Withholding taxes of insurance agents: New provisions in the Italian Budget Law 2024
Following the approval of the Italian Budget Law 2024, as of 1 April 2024, commissions received by insurance agents for services rendered directly to insurance companies will be subject to withholding tax (Article 1, paragraph 89).
The new provision is aimed at fighting tax evasion. It extends the application of withholding tax to commissions received by insurance agents directly from insurance companies, to the amount and under the conditions set out in Article 25-bis of Presidential Decree 600/1973. Withholding tax is already in force for commissions paid under commission, agency, brokerage, trade representation and business procurement relationships.
As of 1 April 2024, withholding tax will have to be applied, at a rate of 23%:
- on 50% of the amount of commissions received by insurance agents; or
- on 20% of the amount of commissions if the recipients declare to their commissioners, principals or mandators that they continuously use the work of employees or third parties in the conduct of their business.
Insurance companies, to market their products, often collaborate with parties operating in sectors other than insurance (eg airlines, travel agency) who, in return, receive commission. In light of the new rule, it will be important to carefully evaluate the withholding discipline in these cases.
It would have been appropriate to distinguish between annual and multi-year contracts for paying pre-contracted commissions. In the latter case, given that commissions to agents contribute to the latter's income, applying the new provision will create a mismatch between the withholding to be made on the full amount of pre-contracted commissions and the share of the latter that will be part of the business income for the years following the year of collection.
