RSM PALEA LAURI GERLA Associazione professionale di Studio Palea, Studio L4C, Studio Gerla Associati

TAX NEWS 2016 - 09

This disclosure, while scrupulously drawn up and checked, may, under no circumstance, entail our firm's liability in case of errors or inaccuracies, nor should it replace professional consulting and advice under any form.

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TABLE OF CONTENTS FOCUS ON TAX AND ACCOUNTING TOPICS

The new “white list” of collaborative jurisdictions from a tax point of view

The new CFC rule analysed by the Italian Revenue Agency

The new "abuse of law" examined by Assonime

FOCUS ON EMPLOYMENT TOPICS

(IN COLLABORATION WITH DE LUCA & PARTNERS AND HR CAPITAL IN MILAN)

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FOCUS ON TAX AND ACCOUNTING TOPICS

The new “white list” of collaborative jurisdictions from a tax point of view (Decree of the Ministry of Economy and Finance dated August 9th, 2016) On August 9th, a decree of the Ministry of Economy and Finance (published in the Official Gazette of August 22nd) was issued. It has made many significant changes to the list of “collaborative” jurisdictions, with which Italy has in force provisions on the exchange of information in the framework of the double taxation Conventions. The decree of August 9th changes the previous decree issued on September 4th, 1996 which was subject to repeated amendments over the years. Please find below the new list of “collaborative” jurisdictions, pointing out the main tax provisions that are affected by this change. List of collaborative countries Countries indicated in bold are those ones included in the list in August and that were previously considered as “non-collaborative” countries.

o Albania o Alderney o Algeria o Anguilla o Saudi Arabia o Argentina o Armenia o Aruba o Australia o Austria o Azerbaijan o Bangladesh o Belgium o Belize o Bermuda o Byelorussia o Bosnia Herzegovina o Brazil o Bulgaria o Cameroon o Canada o China o Cyprus o Colombia o Congo (Republic of Congo) o South Korea o Ivory Coast o Costa Rica o Croatia o Curacao o Denmark

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o Ecuador o Egypt o United Arab Emirates o Estonia o Ethiopia o Russian Federation o Philippines o Finland o France o Georgia o Germania o Ghana o Japan o Gibraltar o Georgia o Greece o Greenland o Guernsey o Herm o Hong Kong o India o Indonesia o Ireland o Iceland o Isle of Man o Cayman Islands o Cook Islands o Faroe Islands o Turks and Caicos o British Virgin Islands o Israel o Jersey o Kazakhstan o Kirghizstan o Kuwait o Latvia o Lebanon o Liechtenstein o Lithuania o Luxembourg o Macedonia o Malaysia o Malta o Morocco o Mauritius o Mexico o Moldova o Montenegro o Montserrat o Mozambique o Nigeria o Norway o New Zeeland o Oman o Netherlands o Pakistan

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o Poland o Portugal o Qatar o United Kingdom o Czech Republic o Slovak Republic o Romania o San Marino o Senegal o Serbia o Seychelles o Singapore o Saint Maarten o Syria o Slovenia o Spain o Sri Lanka o U.S.A. o South Africa o Sweden o Switzerland o Tajikistan o Taiwan o Tanzania o Thailand o Trinidad e Tobago o Tunisia o Turkey o Turkmenistan o Ukraine o Uganda o Hungary o Uzbekistan o Venezuela o Vietnam o Zambia.

Provisions influenced by the list The “white list” contained in the decree of August 9th has an influence on several tax laws. Among the most significant ones the following should be pointed out. Income tax Deductibility of losses on receivables (article 101, paragraph 5, of the TUIR, i.e. Income Tax Act) - according to this article, the losses on receivables arising from insolvency proceedings provided for in countries or territories with which there is an adequate exchange of information shall be deductible. Inbound transfer of tax residence to Italy (article 166-bis, TUIR) – companies moving tax residence to Italy from collaborative jurisdictions may assume the tax base of assets and liabilities at their normal value (as defined by sr. 9 of the TUIR).

