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  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 12/12/2013

Italy – Removal of joint VAT payment responsibility for contractors 

GITB Italy
With article no. 50 of law Decree no. 69/2013 the Italian legislator has recently amended regulations that provided that contractors would be ordinarily jointly liable for the payment of VAT on work performed by subcontractors. Prior to this change, Italian law provided that contractors could be jointly liable for a subcontractor’s obligation to pay VAT on subcontracted work as well as their obligations to pay withholding taxes on employees’ compensations. The liability cap was equal to the consideration payable for service provided.

Previously, the law also allowed principals and contractors to refrain from making payment to their counterparts where the latter failed to produce special letters and certifications attesting that VAT and withholding taxes had correctly been accounted for and paid. A penalty of 5,000 to 200,000 euros (EUR) could be imposed on principals where payments were made without such documentation being provided in advance.


This regime greatly impacted the contract work industry; it especially resulted in a generalized block of payments from principals and contractors to contractors and subcontractors respectively, thus worsening the already difficult financial positions of small construction businesses.


To force the legislator to remove such burdens and obstacles for smoother execution of payments, the National Associations of Italian Manufacturing Corporations (Confindustria) filed a complaint with the EU Commission. The Confindustria claimed that it is against EU principles for a law to give taxpayers control over whether other taxpayers comply with their tax obligations, when responsibility should be on the tax administration only.


With this in mind, and to avoid an infraction procedure against Italy, the government removed the joint liability with respect to VAT, still leaving the responsibility in place for withholding tax obligations.

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Global Indirect Tax Brief - December 2013

GITB - December 2013
Global indirect tax brief brief brings together articles on international VAT developments, written by KPMG member firms' VAT professionals worldwide and will be of interest to anyone managing VAT in an international business environment.