Failure to pay or evasion of social contribution duties – changes from September 2024
Art. 30 of Decree-Law No. 19/2024, converted into law – with amendments – by Law No. 56 of 29 April 2024, introduces, as of 1 September 2024, significant changes in the sanction regime for failure to pay or evasion of social contribution duties pursuant to Art. 116(8) of Law No. 388/2000.
Below is an illustration of the new regulations which, as mentioned, will only apply from 1 September 2024.
New penalty system in case of failure to pay or evasion of social contribution duties
An employer who fails to make full payment of social security, welfare and insurance contributions due within the prescribed time limit shall be liable to a civil penalty of an amount per annum equal to:
(a) the official reference rate (currently 2.5%) increased by 5.5 percentage points in the case of failure to pay contributions.
In no case may the civil penalty exceed 40% of the amount of the unpaid contributions.
From 1 September 2024, the 5.5 percentage point surcharge will not apply if the employer spontaneously pays the due amount:
- in a lump sum within 120 days, and
- before any dispute or request from the tax authorities.
(b) in case of evasion, 30% of the amount of social contribution not paid within the statutory time limit, up to a maximum of 60% of that amount. Evasion of social contribution shall be deemed to have occurred if the failure to pay the compulsory contribution due is linked to omitted or false registrations, reports or compulsory declarations made with the specific intention of not paying the contribution or insurance premiums, by concealing (i) existing employment relationships, (ii) wages paid or (iii) income earned, as well as (iv) facts or information relevant for the determination of the obligation to pay contribution.
From 1 September 2024, if the declaration of the debt situation is made spontaneously before any dispute or request by the tax authorities, and in any case within 12 months of the normal deadline for payment of the contribution due, the civil penalty shall be calculated according to the following rules:
(i) the official reference rate increased by 5,5 percentage points, provided that the payment of due contribution is made in a single instalment within 30 days from the date of submission of the report itself,
(ii) the official reference rate increased by 7,5 percentage points, provided that due contribution is paid in a single instalment within 90 days of the report being lodged,
In the cases mentioned in points (i) and (ii) above, the penalty may in no case exceed 40% of the amount of social contribution not paid within the statutory deadline. If the employer chooses to pay the debt in instalments, the penalty shall be calculated in the same way as in points (i) and (ii) if the first instalment is duly paid. In the event of failure to pay, insufficient payment or late payment of any of the instalments following the first instalment, a civil penalty equal to 30% of the amount of the contribution not paid by the due date, up to a maximum of 60%, shall be applied.
If the debt situation is established by the tax authorities or as a result of inspections and the contributions and premiums are paid in a single instalment within 30 days of the notification of the dispute, the amount of the civil penalty is reduced by 50% in the following cases
1) Failure to pay or late payment of contribution or premiums, the amount of which can be ascertained from mandatory reports and/or registrations and for which a civil penalty equal to the official reference rate increased by 5.5 points on an annual basis is provided for.
2) Evasion of contribution, for which a civil penalty of 30%, up to a maximum of 60%, of the amount of the contribution not paid within the prescribed period is provided for.
The penalty is reduced by 50% if the amount due is paid:
- as a lump sum
- within 30 days of notification of the dispute.
In case of
- payment in instalments, the halving of the amount of the civil penalty shall be subject to the payment of the first instalment,
- failure to pay, insufficient payment or late payment of any of the instalments following the first instalment, the civil penalty shall be determined in the manner set out in points 1) and 2) above.
In light of the amendments to Art. 116(15) of Law No. 388/2000, which will take effect on 1 September 2024, the Boards of the Revenue Authorities will establish criteria and procedures for reducing the aforementioned civil penalties up to the amount of statutory interest:
- in case of objective uncertainty due to conflicting jurisprudence or administrative rulings as to the occurrence of the obligation to pay contribution,
- in the event that the non-payment or late payment of contribution or premiums is the result of an intentional act on the part of a third party, reported to the judicial authority within three months of the date of notification of the fact constituting an offence pursuant to Art. 124(1) of the Criminal Code,
- in the event of a crisis, conversion or restructuring of a company to which extraordinary wage subsidies (Specifically, CIGS subsidised furlough) have been granted and “in all circumstances of crisis of particular social and economic importance in terms of the local employment situation and the productive situation of the sector, which make insolvency appear likely” .
In the event that the non-payment or late payment of contribution or premiums is the result of objective uncertainties stemming from conflicting judicial or administrative guidelines recognised by the courts or administrative authorities, only the legal interest referred to in Article 1284 of the Civil Code shall be due, provided that the contributions or premiums are paid within the time limit set by the tax authorities.