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Presumption of tax residence in Italy of Trusts instituted abroad (art. 73, paragraph 3, of the TUIR) - according to the aforementioned provision, it is assumed, unless proved otherwise, that trusts and institutions established in countries or territories different from those mentioned in the list above are resident in Italy; moreover, at least one of the dispatchers and at least one of the beneficiaries of the trust shall be tax resident in the Italian territory. Accordingly, trusts established in a country different from those mentioned in the decree above are considered as resident in Italy, when, following their setting-up, a subject resident in Italy carries out, in favour of that trust, an allocation that transfer in Italy the ownership of real-estate property or the establishment or the transfer of real property rights, including shares and bonds on the same target. Disclosure of assets held abroad - the holding of shares in the companies located in “collaborative” jurisdictions allows the disclosure of the information in the RW section to the nominal value of the shares, rather than the disclosure of the total asset of the company (“look through” approach) if established in non-collaborative jurisdictions. Moreover, if the taxpayer holds bank accounts in “collaborative” jurisdictions they are no longer obliged to disclose the maximum threshold reached by the bank account in the course of the fiscal year. Taxation of financial instruments Among the several tax-financial provisions affected by the change to the list, it shall be pointed out that bonds and similar securities issued by the countries included in the list discount a tax rate at 12.5%. To this extent, tax payer resident in one of the new collaborative countries may benefit from the exemption of the Italian withholding tax applicable to the financial income generated in Italy for specific items of income (e.g. income from the Italian OICR, i.e. collective investment undertakings, capital gains from investments in non-qualified Italian companies, etc. ...).

Effective date With reference to the taxation of financial income it is not clear whether the effective date of the new list should be August 22nd (the date of publication in the Official Gazette) or September 6th, 2016. With regard to the provisions related to a given tax period (in which the publication of the list was carried out) it shall be explained if the new list affects the whole tax year 2016 or it has an effect only from the date of entry into force: it shall be pointed out that the Italian Revenue Agency, with the recent circular no. 39/E/2016 (referring to the changes made to the list contained in the Ministerial Decree of January 23rd, 2002 within the legislation pursuant to art. 110 of the TUIR on the costs of black-listed countries) has confirmed this second argument. Finally, for those changes affecting aspects related to tax-returns (e.g. simplifications in the compilation of the RW section) the new list should be effective from the tax return form 2016 (whose deadline for the submission is subsequent to the date of publication of the decree) but there are no clarifications relating to this matter. Fortunately, we are witnessing a rationalization of the system, since two rules (the one on CFCs and the one referring to the deductibility of costs from tax havens) have recently been subject to recent structural changes which have made the relevant lists of reference no more effective.

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For further information, please contact:

Dott. ssa Silvia Cirillo RSM Palea Lauri Gerla Foro Buonaparte, 67 20121 Milan Tel: (+39) 02.89095151 Fax: (+39) 02.89095143 email: silvia.cirillo@rsm.it WWW.RSM.IT

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The new CFC rule analysed by the Italian Revenue Agency (Italian Revenue Agency, circular no. 35/E of August 4th, 2016) With the Circular no. 35/E of 4 August (hereinafter also the “Circular”), the Italian tax authorities have provided the first clarifications of the renewed rules of the Controlled Foreign Companies legislation contained in article 167 of the TUIR. Based on the provision above, the income generated by a entities, company resident in one of the countries or territories with a privileged legislation are also subject to taxation in Italy by in the hand of the control entity. Among the new features, the following can be pointed out:

- repeal of article 168 of the TUIR, which contained the extension of the provisions related to the CFCs also to the affiliated companies located in countries or territories with a favourable taxation;

- repeal of article 168-bis of the TUIR, which provided for the drawing-up of a list of countries or territories that allowed an adequate exchange of information and, therefore, excluded from the CFC provisions of the non-black-listed countries, date of repeal from article 10, paragraph 1 of the Law Decree no. 147/2015);

- identification of the countries or territories with a favourable taxation based on the nominal tax level;

- identification of the criteria to determine the actual level of taxation (see also the provision of the director of the Italian Revenue Agency no. 143239 of September 16th, 2016) for the application of the CFC rule to the subsidiaries resident in countries or territories whose level of nominal taxation is lower than 50 % of the amount applicable in Italy or in European Union countries or lower that those belonging to the European Economic Area (Iceland, Norway and, most recently, as explained in the Circular, the Liechtenstein , because of the agreements ratified with the European Union on the exchange of information in tax matters);

- determination of the income attributable (on the basis of the “look through approach”) to the resident shareholder;

- definition of the new ruling (in the field of the reformed article 11, paragraph 1, letter b) of the Law no. 212 of July 27th, 2000) for the disapplication of CFC rule (in other words, the ruling is no longer mandatory but optional, while the obligation to prove the existence of exempting subjects for the for the non-application remains, also during the assessment by the tax authorities with the obligation of notice for this latter, before issuing a notice of assessment in accordance with paragraph 8-quarter);

- obligation to report, within the tax return, the presence of controlled CFCs; - recognition of a tax credit pursuant to article 165 of the TUIR in case of proof by the exemption

as per letter a) of paragraph 5 of article 167.

