Taxation of the early LPP performance due to restructuring

Table of Contents

The answer to the Tax ruling n. 702 published by the Italian Revenue Agency provided clarifications on the taxation of LPP revenues by analyzing the case of the early performance for the house renovation and credited to the Italian current account of the company who carries out the renovations.

The opportunity to collect in advance part of the compensation paid by the so-called Second Swiss Pillar (LPP or Occupational Pensions Act) is given to the individual who is resident in Italy and works in Switzerland as a frontier worker in order to incur renovation costs that have to be carried out on the main abode in Italy.

In the case of LPP services collected through an Italian resident intermediary and directly credited to the Italian bank account of the company carrying out the restructuring works, who is not the person who can entrust the bank with the payment of the substitute tax, the taxpayer who is the recipient of the social security benefit will be able to pay the tax due in the tax return, and subjecting it to the substitute tax at the same rate of 5 per cent that it would have discounted if the withholding tax would have been applied by the financial intermediary.

In fact, in the case described by the Revenue Agency, the individual can indicate the LPP service collected in 2020 in section V of the RM form of the Modello Redditi PF 2021, reporting the residual causal “I”, the foreign State code “071” (corresponding to Switzerland) and paying the amount with the tribute code “1242”.

Finally, regarding the determination of the tax base, the withholding tax must be applied by the intermediary on the gross value of the service at the time of payment in Italy.

Regulatory Framework

Reply n. 702/2021

Reference (Italian only)

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