From January 1, 2025, new provisions regarding the application of VAT to staff loans and postings come into effect, marking a significant change from the current legislation. The amendments, introduced by Decree-Law 131/2024 (commonly referred to as the “EU Compliance Decree”) and later converted into Law No. 166 of November 14, 2024, end the automatic VAT exemption for fees equal to mere reimbursement of staff costs.
The reform repeals Article 8, paragraph 35, of Law No. 67/1988, which deemed posting and staff loans with fees limited to cost reimbursement irrelevant for VAT purposes. Under the new legislation, such transactions are now subject to VAT, regardless of the agreed fee, and may be classified as services pursuant to Article 3 of Presidential Decree 633/1972.
The legislative change was necessary to address an infringement procedure initiated by the European Commission against Italy for failing to comply with EU VAT rules. In its March 11, 2020 ruling (Case C-94/19), the Court of Justice of the European Union determined that posting of workers constitutes a supply of services subject to VAT, regardless of the fee amount, if there is a legal relationship between the parties involving an exchange of mutual services.
Transitional Regime
The provisions apply to contracts signed or renewed from January 1, 2025. For pre-existing contracts, a transitional regime remains in place, protecting taxpayers’ practices until December 31, 2024, provided that no final tax assessments have been issued.
Article 16-ter of Decree-Law 131/2024 states that until December 31, 2024, taxpayers may continue to apply the previous regulations. Specifically:
- VAT can still be excluded for secondments where the fee equals mere reimbursement of staff costs.
- If fees exceed reimbursement, VAT is applicable only on the margin.
This transitional regime aims to ensure stability for businesses while preparing for the uniform application of the new rules.
Possible Consequences in Workforce Leasing
The introduced changes may also have a significant impact on workforce leasing.
Currently, VAT is applied only on the supplier’s margin (Article 26-bis of Law No. 196/1997). However, extending the principle established by the Court of Justice of the European Union could lead to a review of the rules for these contracts, imposing VAT on the entire fee.
Conclusions
Aligning Italian legislation with European provisions aims to ensure greater fiscal uniformity within the EU but introduces additional compliance requirements for businesses. Companies which post their workers abroad will need to implement appropriate procedures to manage the new VAT regime, particularly concerning invoicing obligations, determining the taxable base, and exercising the right to deduct VAT paid by the company using the employees.