The most characteristic and important aspects of the CFC rule in force for the current and following tax period will be analysed in depth. With regard to the assessment of the nominal level of taxation, the Circular points clearly out the calculation methodology to be followed for the proper control of the causes of exclusion in question, based on a mobile criterion which takes into account the actual level of taxation in the other State. The assessment takes into consideration the ratio between the nominal level of taxation in the foreign country and the nominal level of taxation in Italy, as the sum of the IRES rate (27.5% or 24%, from 2017)

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and Irap (assuming an ordinary rate of 3.9%). If the ratio is below 0.5, the Italian shareholder is subject to the fulfilment obligations provided by the CFCs rule, unless the same latter is not able to meet one of the exemption from liability provided for under paragraph 5, letters a) and b) of the TUIR, meaning:

- the non-resident company carries out an economic or commercial business activities as main activity in the market of the Country or territory in which it is located (letter a) of paragraph 5);

- the investments did not lead, since the beginning, to the shifting of profit in the state or territory with a favourable taxation (letter b) of paragraph 5).

With reference to the first safe-harbour, the CFC rule do not apply if the resident shareholder is able to prove that the non-resident subsidiary derives less than 50% of its income from the passive income (securities and investments management, receivables or other financial assets) towards subjects who directly or indirectly control the company or the non-resident entity. As for the second safe-harbour, the Circular identifies a series of case studies aimed at overcoming the presumption made by the rule. First, it should be pointed out that an assessment on the level of taxation in the country where of the CFC is located is a priority, relating to (conditions that have to occur alternatively):

- the actual level of taxation in the country of residence of the CFC equal to at least 50 % of the nominal taxation in Italy (IRES and IRAP, excluding regional and municipal surcharges),

- level of taxation incurred by the CFC in the country where it is located equal to at least 50 % of the taxation level that it would be subject to if it was taxed in Italy.

After that, the administrative practice identifies the following case studies to show the second safe-harbour (for the purpose of the letter b) of paragraph 5):

- more than 75 percent of the income of the CFC is produced in countries or territories with a favourable taxation and is subject to ordinary taxation and there are no special tax regimes (these regimes are those that give a favourable structural treatment, so that even if the nominal level of taxation of the country is more than 50% compared to the one in force in Italy, due to special tax benefits, the subsidiary is subjected to a level of taxation below this threshold);

- the CFC, even if it is located in a country or territory with a favourable tax regime, exclusively carries out its main activity or it is tax resident or has the actual headquarters in a country or territory with a non- favourable tax regime, in which the income produced by it is fully subject to taxation, without enjoying a special taxation regime;

- the non-resident subsidiary is located in a country or territory with an ordinary taxation, and although it also is located in a country or in a territory with a favourable tax regime by means of a permanent establishment, the income of this latter is fully taxed in the first country of residence, at the ordinary rate;

- the overall tax rate discounted on the income produced by the CFC would however been consistent, according to the standards provided for in paragraph 4), with the one that would be applied in Italy. For example, (with reference to the case study described in the Circular) let’s think about a holding company located in a tax haven, being the parent company of other company resident in countries with an ordinary tax regime but that it is controlled by a shareholder resident in Italy. In this context, the income allocated to the CFC (considering the demonstration of the safe-harbour as per letter b) of paragraph 5 of the TUIR, see also article 89, paragraph 3 of TUIR), having been excluded from the ordinary taxation in the respective

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countries of residence, would however be subject to an overall tax rate in line with the possible level of taxation (1.375%) of the dividends received by a white-listed country, without the fictions involvement of the CFC.

