{"id":27969,"date":"2024-12-03T15:28:43","date_gmt":"2024-12-03T14:28:43","guid":{"rendered":"https:\/\/it.andersen.com\/?p=27969"},"modified":"2025-03-18T15:37:10","modified_gmt":"2025-03-18T14:37:10","slug":"vat-on-employee-posting-what-changes-from-january-1st-2025","status":"publish","type":"post","link":"https:\/\/it.andersen.com\/en\/vat-on-employee-posting-what-changes-from-january-1st-2025\/","title":{"rendered":"VAT on employee posting: what changes from January 1st, 2025"},"content":{"rendered":"

From January 1st<\/sup>, 2025<\/strong>, a significant amendment will take effect regarding VAT taxation on the posting of workers<\/strong>, to date considered outside the scope of this tax. Despite the fact this matter has been subject to several debates and interpretations. However, with the introduction of the \u201cSalva infrazioni\u201d Decree-Law, Italy aligns with the EU Court of Justice\u2019 decision in the San Domenico Vetraria case (Case C94-19 of March 11th<\/sup>, 2020). The Decree repeals the rule that excluded the pure cost charge for the posting of workers from VAT applicability.<\/p>\n

With the start of the new year, the posting of workers between companies will be treated as a supply of services for VAT purposes, with the consequent application of the tax. This represents a significant change that implies an adjustment of business practices, from a tax, labour law and administrative perspective.<\/p>\n

Therefore, companies will need to review their internal procedures to ensure compliance with the new provisions and assess the impact of this change on costs, invoicing process and human resources management.<\/p>\n

 <\/p>\n

What is posting of workers<\/h2>\n

Posting of workers<\/strong> occurs when a company (posting company<\/strong>) temporarily sends one or more of its employees (posted worker) to perform specific activities at another company (host company<\/strong>) to serve its own business interests. <\/strong>Although this practice has advantages for both companies, it is subject to precise and complex legislation, especially regarding labour, social security and tax aspects.<\/p>\n

Posting of workers characteristics<\/strong><\/p>\n

    \n
  • Maintenance of the employment relationship<\/strong>: the posted employees remain employed by the posting company, which continues to manage their salary, social security contributions and legal obligations.<\/li>\n
  • Purpose of posting<\/strong>: the posting company sends its employees to meet specific temporary needs at the host company.<\/li>\n
  • Cooperation between the companies<\/strong>: the posting company and the host one must cooperate on important issues such as safety at work and possible disciplinary matters.<\/li>\n<\/ul>\n

    Differences between posting and staff leasing<\/h3>\n

    It is essential to distinguish between posting of workers and staff leasing<\/strong>, an activity carried out by specialised agencies. Unlike posting, staff leasing is a commercial service that is provided for a fee.<\/p>\n

    Posting regulations<\/h3>\n

    Posting legislation aims to regulate this practice, avoiding abuses and protecting workers’ rights. In particular, posting has long been considered an exception to the general rule of staff leasing, emphasising its temporary and non-commercial nature.<\/p>\n

    Fiscal aspects of posting<\/h3>\n

    The tax discipline of posting is complex and has evolved over time. In general, the host company can only reimburse the posting one for the costs of the posted worker but may not pay compensation for the service rendered.<\/p>\n

     <\/p>\n

    New VAT rules on employee posting: what changes from 2025<\/h2>\n

    Posting of employees and VAT: an overview of what’s new<\/h3>\n

    Until recently, Italian VAT<\/strong> legislation on the posting of employees<\/strong> presented different interpretations, generating uncertainty among businesses.<\/p>\n

    Article 8(35) of Law 67\/1988 stated that the reimbursement of costs<\/strong> incurred for the posting of an employee was considered outside the scope of VAT. This interpretation was based on the assumption that posting was a mere \u2018workforce transfer\u201d without any supply of services.<\/p>\n

    However, if the reimbursement to the posting company exceeded or fell short of the posted worker’s costs, the entire amount was deemed subject to VAT.<\/p>\n

