Italy

To process payroll in Italy, a foreign company needs to be registered with the following Italian authorities, before hiring employees and starting any activity:

• INPS (Social Security);
• INAIL (Labour Insurance);
• Sistema Regionale COB (Labour Office).

These obligations are due with a permanent establishment or a simple social security representative office.

In the event of a permanent establishment (PE), there will be additional potential tax implications for the company (corporate taxation) and the employees (the company will be obliged to perform the role of the tax-withholding agent). If the company has a stable presence in Italy the nature of the activity conducted as well as the level of autonomy and responsibility of the people involved in the activity may trigger some tax implications for the company.

A preliminary tax analysis is suggested to confirm if there is an Italian Permanent Establishment (PE) in Italy in order to set the right structure for carrying out the business in Italy. In fact, if from the analysis it arises that your Company is not putting in place any PE, a suitable solution could be the domiciliation of a Social Security Representative (SSR) in Italy in order to comply relevant domestic duties via domestic payroll. The Legal Representative of the mother Company, as well as the company needs to be fiscally domiciled in Italy in order to receive a Company Identification Number (so called “codice fiscale”).

The company will need to decide if they wish to set-up a PE or a legal entity and this may be based on the type of involvement and cost structure required Italy. This can be a branch (with an Italian VAT code) or a limited liability company (SRL or SPA).

The main types of entity in Italy are:

Partnerships (società di persone):

Assets and Liabilities are only partially segregated from the assets and liabilities of their members. There are 3 types of partnerships available; Simple Partnership (Società Semplice), General Partnership (Società in Nome Collettivo), or Limited Partnership (Società In Accomandita Semplice).

Companies (società di capitali):

Assets and liabilities are completely segregated. There are 3 types of companies: Stock Companies (società per azioni or SpA); limited liability companies (società a responsabilità limitata or Srl) and partnerships limited by shares (società in accomandita per azioni).

A company must be registered to:

The Tax Agency (Agenzia delle Entrate):

An Italian company tax code is needed; the legal representative of the Italian entity should also have a tax code. Registration could take up to 2 weeks.

The Social Security Body (Istituto Nazionale Previdenza Sociale):

Require the same data for registration as the Tax Agency, plus core business information. This should be completed by the 16th day of the following month in which the first employee has been hired in order to pay the social security contribution.

Insurance Against Accidents at Work (mandatory) (Istituto Nazionale per l'Assicurazione contro gli Infortuni sul Lavoro):

The same data as above is required, as well as the line of work (to define risks). This should be completed within the first working day of the first employee.

The Employment Agency (Centro per l’impiego):

Requires new starters and leavers information. This should be completed the day before the first working day the first employee is hired.

The National Collective Bargaining Agreement (NCLA) is the regulatory source through which employee representative organisations and employer associations (or an individual employer) agree on the rules governing the employment relationship.

The NCLA defines many employment rules and regulations in Italy in addition to the Italian labour laws. Different industries are governed by different NCA’s depending on their scope of business; e.g. the NCLA is different for food, chemical, engineering sectors, etc. The NCA defines salaries for different levels of employment.

NCLA is generally contain 2 parts:

• the normative part, with the pay scales and the basic rules of the employment relationship (hours, leave, overtime, holidays, etc.);
• the mandatory part, with the rules that will govern future relations between the (collective) counterparts to the contract, i.e. the trade unions and employers' associations that are signatories to it.

Normally NCLAs regulate both the regulatory aspects of the relationship, as well as those of an economic nature. There is also almost always a part intended to regulate certain aspects of the trade union relationship between signatory organisations and employers' associations, as well as the company relationship between the employer and company trade union representatives.

The essential purposes of the collective agreement are:

• To determine the content regulating labour relations in the sector to which it belongs (e.g., transport, engineering, commerce, chemicals, etc.);
• To regulate relations between the signatories to the agreement.
  
  

Collective bargaining can take place at different levels

• Inter-confederal, whose task is to define general rules affecting all employees regardless of the production sector to which they belong;
• National category (the already mentioned CCNL);
• Territorial interconfederal and sectoral;
• Company category.