With reference to this last aspect, please find below a statement of the Circular regarding the calculation of the effective tax rate (for the purposes of the assessment as per paragraph 4), in case of income produced in countries different from the one in which the non- resident subsidiary is located. In such a situation (with reference to the previous statement expressed in Circular no. 51/2010), the tax rate shall be calculated based on the ratio between the sum of the whole taxes discounted by the CFC, regardless of the country of taxation, and the profit of the CFC before tax. This happens because, if the first assessment on the level of nominal taxation below 50% compared to one in force in Italy would not be met, the resident parent could always carry out a second assessment in which it is requested that the taxation actually applied to the CFC abroad is not lower than more than 50 % of the taxation that would have actually be applied in Italy (if resident there). With reference to the calculation of the actual level of taxation provided for in checking the existence of the CFC rule for those companies or entities resident in countries or territories, whose nominal tax level is higher than 50 % compared to the amount applicable in Italy or in countries belonging to the European Union or to those belonging to the European Economic Area and that have together also achieved an income resulting , for more than 50 %, from the management, holding or investment in securities, investments, loans or other financial assets (in other words, for cases falling within paragraph 8-bis), the Italian Revenue Agency has issued the recent Provision no. 143239 of September 16th, 2016. In the mentioned document there are criteria to determine the actual foreign taxation and the ones to determine the virtual national taxation, including in the first category income taxes payable in the country where the company is located (before any tax credits for income produced in countries different from the ones where they are located), and in the second category the IRES (or IRPEF based on the average rate applied on the income, in case of individuals carrying out a business activity) and any regional and municipal surtaxes authorities (paragraph 5 of the Provision sets out the different criteria for determining the tax base for the calculation of virtual domestic taxation, starting from the financial statements or the statement of cash flows of the subsidiary). Within the news included in the circular, always with reference to the calculation of the tax base for the purposes of the CFC income taxation in Italy, the issue proposed in paragraph 6 of article 167 of the TUIR, aimed at determining the foreign income to be charged to the shareholder in case of participation in the CFC, shall be analysed. The latest regulations have significantly simplified the regulatory framework, referring to the provisions ruling the determination of the whole income of the resident companies (except for the provisions contained in article 86, paragraph 4 of the TUIR regarding the instalment of capital gains) for the purpose of calculating the CFC taxable income. In other words, the rules to be followed (both in case of legal entity and individual in the carrying out of the business activities with income attributed for transparency, as well as for partnerships) always and only refer to the provisions for IRES purposes.

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For further information, please contact:

Dott. Elio Palmitessa RSM Palea Lauri Gerla Foro Buonaparte, 67 20121 Milan Tel: (+39) 02.89095151 Fax: (+39) 02.89095143 email: elio.palmitessa@rsm.it www.rsm.it

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The new "abuse of law" examined by Assonime

1 INTRODUCTION

The Assonime (i.e. association between Italian joint stock companies), with the Circular no. 21 of August 4, 2016 (hereinafter the "Circular"), analyses in depth the content and application of the "new” concept of abuse of law, as foreseen by article 10-bis of Law 27 July 2000, no. 212 (also called "Statute of taxpayers’ rights"), introduced by Legislative Decree no. 128/2015. The above-mentioned Legislative Decree no. 128/2015 has definitively improved this concept, stating that abuse of law exists when the following requirements are jointly met: achieving undue tax advantages, lacking of economic substance on transactions performed, the fact that undue tax saving must be the main result of the transaction.

2 REGULATORY FRAMEWORK

Paragraph 1 of article 10-bis of Law 27 July 2000, no. 212 provides that “abuse of law exists when a transaction lacks any economic substance and, while formally consistent with tax law, is aimed at obtaining undue tax advantages. These transactions are not opposable to the Italian Revenue Agency, which ignores the advantages determining the due tax amount considering (i) standard rules and avoided principles and (ii) the amount paid by taxpayers as a result of these transactions”. Furthermore, paragraph 2 of the same article points out that “for the purposes of paragraph 1:

a. transactions are regarded as lacking any economic substance when they consist in facts, contracts, deeds, even interconnected, that are unsuitable to generate significant effects other than tax saving. Indicators of lack of economic substance are, in particular, represented by those cases where there is an inconsistency between the qualification of the individual transactions and their legal basis as a whole and where the choice to use certain legal instruments is not consistent with the ordinary market practice;

b. undue tax advantages consist in tax benefits, even incurred in the long run, obtained in contrast with the purpose of the tax rules or with the principles of the tax legal system.”

