Tax Authority clarifies withholding tax rules for insurance agents
Background
With the amendments introduced by the Budget Law 2024 (Art. 1, Par. 89, Law 231 of 2023), as of 1 April 2024, insurance agents’ commission for direct services to insurance companies is now subject to withholding tax.
The provision extends the application of the withholding tax. It was already applicable to fees paid under commission, agency, mediation, sales representation and business procurement relationships. Now it’s also applicable to commission received by insurance agents directly from insurance companies to the extent and under the conditions set forth in Article 25-bis of Presidential Decree No. 600/1973.
As of 1 April 2024, the withholding tax will be levied at 23% when the commission is paid (regardless of the time of accrual):
- on 50% of the amount of commission received by insurance agents; or
- on 20% of the amount of that commission if the recipients declare to their principals that they rely continuously, in exercising their activity, on the assistance of employees or third parties.
According to Ministerial Decree 16.4.1983, a declaration must be sent for each calendar year, by 31 December of the year before. It must be sent as a registered letter with notice of receipt or PEC. And it must be filled on plain paper, dated, signed, and contain the sender’s identification data.
Tax Authority Circular no. 7 of 21 March 2024
With Circular no. 7 of 21 March 2024, the Italian Tax Authority has clarified the implications of the amendments, with particular reference to point 2 above.
The Italian Tax Authority clarified that the communications under 2 above “may be received within fifteen days following the effective date of the provision, ie by 16 April 2024.”
Circular No. 7 of 2024 also provides more detail about when agents directly withhold the commission due to them, deducting it from the amounts collected as a result of the transaction for which they provided services. In this case, the recipient of the commission also has to remit to its principals the amount corresponding to the withholding. This withholding is deemed to have been levied in the month following the one in which the commission is retained and must be paid by the 16th day of the month following the one in which it is deemed to have been levied. Therefore, agents also have to remit to principals the withholding taxes deemed to have been levied as of May 2024 – ie retained in April 2024 – for commission received before April 2024 and which they remit to principals as of that month (irrespective of when the contract was concluded).
