Staff secondments subject to VAT – A possible alternative: joint employership

We have already informed you about this: since 1 January 2025, recharges arising from the provision or secondment of employees fall within the scope of VAT and must accordingly be invoiced at the standard rate, currently 22%, irrespective of whether only the costs incurred are recharged or whether a mark-up is also charged. The Italian legislator has thereby complied with a ruling against Italy by the Court of Justice of the EU (C-94/19 of 2020) and has aligned national law with the EU provisions (see also our Circular No. 41/2024 on this subject). The change applies only to agreements newly concluded or renewed as from 1 January 2025, whereas secondments based on „old“ contracts may continue to be invoiced without VAT.

A few days ago, with Circular No. 5 of 16 May 2025, the Italian Revenue Agency also provided clarification on the new rules applicable since the beginning of the year. With regard to the temporal application, it is clarified that VAT must now also be applied in the case of tacit renewals occurring after 1 January 2025. Incidentally, in order to demonstrate that a contract was concluded before 1 January 2025 (thereby avoiding VAT), a certain date must be available, and in this respect the circular recognises, among other things, the mandatory notification of the secondment to the Ministry of Labour or to the trade unions. The circular also confirms that secondments to other EU countries qualify as other services and are therefore invoiced, where the customer is a business, as „not subject to tax pursuant to Art. 7-ter of the VAT Act“; secondments outside the EU, by contrast, are not subject to tax in Italy irrespective of the customer.

However, a completely different aspect of the circular is of interest: the circular clarifies that, in the case of „joint employership“ in respect of an employee, there is no relationship of performance and consideration, and that accordingly the reimbursement of remuneration is likewise not to be invoiced with VAT in such cases. Three days later, namely on 19 May 2025, the Italian Revenue Agency also published Ruling No. 136/2025, in which it explains the instrument of joint employership in detail. The key findings are as follows:

• By way of introduction, it is noted that „joint employership“ is not governed by statute, but that a consolidated body of case law on the subject has meanwhile developed.

- On this basis, a distinction is drawn between typical and atypical „joint employership“: the former exists above all in the case of business network contracts, where undertakings pursue a common objective by means of a network contract and also make their own employees available for that purpose. Atypical joint employership, by contrast, is considered to exist in situations involving companies subject to „management and coordination“ within the meaning of Art. 2497-bis of the Italian Civil Code, where as a rule employees of the parent company also work in subsidiaries.

In both cases, according to the interpretation of the Italian Revenue Agency, there is generally no staff secondment that must be invoiced with VAT. Rather, the undertakings assume the role of joint employers, which, however, also entails joint and several liability for the proper remuneration and insurance of the employees made available, and this applies even where formally the employee has an employment relationship with only one of the undertakings. In the case of network contracts, it is expressly required that the network contract clearly set out the rules governing the joint use of employees for the achievement of the network's objective. The undertakings that contractually accept the rules on the joint use of employees within the network thereby each also assume the role of joint employer, directly responsible for the corresponding portion of the salary payment. Consequently, the reimbursement of any personnel costs takes place solely within the framework of a cost allocation and not on the basis of a synallagmatic relationship of performance and consideration, and is therefore not subject to VAT.

Consideration: although the instrument of staff secondment is widely used, and although the fact that VAT has had to be charged since 1 January 2025 hardly poses a problem, at least for undertakings entitled to a full input VAT deduction, it must also be noted that the formal requirements applicable to a secondment of employees (advance notification to the employee, notification to the authorities within 5 days, recording in the employment register) are often not complied with or cannot be complied with in practice. Typical joint employership in the context of network contracts, or atypical joint employership in the context of undertakings „under management and coordination“, may in certain circumstances offer an appropriate way out here. In doing so, however, the employment law implications must be carefully weighed. Should you operate through network contracts or second employees to controlled companies, we ask you to review this instrument of joint employership with your labour consultant in the light of the present interpretation by the Italian Revenue Agency. As far as the tax aspects are concerned, we will gladly assist you.

Annex: Ruling No. 136/2025