Finally, paragraph 3 of article 10-bis of Law 27 July 2000, no. 212 provides that “a transaction is not considered to be abusive when it is justified by sound and non-marginal non-tax reasons, even if managerial or organizational, aimed at improving the structure or functionality of the business of the taxpayer.”

3 REQUIREMENTS OF ABUSE OF LAW

The Circular analyses in depth the “new” concept of abuse of law, highlighting all relevant aspects regarding the requirements in order to have abuse of law. Such requirements, as clearly specified in paragraph 2 of article 10-bis of the Statute of taxpayers’ rights, are essentially three:

1. undue tax advantages; 2. lack of economic substance of transactions performed; 3. undue tax saving must be the main result of the transaction.

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3.1 UNDUE TAX ADVANTAGE

With reference to the undue tax advantage, the regulation establishes that undue tax advantages consist in tax benefits, even incurred in the long run, obtained in contrast with the purpose of the tax rules or with the principles of the tax legal system. Therefore, essential element of abuse of law consists in achieving an advantage not allowed by Italian legislation, obtained through a behaviour that, while not directly violating the obligation or prohibition, is able to get around it. This requirement must be verified mainly with regard to the objective content of obligations and prohibitions and considering also subjective opinions and discretional judgments. In other words, it is necessary to verify whether transactions performed by the taxpayer regarding a particular tax regime are in compliant with Italian legislation foreseen for that specific tax regime. However, possible discrepancies, between the ratio of that regime and the ratio of other regimes that could be applied in different scenarios, are not relevant and have not to be considered in this regard. Otherwise, as explained by Assonime, it might lead to consider abusive a situation which does not violate the ratio of the rules applied by the taxpayer, but in contrast with those rules that would be applied to other circumstances).

3.2 LACK OF ECONOMIC SUBSTANCE

Additional element of abuse of law is the lack of economic substance of transactions performed when they consist in facts, contracts, deeds, even interconnected, that are unsuitable to generate significant effects other than tax saving. Looking at expression contained in article 10-bis of Law 27 July 2000, no. 212, lack of economic substance exists when there are no relevant “non-tax” effects and refers to both "circular" and "linear" operations (i.e. operations which are direct to realize a change of the previous situation of taxpayers, even though a specific process aiming at achieving a undue tax benefit). These operations are characterized by the “inconsistency between the qualification of the individual transactions and their legal basis as a whole” and “where the choice to use certain legal instruments is not consistent with the ordinary market practice”, according to paragraph 2 of Article 10-bis of Law 27 July 2000, no. 212. As stated by Assonime, for both types of operations, "the requirement of lack of economic substance should be verified taking into account the plurality of deeds connected with each other." However, it is clear that spotting the lack of economic substance is much more complex in "linear" operations, and even more complicated when those operations use legal instruments not consistent with the ordinary market practice. Furthermore, Assonime clarifies that, in this case, lack of economic substance is even less recognizable; it seems hard to believe that the requirement of lack of economic substance may be inferred by unusual choices compared with the ordinary market practice, considering that what matters here is only the realization of significant “non-tax” effects, regardless of efficiency or risk of those choices which are not consistent with market standards.

3.3 TAX SAVING MUST BE THE MAIN RESULT OF THE TRANSACTION

As clarified by the Circular, the third requirement in order to have abuse of the law is the fact that undue tax saving represents the main result of transaction performed. On this point, the explanatory report of Legislative Decree. N. 128/2015 has indeed specified that "undue tax benefits realized through transactions with no economic substance must be fundamental and relevant more than any other purpose or aim pursued by taxpayers, meaning that that undue tax advantage has to be essential and the main purpose of the whole transaction. In the light of the above, Assonime stated that, and we totally agree with this point of view, undue tax advantage seems to be an element of abusive conduct exactly complementary to the requirement of lack of economic substance, representing the “other side of the coin”.

