How to navigate Immigration, Tax, and Social Security Aspects when assign EU and Non-EU Workers to Italy

The assignment of foreign workers to Italy is a complex process that requires accurate planning and compliance with immigration, tax, and social security regulations. Understanding and adhering to these regulations is crucial when posting workers to Italy. Compliance with the law is essential to avoid legal consequences.

Assignment of EU and Swiss citizens to Italy

When foreign undertakings:

  1. post workers to a Member State's territory under their control.
  2. post workers to an establishment owned by their group in a Member State.
  3. act as a temporary employment agency, supplying workers to a user undertaking in a Member State,

they fall under the legislation governing the posting of workers to Italy. Legislative Decree No. 136/2016 implement the Directive 2014/67/EU. The key Requirements for Posting Workers to Italy are:

  1. prior notification obligation: Foreign employers must notify the Italian Ministry of Labour by midnight the day before the assignment begins. The notification must be submitted online via "UNI_DISTACCO_UE" before the posting starts, including specific information about the posting;
  2. liaison person(s) designation: foreign companies must designate a liaison officer in Italy for official document exchange and a representative for collective negotiations;
  3. document safekeeping: all relevant assignment documentation (A1, employment contract, payslips, etc.) must be retained for the entire secondment period and up to two years afterwards. These documents must be translated into Italian and provided to Italian authorities upon request.

EU Directive 2018/957, transposed with Legislative Decree No. 122 of September 15th, 2020, extends guarantees on working conditions for posted workers, ensuring they receive terms and conditions set by local laws or collective bargaining if more favourable. This includes matters like work hours, leave, remuneration (“equal pay for equal work”), and health and safety. As introduced by Directive 957/2018, for postings exceeding 12 months (or 18 months with a reasoned request), all local employment conditions apply.

Certain exemptions from the notification obligation may apply in the following cases:

  • certain assembly or installation work, essential for start-up and performed by skilled workers, is exempt.
  • posting workers for conferences, meetings, events, etc., is not considered a posting under this framework.
  • traineeships under international programs follow Decree 136/2016 if paid.

Non-compliance with notification obligations, liaison officer, or representative obligations can result in fines ranging from €180 to €7,200. Failure to retain documents may result in fines from €600 to €3,600 per worker. Violating statutory posting rules can lead to fines of €50 per worker per day worked, with a minimum of €5,000 and a maximum of €50,000. Fines cannot exceed € 180.000,00.

Assignment of non-EU-workers

In the globalised business landscape, companies often seek to leverage international talent by seconding employees from outside the European Union (EU) to Italy. While this can bring valuable expertise and diversity to company's team, it is crucial for HR managers to be well-versed in the intricacies of immigration, taxation, and social security regulations when managing non-EU worker assignments to Italy.

Immigration Considerations

Before initiating an assignment to Italy, understanding Italy's immigration requirements is a matter of great importance. Non-EU workers must typically obtain a work visa or residence permit to legally work in Italy. Key aspects to consider include:

  1. visa categories: Italy offers various types of visas, including work visas. Choosing the right category depends on the purpose and duration of the detachment and on the type of assignee: Executive/Manager, specialised employee, trainee;
  2. application process: HR managers need to be aware of the documents they need to gather and prepare for the visa application process. This can involve a lengthy and complex phase of collecting, translating, and verifying documents (employment contract, secondment letter, educational certificates, company financial statements, housing eligibility, etc.). It is therefore crucial to start this process well in advance;
  3. renewals and extensions: companies must be aware of visa expiration dates and the processes involved in renewing or extending them. Failure to do so can lead to complications for the employee.

There are several categories of workers are excluded from the available quota (which is fixed annually by means of a Decree – the so-called “decreto-flussi”) and are not subject to a fixed limit, such as ICT assignments, highly qualified workers, executives, or managerial employees assigned to the Italian branch of a foreign legal entity, etc.

For what concern intra-group mobility, as of today, Italian Immigration law provides two different kinds of intra-company transfer work permits for workers from non- EU countries assigned to work temporarily in Italy. Under these options, workers do not become local employees but maintain an employment relationship with the home country employer:

1) Intra-company work permit is for highly specialised staff/managers/directors/ on assignment (Art. 27 c. 1 lett. (a) of Italian Immigration law); this procedure allows the foreign employee in an executive, senior managerial, or specialised knowledge role to be temporarily assigned - up to 5 years - to a subsidiary, branch, or an affiliate in Italy (sending and host companies should be part of the same business group);

2) Intra-company transfer work permit (ICT) for managers, specialists, trainees temporary seconded from a company established outside the EU where the worker is employed since at least 3 months prior to the transfer to a host entity established in Italy either directly owned by the non-EU sending company or by another company of the same group (Art. 27 quinquies and Art. 27 sexies of Italian Immigration law). The maximum duration is 3 years for managers and specialists, and 1 year for trainees. It also applies to holders of an ICT Permit issued by another EU State, being transferred temporarily to a company of the same group established in Italy. These are not required to apply for a visa to enter Italy if the assignment does not exceed 90 days within 180 days.

Even though there may be slight variations from one category to the other, the basic procedure for obtaining a work permit is as follows:

  1. work permit (Nulla Osta) online application, filed by the Italian host company;
  2. work visa (Visto) application, filed by the worker at the Italian Consulate abroad (worker's place of residence);
  3. entry into Italy, sign the contract of stay (contratto di soggiorno) and/or file the application for the residence permit (permesso di soggiorno).
  4. obtain the residence permit (Permesso di soggiorno).

Taxation Matters

Navigating the Italian tax system is crucial for both the employer and the detached employee. Irrespective of the nationality/Home Country, the following must be considered:

  1. tax residency: determine the tax residency status of the employee and related taxation principle applicable (resident employees are taxed on their worldwide income, while non-residents are taxed only on Italian-sourced income);
  2. double taxation agreements: check if Italy has a double taxation agreement with the employee's home country in order to prevent/reduce double taxation and clarify which country has taxing rights;
  3. tax compliance: ensure compliance with Italian tax obligations, including annual tax return. Proper record-keeping (e.g., travel calendar) is vital.
  4. Expatriate concession: individuals who fulfil the conditions may be granted a tax deduction of 70% of employment income, rising to 90% in southern regions. The concession applies in the year the individual becomes tax resident of Italy and the following four years.

Social Security Obligations

To ensure full compliance with Italian social security obligations for both the employee and the company, different rules apply to EU and non-EU workers.

Employees posted from EU Countries and non-EU employees posted from non-EU Countries bound to Italy by a Bilateral Social Security agreement, may keep their home country social security schemes, according to EU Regulations (e.g. No. 883/2004) and each agreement.

Employer posting employees from Countries with no (or partial) agreement with Italy must register their employees with the Italian National Social Security Institute (INPS) and pay Italian (minor) social security contributions through an Italian Social Security Agent. Social security benefits eligibility can vary according to each bilateral agreement.

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In conclusion, seconding foreign (Eu and Non-EU) workers to Italy is a complex process. HR managers play a critical role in ensuring a smooth and successful international experience for both the employees and the company. By staying informed, maintaining accurate records, and seeking professional guidance, when necessary, you can navigate these aspects with confidence and facilitate the seamless integration of international talent into your workforce.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.