    The European turning point and the new provisions<\/h3>\n

    The EU Court of Justice<\/strong> clarified that the posting of workers always constitutes a supply of services<\/strong> subject to VAT, regardless of the amount of the reimbursement.<\/p>\n

    What changes in Italy and why it matters<\/h3>\n

    Following the ruling of the EU Court of Justice and the subsequent rulings of the Court of Cassation, Italian legislation has been brought into line with EU’s position of the taxability for VAT purposes of posting of workers: as of January, 1st<\/sup> 2025<\/strong>, even posting of workers carried out purely on a cost basis are subject to VAT.<\/p>\n

    This change in legislation has important implications for businesses that make or receive posting of workers by providing greater clarity and removing previous uncertainties in interpretation.<\/p>\n

    Why this change?<\/strong><\/p>\n

      \n
    • To increase transparency<\/strong>: by making all posting subject to VAT, the discrepancies included in previous interpretations are eliminated and greater tax fairness is ensured.<\/li>\n
    • To align Italian legislation with European legislation<\/strong>: the new rule is in line with EU VAT directives.<\/li>\n
    • To prevent tax evasion<\/strong>: the application of VAT on all posting operations makes tax avoidance more difficult.<\/li>\n<\/ul>\n

      The consequences for businesses<\/strong><\/p>\n

        \n
      • Increased costs<\/strong>: businesses will have to charge VAT at the ordinary rate of 22%<\/strong> even in cases of purely cost-based posting.<\/li>\n
      • Increased compliance<\/strong>: invoices will have to be issued and transactions registered for VAT purposes.<\/li>\n
      • Need to update information systems<\/strong>: management software will have to be adapted to handle the new legislation.<\/li>\n<\/ul>\n

         <\/p>\n

        Possible implications for companies<\/h2>\n

        In addition to what has already been said, going into greater detail, the introduction of these new rules will have several practical implications for companies:<\/p>\n

          \n
        1. VAT invoicing obligation<\/strong>: posting companies will be required to issue an invoice for the posting of workers, applying the related VAT rate. This implies an adjustment of accounting and tax systems, which also has an impact on administrative management. It should be noted that in the case of foreign counterparts<\/strong> posting workers, the reverse charge<\/em> must be applied. B2B services provided to companies not established in Italy would remain outside the scope of the tax, as the service is considered a transnational one. VAT is due in the country where the principal is established. Since the territorial requirement is not met, the posting company will issue an invoice under 7-ter of Presidential Decree 633\/72<\/strong> for \u201cgeneric\u201d services, which also include postings of workers (with an exemption for B2C transactions only pursuant to Art. 7-septies letter e) of Presidential Decree 633\/72). VAT will therefore be paid by the receiving company through the reverse charge mechanism. If, on the other hand, the posting company is resident in Italy and the service is provided by the non-resident company, the purchase invoice received will have to be supplemented and recorded through the reverse charge mechanism. In this case, the obligations relating to the settlement of the tax must be fulfilled by the ordering party as provided for in Art. 17, par. 2 of Presidential Decree 633\/72.<\/li>\n
        2. Right of deduction<\/strong>: in the hands of the host taxable company. The effects, however, may vary depending on the nature of the parties involved in the transaction. In the case of industrial groups where the poster worker is subject to full pro-rata deductibility, there should be no significant issue with receiving a supply subject to VAT, which will be fully deductible. On the contrary, in the case of financial groups (banks, insurance companies, postal and medical services) where the right to deduct VAT is limited, this will lead to an increase in the cost resulting from the non-deductibility of the tax. A similar situation will arise when an Italian host company receives workers from a non-resident posting company, as a pro-rata deductibility also applies in cases of double VAT registration.<\/li>\n
        3. Human resources management<\/strong>: companies should continue to pay attention to human resources management aspects, ensuring that the conditions of a lawful posting are clearly defined in order to avoid possible claims related to the nature of the posting and the possible configuration of unlawful staff leasing. However, this amendment does not affect the quantification of the reimbursement agreed between the posting company and the host company, but the tax treatment of the reimbursement itself. The posting companies will still be able to request a reimbursement (of the wage, social contribution and insurance costs incurred) from the host companies, the amount of which does not, however, exceed the effective cost incurred by the posting company. Otherwise, the topic would be relevant under criminal law, as an unlawful staff leasing (regardless of the tax treatment of the reimbursement applied to the posting).<\/li>\n
        4. Possible impact on costs<\/strong>: since posting of workers becomes a transaction subject to VAT, companies, both the posting and the host ones, should consider how this may affect their costs.<\/li>\n<\/ol>\n