The NCLA, depending on the industry, also stipulates the number of extra months that an employee must be paid and the payment date, i.e. The 13th month salary is paid in December (within Christmas) and the 14th month is usually paid in June.

The working week in Italy is usually Monday to Friday and weekly working hours are normally stated by the NCLA. Obviously, this depends from job to job, but it is always regulated by the relevant collective labour agreement.

All companies must have:

• A tax code
• An employment agency access code
• An INAIL code
• An INPS code

The Tax Year usually runs from 1st January to 31st December. Companies may however choose a different fiscal year.

In Italy, taxable income is subject to Personal Income Tax (IRPEF). Furthermore, a Regional Tax and a Municipal Tax are applicable, which vary according to the Regional and Municipal authorities.

Further information is available on the Government Websites:

• INPS - Social Security Authority
• INAIL - Social Security Authority
• Italy Tax Department

Income Tax

The Company Identification Number (“codice fiscale”) is required for any operation involving local authorities.

For companies without an In-Country presence: The in-country payroll office may obtain the company tax code number on behalf of the company by obtaining Italian Personal Fiscal Code and the company code. It normally takes 15 business days to process and the legal representative will be required to sign the necessary documents.

Any delays in the process will affect the implementation for a new employee as no employees can commence employment before this process is successfully completed.

A tax advisor is required to support the clients in setting up an Italian Branch, a Capital Company or a Subsidiary. They must obtain a VAT and Fiscal Code by requesting it from the local VAT Office.

Income Tax withheld to the employee must be paid to the Tax Office (Agenzia Entrate) before the 16th of the following month.

The Italian Tax Card
The Budget Law 2022 (Law No. 234/21) changed the IRPEF tax rates.

Currently, the current taxes rates are:

All the employees pay Regional and Municipal Tax according to their effective residence. An additional 10% for specific cases in the Financial Sectors on Bonuses and Stock Options.

MOD.F24 is the payment order form used by the employer to pay local authorities and is used for:

• Employer and Employee Contributions;
• Work Related Accident Insurance Payments;
• Withheld Taxes for Employees and Company/Employer liabilities for local taxes and other charges.
  
  

The MOD F24 form must be completed, signed for approval and paid within the 16th of each month. The amounts will then be debited from the account. For local authority payments, wire transfers cannot be made from abroad but must be done from an Italian bank account.

For omitted, late or insufficient payment beyond the deadline for submission of the declaration for the year following the year in which the violation was committed, or, if there is no declaration beyond 2 years from the omission or error 5.00% (1/6 of 30%) (Art. 13, c. 1, Legislative Decree 472/97). After ascertainment of the violation with a dispute report (2) Regularisation of errors and omissions, including those affecting the determination or payment of the tax, after ascertainment of the violation with a dispute report 1/5 of the minimum penalty (Art. 13, c. 1, Legislative Decree 472/97):
Occurs, for example, when the employer delays the payment of IRPEF withholdings that he has regularly made on wages paid to employees.

Only for taxes administered by the Internal Revenue Service.

The employer must submit their Annual Declaration by submitting:

• CU form to the tax agency;
• 770 forms to the tax agency.
  
  

Social Security

The Social Security body is named INPS (Istituto Nazionale Previdenza Sociale). A company must register with the Labor Office, the Social Security Institute and the Insurance Institute, all of which are public authorities. The core business of the company will define the “class of activity” to determine the contribution rate.

The Legal Representative of the company is required to sign the relevant documents which are then delivered to the relevant Institutions by the In-Country Payroll at the agreed schedule.

The pre-agreed schedule dates for the process:

Insurance Institute (INAIL):
Registration must be completed no later than the first day of employment.

Social Security Institute Registration:
By the 16th of the month after commencing the employment.

Labor Office Registration:
Must be completed at least 1 day prior to the start date of employment.

Penalties:
In the cases of delay, fines and interest are due to the respective authorities.

