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VAT Regime of the Detachment of the Workers
Detaching an employee is a temporary change in the employer’s job at another employer, according to the definition provided by law (art. 30 of Legislative Decree 276/2003). In particular, the primary employer detaches one or more employees to a secondary employer, for a determined period, to perfom specific activities in the interest of the first one.
Usually the primary employer charges the secondary employer the cost of personnel detached and consequently the procedure has also fiscal implications.
It is known that, according to art. 8 (35) of the Italian Law n. 67 dated March 11, 1988, “the detachment of personnel is not relevant for VAT purposes if the reimbursement regards only the cost incurred”. However, the interpretation of the above mentioned provision is not still clear and accepted by all parties.
In the past, the Supreme Cort decided in the following different ways:
- if the reimbursement exceedes the effective cost incurred by the primary employer, the VAT is applicable only on the mark up, according to the provisions related to temporary work (Decision n. 19129/2010);
- if the reimbursement exceedes the effective cost incurred by the primary employer, the entire reimbursement is VAT taxable (Decision n. 23021/2011 and n. 14053/2012).
Recently, the Supreme Cort (decision n. 2385 of January 29, 2019) has decided to involve the European Justice Court to clarify the matter, by asking to the EU Court how articles 2 and 6 of the Directive 77/388/EU must be interpreted with reference to the above mentioned art. 8 (35) of Italian Law 67/1988.
We hope the matter will be solved asap because it is creating difficulties to the companies involved.
Maurizio Bottoni is the senior partner of Interconsulting. As a consultant in one of the Big Four he has developed a deep knowledge of the Italian and International tax law, through the involvement in operations and reorganization of multinationals. Extraordinary transactions and international issues are his daily business.