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4 SOUND NON-TAX REASONS

The Circular also analyses the concept of sound non-tax reason, as required by paragraph 3 of article 10-bis of Law 27 July 2000, no. 212, according to which “a transaction is not considered to be abusive when it is justified by sound and non-marginal non-tax reasons, even if managerial or organizational, aimed at improving the structure or functionality of the business of the taxpayer”. In this respect, Assonime provides two different point of views about the difficulties of reconciling the requirement of lack of economic substance, as stated by paragraph 1 of article 10-bis of Law 27 July 2000, no. 212, with that of sound non-tax reasons, as stated by paragraph 3 of the same article. According to first point of view, the two concepts are non-overlapping requirements as operating on separate levels. The requirement of lack of economic substance refers to the adequacy and appropriateness of the legal instruments used with respect to the economic purposes of the taxpayer. The second viewpoint, considered more coherent by Assonime, puts the two concepts on the same level, being only a difference of perspective between them, meaning that requirement of paragraph 1 would be considered by the Italian Revenue Agency’s perspective, while that of paragraph 3 would be considered by the taxpayers’ perspective. According to this point of view, lack of economic substance does not coincide with the incongruity of legal instruments used but with the incapacity of generating sound non-tax effects. For further information, please contact:

Dott. Claudio Romanelli RSM Palea Lauri Gerla Via Ettore De Sonnaz, 19 10121 Turin Tel: (+39) 011 .561 3282 Fax: (+39) 011.561 1733 email: claudio.romanelli@rsm.it www.rsm.it

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FOCUS ON EMPLOYMENT

(IN COLLABORATION WITH DE LUCA & PARTNERS AND HR CAPITAL IN MILAN)

DID YOU KNOW THAT…

….. subsidized part-time for retiring workers is now in effect?

Employees of the private sector who will reach the retiring age by 31 December 2018 will be eligible for a subsidy associated to a reduction of the working hours agreed with their employer (the so called “subsidized part-time”) subject to a number of conditions. In detail, subsidized part-time may be applicable to anyone who: ü was born in the month of May 1952 or earlier and, at the time of the subsidy request, has accrued

seniority contributions for at least 20 years to the general compulsory insurance (AGO) or to its alternative or exclusive forms;

ü has a full-time permanent employment contract; ü enters into an agreement with his/her employer for a 40% to 60% reduction of contractually-

agreed working hours. In so doing, the employee shall obtain: - in the monthly payslip and at the employer’s cost, an all-inclusive amount – which does not concur

to form part of the employee’s income – equal to the social security contribution towards the pension plan for the portion of work no longer performed, as well as

- recognition of the notional social security contributions in respect to the work no longer performed, as mentioned above.

This scheme, if accompanied by other types of employment contracts currently made available by the law (such as, for example, internship), could promote generational change within companies.

JUDGEMENT OF THE MONTH

Court of Cassation: invalidity of the probation clause leads to the application of legislation on dismissal restrictions

The Court of Cassation with judgement No. 17921 dated 12 September 2016 ruled that if a probation clause included in the employment contract is found to be invalid, the employer's termination of the contract is subjected to the application of the protections against unlawful dismissal. Thus, the Supreme Court of Cassation reversed the interpretation provided by the Court of Appeal, according to which the invalidity of the probation clause had to be followed automatically by reinstatement of the employment relationship and compensation for damages in an amount equal to the wages accrued from the date of withdrawal until the reinstatement. In fact, the Supreme Court referred to the following principle of law: “Dismissal triggered on the wrongful assumption of the validity of the probation clause, in truth invalid, referring to a permanent employment relationship, is subjected to the application of the rules restricting dismissals; therefore, the employee shall be under the protection provided by Law No. 300 dated 1970, article 18, if the employer does not attach and does not demonstrate the absence of the dimensional requirement, or the protection recognized by Law n. 604 dated 1966, in the absence of the necessary conditions for the applicability of the effective protection”.

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REGULATION

Accessory work and social support provisions: the Jobs Act's corrective decree was finally approved by the Council of Ministers

The Council of Ministers, in its meeting of 23 September 2016 has approved in its final form, a legislative decree containing, among others, provisions integrating and correcting Legislative Decree No. 81/2015 and Legislative Decree No. 148/2015. With regard to accessory work, the decree calls for the principal to notify by text message or email to the local office of the National Labour Inspectorate, the worker's personal details or tax code, as well as the place and duration of the accessory work, at least 60 minutes prior to the start of the work. In addition, the principal shall specify the day and time of start and end of the work. This is a new regulation with the goal of countering, through the traceability of the vouchers, any abuse. In order to ensure the effectiveness of the regulation reported, the decree establishes an administrative fine, ranging from a minimum of 400 Euros to a maximum of 2,400 Euros for each employee for which the notification is not provided. Additional new regulations have also been applied to social support provisions. The main ones concern: (a) the possibility of transforming job-security agreements (contratti di solidarietà difensivi) that have been in effect for at least twelve months or entered into before 1 January 2016, into job-creation agreements (contratti di solidarietà espansivi) in order to ensure more jobs, as long as this does not lead to a reduction of working hours greater than the agreed reduction; (b) for companies of strategic national interest from an economic standpoint that entered into government agreements by 31 July 2015, the possibility of requesting the extension of the contribution reduction pursuant to art. 6, paragraph 4, Law Decree No. 510/1996 for a term established by a special committee appointed by the Presidency of the Council of Ministers and in any case within the 24-month limit; (c) the possibility of authorizing further action of extraordinary wage subsidies for companies operating in the so called areas of complex crisis already identified. The benefit may be granted for no more than 12 months.

