New law on fake consultants in Italy: law 92/2012

30 October 2012

Caterina Rucci

Two recent laws now set new and stricter rules, which suggest that any company with consultancy contracts in place in Italy, should perform serious due diligence to make sure they avoid the relevant costs and penalties related to a re-classification into subordinate employment contracts. We can also provide our clients with properly drafted project consultancy contracts and check the existing ones.

Below is a short description of the changes introduced.

New rules have recently amended existing rules on consultancy contracts in Italy.

The previous amendment was in 2003, whereby only consultancies specifically linked to a project or part of a production/management program were allowed, whilst any “generic” consultancy was potentially classified as an open-ended subordinate employment contract from the beginning.

Project-consultancies (the only type still possible) must now be expressly related to a specific result. The project shall be analytically described and an exact identification of the final result is necessary.

These provisions apply to ALL consultancy contracts agreed after July 19, 2012
As far as existing contracts are concerned, they will be subject to the new rules from July 19, 2013: however, this does not mean that – even now – one or more of these project-contracts can be classified as employment contracts, since the requirements under former law were already quite specific and are often not met by existing contracts.

Basically, until July 12, 2013 it will be acceptable to have the so called “contratti a programma”, but they will be prohibited after that date.

The new law, however, also deals with a typical way to hide fake consultancy contracts, by asking the “consultants” to provide a VAT number, as if they were a professional consultant, having lots of clients and as such under a different tax regime.

The new law provides that, despite the VAT number, if two of the following three requirements are met, relationships and/or contracts with VAT holders will be classified as a subordinate employment contract:

- if the activity is carried out by the contractor for ONE subject ONLY for at least 8 months a year, during a period of two consecutive years;

- if the income for the activity carried out is equal to 80% of total the income earned by the contractor for the same period of two consecutive years;

- if the contractor has a personal working position or office at the principal’s premises.

Exceptions are provided for quite specific cases:

- the activity is a highly professional one;

- the activity is carried out by a person whose annual income is higher that EUR18.000,00.

These rules do not apply to professionals who are members of specific registers to be listed in a future decree of the Labour Ministry to be issued within 3 months after the enforcement of Law 92/2012.

These rules, related to VAT holders, will apply to new consultancy relationships, agreed after July 19, 2012.

For existing relationships the new rules will only apply in one year from the date of the new law entering into force.