Where more favourable to the taxpayer than the above provisions, the different existing penalty regime applies.
New forms of communication between INPS and taxpayer and penalty regime
From 1 September 2024, INPS will provide taxpayers, or their appointed advisors, with information on the taxpayer’s contribution situation in accordance with new procedures and criteria, to be defined by the INPS Board of Directors.
Specifically, it is established that if, according to the information communicated by the INPS, unpaid contribution is detected, it will be regularised in accordance with the procedures and conditions indicated by the Institute in the aforementioned resolution, which will determine:
(a) in case of non-payment of contribution, a civil penalty set annually at an amount equal to the official reference rate; under no circumstance may the civil penalty exceed 40% of the contributions due
(b) in the event of evasion of contribution duties, a civil penalty calculated on an annual basis equal to the official reference rate increased by 5.5 percentage points; under no circumstance may the civil penalty exceed 40% of due contribution.
In case of payment by instalments, the application of letters (a) and (b) above is subject to the payment of the first instalment. In the event of non-payment, insufficient payment or late payment of any of the subsequent instalments, a civil penalty shall be payable at an annual rate of
- the official reference rate increased by 5.5 percentage points if the failure to pay is contested,
- up to 30% of the amount of the contribution not paid by the legal deadline in the case of evasion. Under no circumstance may the amount of the penalty exceed 60% of due contribution.
In the event of failure to regularise the situation and to pay within the time limits set by the INPS Board, the Institute will notify the taxpayer in the event of:
- failure to pay contribution: a civil penalty equal to the official reference rate increased by 5.5 percentage points per year, but never exceeding 40% of due contribution,
- evasion of social contribution duties: a civil penalty of 30% per annum, subject to a maximum of 60% of due contribution.
Application of the National Collective Bargaining Agreement
In its decision no. 7203 of 18 March 2024, Corte di Cassazione confirmed that an employer’s repeated application of the provisions of a national collective agreement constitutes conclusive conduct, obliging him to apply the same agreement to newly recruited workers.
In this case, the workers recruited and classified under the NCBA for the multiservice sector had requested the right to be classified at the third level of the NCBA for employees of the tertiary sector, which had been applied in the company before their recruitment.
According to the Court, collective bargaining is binding only on the members of the trade union organisations that have concluded it and on those who have explicitly or implicitly signed the NCBA. Thus, the employer’s willingness to be bound by the collective agreement can be inferred “not only from membership of the employer’s union or from an explicit act of adherence to the implementation of the collective agreement, but also from conclusive facts or behaviour which, even if implicit, express the employer’s willingness to apply the collective discipline”.
Consequently, the collective agreement is also effective towards the parties to the employment relationship who have voluntarily accepted the discipline of the collective agreement or, in any case, have implemented it. In practical terms, this transposition takes place:
- by means of a clause, specified on the individual employment contract, invoking the application of regulations set by the collective agreement (explicit adherence), or
- by a conduct which is consistent with the continuous and unquestioned application of regulations set by the NCBA (implicit adherence).
Therefore, “the repeated and constant de facto application of the NCBA within a given company constitutes a conclusive conduct with negotiating value, which triggers the employer’s obligation to apply the same NCBA also with respect to new employees who have requested its application”.
In the case at hand, in view of the previous and continuous application of the Collective Agreement for Tertiary Distribution and Services, the employer is obliged to apply the same collective agreement to newly recruited workers.
Stressful work environment
By order no. 4279 of 16 February 2024, Corte di Cassazione recognised the unlawfulness of an employer’s conduct that allows, even by negligence, the perpetuation of a “stressful” working environment.
In this case, the employee had claimed compensation for the damage (both material and non-material) she had suffered as a result of the harassing and degrading behaviour of her colleagues.
During the proceedings at first instance, it had indeed been established that “the adjustment disorder with anxious and depressive emotional aspects of a moderate and chronic degree suffered by the employee was causally linked to the professional de-qualification”.
The Court stated that, in order to reject the claim for compensation for damage to the employee’s health, it is not sufficient to exclude the possibility of harassment, since it is necessary to assess and establish the employer’s responsibility for having allowed, even if by passive negligence, “the maintenance of a stressful environment harmful to the employee’s health”.
In fact, the employer is obliged to take “the measures necessary to protect the physical integrity and moral personality of workers, taking into account the specific nature of the work, experience and technology”. According to the Supreme Court, ‘these measures certainly include the prevention and, if possible, the elimination of a tense working atmosphere marked by mutual misunderstandings’.
The employer, who had failed to take such measures, had to compensate the woman for the damage to her health caused by the ‘stressful’ working environment.