Calculation of the net amount and deduction of the gross for the restitution of sums unduly received: the Relaunch Decree, with article 150, outlined two possible ways per return to sender the figures that have been disbursed without having the right to and that have been subject to taxation in previous years.
With the circular number 8 of 14 July 2021, the Revenue Agency provided the instructions to follow in the light of innovations introduced:
- the DL n. 34 del 2020, which amended article 10 of the Consolidated Income Tax Law, has left unchanged the letter d-bis) which regulates the restitution of the sums to the lender, gross of withholding taxes when they were perceived;
- at the same time introduced the possibility of paying the amount by making the calculation net of withholding taxes: the rule must be understood in a broad way and, for example, also extends to the restitution of sums subject to substitute tax.
The amendment to the TUIR is applicable to the amounts returned to the lender from 1 January 2021, doing save “Relations already defined at the date of entry into force of this decree” , or already defined as of May 19, 2020.
More in detail, explains the Revenue Agency in the circular number 8 / E of 14 July 2021, it is not possible to follow this new route if on the date of 19 May:
- the taxpayer has already done so by paying the gross amount;
- as a result of final judicial rulings, the restitution is established gross, unless otherwise agreed between the parties;
- a repayment plan in installments is in progress, calculated “gross” of the withholdings made at the time of disbursement, unless otherwise agreed by the parties.
Calculation of the net amount and deduction of the gross for the return of the sums received: the instructions of the Revenue
In its current formulation, modified in 2014, the Consolidated Law on Income Taxes, in article 10, paragraph 1, letter d-bis, establishes that the gross sums returned to the lender, if subject to taxation in previous years, they are deducted from total income.
“The amount, in whole or in part, not deducted in the tax return period can be brought into deduction from the total income of the subsequent tax periods; alternatively, the taxpayer can request a refund of the tax corresponding to the amount not deducted according to the procedures defined by decree of the Minister of Economy and Finance “.
With the possibility of deducting the amount equal to sum previously subject to taxation and, subsequently, reimbursed to the lender, the taxpayer recover the taxes paid when it was perceived.
Circular number 8 / E of the Revenue Agency specifies that this modality it does not apply only to compensation of employees, but to all income subject to taxation with the cash criterion. Also to remuneration for professional self-employment or other income from self-employment (e.g. copyright, etc.), other income (such as occasional self-employment or other).
“In particular, from an objective point of view, article 10, paragraph 1, letter d-bis), of the TUIR applies to the amounts subject to refund, whether subject to withholding tax (or substitute tax) or by way of down payment, and to those subject to Irpef at the time of the tax return.
These sums therefore constitute a deductible charge regardless of the taxation method (even separate) suffered “.
Calculation of the net amount for the return of the sums received: the instructions of the Revenue
Next to the canonical method of restitution, the Relaunch Decree added a new one by introducing paragraph 2-bis inarticle 10 of the TUIR.
It has been established that this type of sums, if subject to withholding, are returned net of the withholding tax e they do not constitute deductible charges.
It is therefore possible to pay the amounts net of the withholding tax. And the Revenue Agency provides the operating instructions to perform the calculation correctly: it is necessary to subtract “From the gross amount that the taxpayer is required to pay, the portion of the withholdings made for Irpef purposes, proportionally attributable to the undue”.
A practical example? Let’s imagine that in the space of a year 28,000 euros have been paid with Irpef withholdings of 6,960 euros, if it is established that a quarter of the amount received must be returned, a quarter of 6,960 euros must be subtracted from the 7,000 euros due.
Net amount for the return of the sums received: a tax credit for the recovery of withholding taxes
Always with thearticle 150 of the Relaunch Decree the methods for recovering the personal income tax paid by the provider of the amounts returned net.
“To the withholding agents referred to in article 23, paragraph 1 and article 29, paragraph 3, of the decree of the President of the Republic no. 600, to which they are returned, pursuant to paragraph 2-bis of article 10 of the consolidated income tax, pursuant to the decree of the President of the Republic no. 917, the sums net of withholdings made and paid, are entitled to a tax credit equal to 30 percent of the sums received, usable without limit of amount in compensation pursuant to article 17 of legislative decree 9 July 1997, n. 241 “.
The calculation of the tax credit it must be made on the net amount returned and if only a part of these have been taxed, no tax credit is accrued on that part. It can be used from the moment it can no longer be objected to legitimacy of the claim for restitution.
The text specifies:
“Taking into account that the recovery of the personal income tax (” operated and paid “) relates to the relationship between the withholding agent and the Treasury, it is believed that the” finality “of the claim to the refund of the sums allows the substitute to benefit from the entire amount tax credit, regardless of the amount actually paid by the replaced “.
Also pending the definitive nature of the claim, if in the meantime the net amounts are returned, the substitute can avail himself of the tax credit in the period in which the return took place.
Finally, the document specifies that this type of operations must be indicated both in the Single Certification and in the 770 form.
Below is one summary table which reports for some possible cases of restitution of the net sums different aspects to consider.
All the details in the full text of the circular number 8 of 14 July 2021.
- Revenue Agency – Circular number 8 / E of 14 July 2021
- : Method of restitution of sums subject to taxation in previous years. Article 150 law decree 19 May 2020, n. 34 (so-called Relaunch decree) and article 10, paragraphs 1, letter d-bis), and 2-bis of the Consolidated Income Tax Act, approved by decree of the President of the Republic 22 December 1986, n. 917 (Tuir).