CASE LAW

Remote monitoring and safeguards established by the Workers' Statute and by the Privacy Code

The Court of Cassation, with judgement No. 18302 dated 19 September 2016, stepped in to settle a dispute between the "Istituto Poligrafico e Zecca dello Stato" (State Mint and Polygraphic Institute) and the Privacy Authority. In the specific case, the Privacy Authority, by order dated 21 July 2011, prohibited the Institute to store and categorize employees' data related to e-mail messages sent and received, Internet browsing information, and telephone calls made. According to the Privacy Authority, such data had been collected in breach of Articles 4 and 8 of the Workers' Statute. The Institute filed an appeal at the Court of Rome, which, however rejected it. Upon the decision of the Court, the Institute filed its appeal at the Court of Cassation. And the Court of Cassation, while confirming the observations made by the Privacy Authority, stated that, on the matter of remote monitoring, a fair balance must be found between the rights of the employer (in particular that of the free economic initiative) and the protection of workers' rights, primarily the right to privacy. A balance that, according to the Court, was provided specifically in Articles 4 and 8 of the Workers' Statute. In fact, article 4 has the purpose of ensuring that remote monitoring of the work performed, even if just potential, is protected by procedural safeguards regardless of the purpose for which it is ordered. And the art. 8 forbids the employer to "conduct investigations, even through third parties, on the political, religious or trade union opinions of the worker, as well as on facts not relevant to the professional role of the worker". Therefore, acquiring and storing data that contain (or that may contain) information of such kind, is in the opinion of the Court, proof of the prohibited conduct, translating into an unauthorized investigation on the opinions

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and conduct of the employee, even if the data is not subsequently used. Last but not least, the Supreme Court emphasized the need to provide the workers with a specific Privacy Policy Information Statement, such as to satisfy the requirements of Article 13 of Legislative Decree No. 196/2003. A decision which, although mainly concerning the interpretation of Article 4 of the Workers' Statute prior to the amendments introduced by Legislative Decree No. 151/2015, finds full correspondence and applicability also in the new formulation. Transfer of business even if in the case of sole transfer or personnel - applicability of the double limitation period of appeal upon formal communication The Court of Busto Arsizio with judgement No. 264 dated 12 July 2016, stated that the law principle according to which a transfer of business pursuant to art. 2112 of the Italian civil code exists also when transferring, without moving materials or assets, personnel between the transferor and the transferee, even if the personnel is not highly specialized and whose activity is unskilled labour, provided that the financial organisation coincides with the workers' organisation. In the same ruling, the Court noted that although Article 32 of the Law 183/2013 (the so called "Collegato Lavoro"), paragraph 4 letter c) extended the limitation terms of the provisions related to dismissals "upon transfer of employment contracts occurred in accordance with art. 2112 of the Italian Civil Code with term effective from the transfer date", it is also clear that the double limitation period (60 days for an out-of-court appeal and 180 days for the filing of the appeal) applies only when there is a formal written notice of the transfer of business. Therefore, in cases such as the present one where "the existence of a transfer of business unit is controversial (...) no limitation term can be applied." Dismissal for just cause: the immediacy of a disciplinary dispute must be automatically verified by a Judge The Court of Cassation, with judgement No. 17371 filed on 26 August 2016, confirmed the law principle already confirmed with ruling No. 26655 dated 28 November 2013 according to which, for the legitimacy of a dismissal for just cause, "the immediacy of the employer's reaction, as a constitutive element of the right of withdrawal, must be automatically verified by a Judge." In the case examined by the Supreme Court, the employer argued the invalidity of the judgement by which the Territorial Court - altering the decision of the Judge of First Instance - had declared the dismissal unlawful given the lateness of the disciplinary measure, although this ground of appeal had not been repeated in the appeal by the employee. The case-law in question suggests, in cases of disciplinary offence, to proceed against the employee promptly given that the immediate reaction of the employer may be subject to independent assessment by the Judge both in the first and/or second degree, even in the absence of a specific claim on that matter by the worker. False certification of attendance: legitimate dismissal imposed by the ASL The Court of Cassation, with judgement No. 17637 dated 6 September 2016, stated that regardless of the prerequisite of intentionality in the conduct, the dismissal ordered by the ASL (local health authority) to an employee who had falsely certified his attendance at work by means of stamping his time-card when arriving and leaving, was lawful. The case in question, according to the Supreme Court, complements the provisions of art. 55 letter a) of the Legislative Decree 165/2001 according to which the disciplinary penalty of dismissal is always applicable in the case of a false certificate of attendance "by altering the attendance tracking systems or in any other fraudulent manner." The interpretation of the Supreme Court is perfectly consistent with recent legislative action to penalize unjustified absenteeism of public officials.