Here an example of social security contributions (INPS) (Terziario Confcommercio sector) up to 15 employees for open-ended contracts.

Social Security Contributions (INPS) for blue and white-collar workers (commerce sector)

Social Security Contributions (INPS) for Dirigente (commerce sector)

Only blue and white-collar workers have to pay the FIS in the Confcommercio sector. Always refer to your payroll specialist for more information.

All the employees registered to Social Security from the year 1996 onwards are limited to the maximum salary of € 113.520,00 for the year 2024. Each year this ceiling may vary according to government decisions. Any further eligible salaries are subject to the minor contributions (employer charge only) depending on their sector of activity.

The MOD.F24 payment order form must include details of all Social Security deduction and payments to the Local Authorities.

Insurance policies:
It is common to grant heath care policies; collective agreements provide mandatory policies for managers or officers and employees. When policies are put in place by an employer it must add an additional social security contribution equal to 10% on the policy itself.

Social Contribution:
Delayed payment cannot be remedied directly by the employer as sanction and interest will be required by the body.

Social contributions also cover the statutory pension contribution. To obtain information regarding an employee's retirement age and how many years of social contributions he or she has paid, one should always refer to social security consultants (CAAFs and patronages), always with the employee's authorization to do so.

INAIL is in charge of company enrolments and providing indemnity to employees that have had accidents during their employment or, companies must inform INAIL about their core business and the main activities of employees to assess the risk, this is to establish the insurance amount to pay for each kind of risk. This may be reviewed based on the accidents.

It is legally acceptable in Italy to provide employees with online payslips.

Reports

By law, payroll reports must be kept for 5 years.

Reporting

Yearly

CU Form
The Certificazione Unica (CU) is the tax document with which tax withholding agents certify employment and assimilated income, but also self-employment income, commissions and miscellaneous income.
Annual Certificates of Salaries for Tax & Social Security (for previous year) should be submitted by 31 March each year to all the employees by the payroll provider and submitted to the agency by 16 March.

Autoliquidazione INAIL
The employer subject to compulsory insurance against accidents at work and occupational diseases and the craftsman without employees pay the premium each year by means of self-assessment.

This procedure allows for the direct determination and payment of the occupational accident and illness premium as well as the special craftsman premium. The other 'special unit premiums' (pupils/students, X-ray and radioactive substances, millers, fishermen, porters, horse transporters and coachmen) are excluded from self-assessment.
With the annual self-assessment of premiums, Inail also collects membership contributions on behalf of the affiliated trade associations.
Annual report of salaries to INAIL (National Institute for Insurance against Industrial Accidents) must be submitted before 16 January of each year via F24 Form by the payroll provider.

Disabled Persons Annual Report as provided for in Law No. 68 of 12 March 1999 (Denuncia Disabili)
The Disabled Persons Annual Report is required to be submitted by 31 January of each year to the labor office for Employers with 15 Employees or more. The Disabled Persons Annual Report must necessarily be filled in electronically by the deadline indicated each year by the Ministry of Labour, under penalty of the sanctions provided for in Article 15 of Law 68/99.
The administrative penalty shall be EUR 702.43, increased by EUR 34.02 for each additional day of delay in complying with the obligations.
If there are no changes affecting the compulsory quota, the prospectus may not be forwarded.
Always consult your payroll specialist or your trusted labour consultant to submit it to the appropriate bodies.

Annual Withholding Tax Return (770 form)
Form 770 is the declaration to be filled in by tax substitutes, i.e. those entities that take the place of the taxpayer in dealing with the tax authorities, withholding taxes on remuneration, wages or pensions and then paying them to the state.
Annual Withholding Tax Return with client’s signatures is required to be submitted before 31 October each year at the Tax office by the payroll provider.

Temporary employees (Lavoratori somministrati): annual communication
Companies which, during the current year, have used temporary agency workers, must submit, by 31 January of the following year, the obligatory annual communication with the data on temporary agency contracts concluded during the current year.
The communication will have to be made to the company trade union representatives (RSA) or to the unitary trade union representation (RSU) or, failing that, to the territorial trade union bodies of the comparatively most representative trade union associations at national level.

