Clarifications on the application of conventional salaries for employees who work in smart working.
Further to Reply No. 345 of 17.05.2021, the Italian Revenue Agency provided clarifications on the application of conventional salaries for employees who work in smart working.
The Italian Revenue Agency has clarified that Conventional salaries (ex Article 51, paragraph 8-bis TUIR) cannot be applied to workers posted abroad who, as a result of the global pandemic, have carried out and carry out their work activity in Italy in smart working mode. Instead, the standard method of determining the employment income provided for in paragraphs 1 to 8 of Article 51 of the TUIR will apply.
Applications of the Tax System
The Italian Agency also specified that the OECD guidelines and provisions within the Agreements between Italy and other States cannot be used to interpret Article 51, paragraph 8-bis of TUIR. The tax system provided for in paragraph 8-bis shall apply if:
- The work activity is carried out abroad with character of permanence or sufficient stability;
- The work activity must be carried out entirely abroad;
- The worker must stay abroad for more than 183 days. It should be noted that holidays, weekly rest periods and other non-working days contribute to the determination of the remuneration of the State in which the work activity is predominantly carried out.
In conclusion, if the requirement of physical presence is not met, the Conventional salary will have to be re-proportioned and the employee income re-determined.
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