Italian Tax Authority provides guidance on VAT treatment of personnel secondment arrangements
ItalyStarting from January 2025, staff secondments are subject to VAT even where limited to the mere reimbursement of costs, provided that the relevant payment received qualifies as consideration for a supply of services. This change results from a modification of the law, which had previously excluded such transactions from VAT.
The Italian Tax Authority, in a circular, clarifies that VAT applies whenever there is a reciprocal link between the service provided and the payment received (i.e., a synallagmatic relationship), regardless of any profit margin.
The circular also confirms that – unlike in staff secondments where the full amount paid is VAT taxable – the special VAT regime applicable to labour supplies remains in force. Under this regime, reimbursed labour costs – i.e., wages and social security contributions – fall outside the scope of VAT.
The circular provides a practical framework for assessing complex scenarios. For example, the global employment contract ("codatorialità") – where multiple companies jointly act as the employer – is outside the scope of VAT, as payments merely reflect internal cost allocations. Conversely, reliance on third-party resources under public procurement rules ("avvalimento") – where staff is made available to fulfill economic and technical requirements – should be treated as a taxable supply when any form of consideration is involved.
Key takeaway
All companies involved in secondments, shared employment, or other staff arrangements should reassess their agreements under the new VAT framework, effective from 2025. Close attention must be paid to the nature of payments, their qualification as consideration, and the rationale behind the arrangement, which are key elements in determining VAT treatment. Potential interactions with other tax areas (e.g., transfer pricing) must be considered.