The communication at a glance.

The mandatory data required, and which must be entered in the attached form, are:

• The number of employment contracts concluded
• The duration of the contracts
• The number and qualification of employees used
  
  

The reference period is the current year and the communication must not include the name of the employees, but only the numerical data.

The submission may be made by:

• Hand delivery;
• Registered letter with acknowledgement of receipt;
• Certified electronic mail (PEC);
  
  

Ordinarily, it is the temporary employment agencies that are responsible for communicating the data to the company.

Sanction
Please note that a fine of between EUR 250 and EUR 1,250 is provided for in the event of failure to comply or incorrect compliance with the reporting obligation.

Payslip

It is legally acceptable in Italy to provide employees with online payslips.

New Employees

To set up a new employee the following is required:

A completed New Employee contract – written working contract signed by the employer and the employee. During the year 2022, the so-called Transparency Decree was adopted in Italy. The Transparency Decree came into force on 13 August 2022 and applies with regard to 'all employment relationships already established as of 1 August 2022'. With specific reference to employment relationships already established as of 1 August 2022, the regulation provides for the possibility for employees to request in writing from the employer (and the principal) an integration of the required information, a request that must be responded to within the next sixty days, under penalty of sanctions. The Transparency Decree point will explain the new regulations in detail.

On the day before the start date, it is mandatory to send a communication (called COB) to the Labour Office before the start date. In order to do it, the employer must be enrolled with Centro per l’Impiego.

The employee is required to produce a complete list of personal data, including Address, Place of Birth, Fiscal Code, Family Status (Wife\Husband Occupational Status, Age of Children), Date of Employment, and Former Employment Income from the same Year.

Appropriate forms (TFR – Tax Deduction Form, SS CAP form and Privacy form) are given to the employee to collect information.

Failure by the labor office to comply will result in a penalty for each employee. Each labor office by province has its own website where this form must be submitted, which is forwarded to INAIL and INPS by the labor office.

Collective agreements provide for probationary periods, when a new employee is hired, ranging from a few days to several calendar months, during which either party may terminate the employment relationship without notice. These periods are defined according to the levels agreed upon within the collective bargaining agreements.

Leavers

Since March 2016, voluntary redundancy and consensual resolutions have been made by electronic submission. Appropriate forms will be made available on the website of the Ministry of Labour and then automatically sent to the competent territorial directorate of the Labour Authority and the employer. In addition, the online communication of termination to the Labour Office must also be completed within 5 days from the termination.

Previously the employer had to receive the resignation and provide the online communication of termination to the Labour Office within 5 days from the termination.

The procedure and the form of termination of employment by the employee is provided for by the Ministerial Decree of 15 December 2015 in implementation of the provisions of Article 26 of Legislative Decree No. 151/2015, which requires the validation of the resignation by directly accessing the website of the Ministry of Labour and Social Policies at www.cliclavoro.gov.it or through qualified intermediaries.

For regulations on the terms of notice, procedures and duration in the event of withdrawal by the employee or the employer, please refer to the CCNL in force at the time of withdrawal.

The Employees have 7 days from the day of request to withdrawn the notice given.

• CCNL defines additional months' pay, bonuses, private health coverage
• Common allowances: meal vouchers, transportation, training

Expenses

• Reimbursements for work-related travel and meals
• Car use reimbursed per ACI official rates
• Housing support taxed based on rental source and value

• Non-EU citizens need an entry visa and work permit (nulla osta)

Work Permits

• Employer initiates process; includes labor market test and contract
• Permits issued for 1–2 years and renewable
• Residence permit (permesso di soggiorno) also required post-entry

Banking

• Mandatory to make F24 form payments from an in-country bank account.
  

• Banks open Mon–Fri, 8:30–13:00, and one hour in the afternoon.
  

• RiBa (Ricevuta Bancaria) is a common electronic bank draft.
  

• IBAN is required since 2008.

Further Information 

For more information, or assistance with Italy tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview 

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.