicated in paragraph 20 of circular no. 83/2010, on the management of the financial situation in the case of contributions received on a provisional basis (Article 73 (2) of Regulation (EC) No. 987/2009);
2) an employed person in a Member State that acts as an administrator in Italy. In this case the worker must be subjected to foreign legislation. Therefore, if a Uniemens complaint has been filed and the contribution to the Separate Account is paid, the company must not make any changes to the complaints sent and the contribution must be
