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When Withholding Tax is a DANGER.

Today we touch on a very sensitive topic that we have encountered in our various appointments with Clients and Insiders: the use of Withholding Taxes.

Let’s start with the pivotal assumptions of this instrument: withholding tax is the form used for regularizing OCCASIONAL SELF-EMPLOYED WORKERS.

Occasional self-employment is characterized by:

-Lack of continuity in performance

This means that performance must be an exception or at least an event that is not repeated over time.

-Lack of coordination (the activity should not be carried out within the business or production cycle of the client)

The lender is autonomous in the choice of schedules, how to get to the goal of his task.

This means that the Employer does NOT give directives to the Worker, let alone direct him in the workmanship. In addition, an Occasional worker cannot be placed in a pivotal context of production activity (e.g., Waiters or Bartenders in a Bar).

From cook to waiter, from gym instructor to musician or DJ, from presenter to software developer, the jobs for rounding up are indeed many and very different in nature. An employee may round off with his own activity if it is not expressly prohibited by the signed contract and if what he does is not in competition with his main occupation.

In fact, Article 2105 of the Civil Code emphasizes that “The employee shall not transact business, on his own account or on behalf of third parties, in competition with the entrepreneur, nor shall he divulge news pertaining to the organization and methods of production of the enterprise, or make use of it in such a way as to be prejudicial to it.”

The employee, in case he or she decides and has the opportunity to round off the salary with an extra activity, has no obligation to communicate with his or her boss, but in order to avoid unpleasant situations it is always advisable to act in full transparency, thus avoiding possible misunderstandings with the employer.

Attention to the weekly schedule

Those who supplement their main paycheck with a second job must also take into consideration the limits imposed by theArt. 4 of Legislative Decree. 66/03. In fact, the legislature emphasizes that “Collective bargaining agreements shall establish the maximum weekly working time. In any case, the average working time may not exceed forty-eight hours in any seven-day period, including overtime hours.” The obligation still applies even if the person has more than one employment relationship; therefore, the employee must take this time limit into consideration.

In summary

The use of occasional self-employment in the Ho.Re.Ca sector is strongly discouraged for figures such as Baristas, Waiters as the latter are the quintessential tasks of Subordinate Work, thus managed, directed and supervised by the Employer.

Withholding tax in such cases, in the event of inspection would give rise to even very steep fines for the Employer as it does not use a form of regularization in accordance with the actual performance.