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Dismissal notified in case of refusal of registered letter The Court of Cassation, with judgement No. 17062 dated 11 August 2016 ruled that notification of dismissal issued by registered letter, even if rejected by the recipient, is deemed notified. According to the Court, in fact, "A postal agent's note on the notice of receipt, showing rejection without further specification regarding the subject, recipient, or other person authorized to receive the letter who has practically refused the letter, can legitimately be assumed to refer to the refusal of receiving the letter or to sign the delivery record by the recipient, thus completing the notification and, therefore, ensuring the legitimacy and validity of the notification itself". This is because according to the law (Art. 6, Law No. 604/1966) the employer must notify the dismissal in writing but this does not require the use of fixed and specific means since it is sufficient for the dismissal to be notified to the worker. Thus, the Court has ruled out that the registered letter - containing the dismissal - needs to be subjected to the legislation for the notification of judicial documents which requires the postal agent to list the individual refusing the package who, if not a subject authorized to receive it, excludes the assumption of acceptance.

PRACTICE The Privacy Authority's ban on indiscriminate monitoring over the use of the Internet and e-mail by employees

The Privacy Authority, with provision No. 303 dated 13 July 2016 disseminated with the Newsletter No. 419 dated 15 September declared unlawful the processing of data carried out by a university using special software. Specifically, the Privacy Authority noted that the software in question was such as to allow a systematic monitoring of the activity and the use of Internet services individually performed by identifiable individuals; after assessing that the same could not constitute a "work tool", it declared it against the provisions of article 4 of the Workers' Statute, also in its new wording, lacking in addition a specific authorization by the ministerial bodies. From a different standpoint, the Privacy Authority noted the violation of the principles of lawfulness, relevancy and non-excessive data processing carried out by the university, in addition to the violation of the principle of fairness. This is because the university regulations on the use of the Internet and e-mail was not suitable to provide adequate information to the data subjects pursuant to art. 13 of the Privacy Code. Basically, with this provision, the Privacy Authority reiterated that indiscriminate monitoring on the use of the Internet and e-mail against employees is in conflict with the Privacy Code and with the "new" article 4 of the Workers' Statute. For further information please contact

Avv. Vittorio De Luca De Luca & Partners Largo A. Toscanini, 1 20122 Milan Tel. +39 02 365 565 1 Fax +39 02 365 565 05 email: info@delucapartners.it; www.delucapartners.it or Dott. Stefano Turchini HR Capital Gall. San Babila 4/B 20122 Milan Tel. +39 02 365 930 1 Fax +39 02 365 930 00 email: info@hrcapital.it www.hrcapital.it

RSM PALEA LAURI GERLA Milan office - Foro Buonaparte 67, 20121 - Milano Tel +39 02 89095151 Fax +39 02 89095143 Roma – Via delle Terme Deciane 10 – 00153, (registered office and operating office) Torino – Via Ettore De Sonnaz 19 – 10121 (operating office) www.rsm.it P.IVA e CF: IT13174301005

RSM PALEA LAURI GERLA is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm, each of which practices in its own right. The RSM network is not itself a separate legal entity of any description in any jurisdiction. The RSM network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose registered office is at 11 Old Jewry, London EC2R 8DU. The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug. © RSM International Association, 2015

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