           <\/p>\n

          Transfer pricing<\/h2>\n

          It is essential to ensure that cross-border posting of workers within a multinational group complies with transfer pricing regulations at both domestic and international levels. Such posting, involving the transfer of workers between companies within the same group, are generally classified as a provision of services. As such, they must align with OECD principles to validate their legitimacy and support the proper recharging of associated costs.<\/p>\n

          Key requirements include the principle of actual benefit, which stipulates that the recharged service must provide a tangible advantage, enhancing the economic and commercial position of the receiving company, as well as the avoidance of service duplication between the parent company and its subsidiary. When an employee is posted from one entity to another within the same group and operating in a different tax jurisdiction, it is essential to ensure that the costs charged between the two entities are accurately allocated and valued in compliance with the arm’s length principle. In particular, intra-group recharges for costs related to posted workers must reflect the true value of the service provided and the specific functions carried out at the host company.<\/p>\n

          In this context, any margin applied to recharged costs should be determined in line with internationally recognized transfer pricing methodologies. For service provisions, the “cost-plus markup” method is generally considered the most suitable. This approach involves adding an appropriate markup to the costs incurred in delivering the service. However, the application of a markup requires careful evaluation on a case-by-case basis and must be aligned with labor regulations, considering the functions performed and the potential benefits accrued by the posting company. If the necessary conditions are not met, the posting should be limited to a straightforward recharge of the labor costs incurred by the posting entity.<\/p>\n

          Furthermore, the cross-border posting of workers may risk qualifying for a permanent establishment for the posting company in the host country. If the posted worker undertakes activities such as negotiating and finalizing contracts on behalf of the posting company, local tax authorities might reclassify the posting as a fixed place of business, thereby meeting the criteria for a permanent establishment. This would obligate the posting company to declare and pay taxes on a portion of its income in the host country.<\/p>\n

          Finally, with regard to value-added tax (VAT), despite the changes introduced by the aforementioned amendment, transfer pricing adjustments<\/strong> related to costs charged for posted workers remain outside the scope of VAT<\/strong>. Financial adjustments made to align with a specific transfer pricing policy are not considered actual remuneration for independent service provisions. Consequently, as these adjustments are not directly tied to the original provision of services, they do not qualify as VAT-relevant transactions.<\/p>\n

          In conclusion, it is crucial to perform a comprehensive analysis of the tasks assigned to posted workers to mitigate the risk of triggering the creation of a permanent establishment and to ensure full compliance with international tax regulations.<\/p>\n

          To learn more about the subject, please read and download the document below and contact our professionals for any clarification.<\/p>\n","protected":false},"excerpt":{"rendered":"

          From January 1st, 2025, a significant amendment will take effect regarding VAT taxation on the posting of workers, to date considered outside the scope of this tax. Despite the fact this matter has been subject to several debates and interpretations. However, with the introduction of the \u201cSalva infrazioni\u201d Decree-Law, Italy aligns with the EU Court […]<\/p>\n","protected":false},"author":125,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[50],"tags":[],"_links":{"self":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts\/27969"}],"collection":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/users\/125"}],"replies":[{"embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/comments?post=27969"}],"version-history":[{"count":1,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts\/27969\/revisions"}],"predecessor-version":[{"id":27970,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/posts\/27969\/revisions\/27970"}],"wp:attachment":[{"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/media?parent=27969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/categories?post=27969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/it.andersen.com\/en\/wp-json\/wp\/v2\/tags?post=27969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}