Recently, Ministerial Decree 40 of January 18 2008 containing provisions on procedures to be followed for payments by public authorities (government authorities, regions, provinces, municipalities, domestic, regional and local non-economic public entities) was enacted.
Pursuant to Article 2 of the Ministerial Decree, before paying amounts in excess of 10,000, the relevant public authority has to verify if the subject entitled to receive the payment has any outstanding liability for taxes. Should this be the case, the public authority cannot make the payment and must retain the amount corresponding to taxes due by its creditor.
The Ministry of Economy and Finance, General Accounting Office, enacted on July 29 2008 Circular 22 to provide guidelines for interpreting the Ministerial Decree. Pursuant to the Circular, all payments between public authorities or by a public authority in favour of companies wholly owned by public entities may be freely made without the need to verify in advance whether the party entitled to receive the payment has outstanding liability for taxes.
Similarly, in the event of payments due by public authorities under loans granted to them by banks or Cassa Depositi e Prestiti, the payments due under the loans do not fall within the Ministerial Decree and therefore the payments by the relevant public authority, in its capacity as borrower, may be freely made without the need for prior verification.
As to payments due to a counterparty which has acquired receivables towards a public authority pursuant to a receivables purchase agreement, the public authority is required to verify the tax position of the original assignor prior to making any payment to the assignee. Should the public authority discover an outstanding tax liability of the original assignor, the public authority is required to deduct such an amount from any payment due to the assignee.
Finally, as to payments of public authorities in favor of non-Italian residents, the Circular specifies that if the creditor holds an Italian tax code number, the public authority must verify the tax position of the creditor prior to making any payment. If, on the contrary, the non-Italian resident creditor does not have an Italian tax number, the payment by the public authority will be freely made.