Italian authorities closing down on Ryanair's contract scam
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Italian authorities closing down on Ryanair's contract scam
Today's news circulating across the bases:
Monti presenta il conto a Ryanair: una tassa ad hoc | TTG Italia
Someone use google translator and paste here, I'm off today and I'm going to celebrate this news with a couple of beers!
Monti presenta il conto a Ryanair: una tassa ad hoc | TTG Italia
Someone use google translator and paste here, I'm off today and I'm going to celebrate this news with a couple of beers!
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Crackdown on Ryanair with the Decree development . The document just approved by the Council of Ministers includes tax 'ad hoc' the Irish low cost.
Government enacts the law
FRANCESCO ZUCCO
According to what reported by Il Sole 24 Ore , the text includes a provision similar to that in force in France: the equalization of taxation of low cost to that of all other companies operating in Italy. At the moment, in fact, the carrier led by Michael O'Leary pay tax rates to 12 percent, according to the Irish legislation, even for Italian employees habitually employed in the Peninsula. To calculate the savings of the carrier, just keep in mind that the regulations require tricolor rate of 37 percent . The operation initiated by the government should bring in about 100 million euro . That figure, of course, would be to undermine the profits of the company. Decision of the Government Monti to adjust the rates of low cost puts a further question to a business model that now seems close to a revolution. Until a few days ago in the dock there were only the financing of airports with no frills (and in particular its Ryanair) now may be at least one other engine development of the carrier, the application of different working conditions those referred to in Italy. Now awaits the response of the CEO O'Leary.
Translated from above link
Government enacts the law
FRANCESCO ZUCCO
According to what reported by Il Sole 24 Ore , the text includes a provision similar to that in force in France: the equalization of taxation of low cost to that of all other companies operating in Italy. At the moment, in fact, the carrier led by Michael O'Leary pay tax rates to 12 percent, according to the Irish legislation, even for Italian employees habitually employed in the Peninsula. To calculate the savings of the carrier, just keep in mind that the regulations require tricolor rate of 37 percent . The operation initiated by the government should bring in about 100 million euro . That figure, of course, would be to undermine the profits of the company. Decision of the Government Monti to adjust the rates of low cost puts a further question to a business model that now seems close to a revolution. Until a few days ago in the dock there were only the financing of airports with no frills (and in particular its Ryanair) now may be at least one other engine development of the carrier, the application of different working conditions those referred to in Italy. Now awaits the response of the CEO O'Leary.
Translated from above link
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Lets specify we are talking of social security (including pension) not income taxes, that will still be paid in ireland.
This new approach is based on several pieces of evidence like the concept of "base",the concept of "effective management", the concept of "international operations", the definition of "employee", the law about "contract workers" and a few other bits of Italian legislation.
Just to give you an idea it seems that in order to comply with just social security any business activity must have a local office or branch through which it employs its workers, consequently these workers must have an Italian contract....and so on.
Fun times ahead.
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Isn't this something similar to how employment via FR/Brookfield is set up???
BBC 'helped its biggest stars to dodge tax' - Europe, World News - Independent.ie
BBC 'helped its biggest stars to dodge tax' - Europe, World News - Independent.ie
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No.
It's the complete opposite of the alleged BBC thing. That worked in favour of the employee. The FR scam works in favour of the company, and the Irish revenue. Why else do you think everyone is so pleased that the authorities are trying to stop it.
Does anyone else appreciate the rich irony that it takes the Italian government to expose alleged corruption
It's the complete opposite of the alleged BBC thing. That worked in favour of the employee. The FR scam works in favour of the company, and the Irish revenue. Why else do you think everyone is so pleased that the authorities are trying to stop it.
Does anyone else appreciate the rich irony that it takes the Italian government to expose alleged corruption
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That's not the info that is circulating lately, that's what the Irish revenue would love to keep but an in depth analysis of the issue seems to suggest that the whole thing will have to be paid in Italy.
This new approach is based on several pieces of evidence like the concept of "base",the concept of "effective management", the concept of "international operations", the definition of "employee", the law about "contract workers" and a few other bits of Italian legislation.
Just to give you an idea it seems that in order to comply with just social security any business activity must have a local office or branch through which it employs its workers, consequently these workers must have an Italian contract....and so on.
This new approach is based on several pieces of evidence like the concept of "base",the concept of "effective management", the concept of "international operations", the definition of "employee", the law about "contract workers" and a few other bits of Italian legislation.
Just to give you an idea it seems that in order to comply with just social security any business activity must have a local office or branch through which it employs its workers, consequently these workers must have an Italian contract....and so on.
Disregarding the big mess that is the whole employed/self employed thing in FR (de facto we can consider them employed, being per contract not allowed to freelance for anyone else), when it comes to INCOME TAXES, between most of EU country there are bilateral agreements to avoid double taxation. They are valid for all kind of income subject to taxes, including salaried employees and self employed people, in aviation and not.
In particulat between Italy and Ireland, see link
http://www.fiscooggi.it/files/immagi...irlanda-it.pdf
The article 14.3 specify that for people employed on board of planes and ships, the salary is taxed where the headquarter of the company is situated, in this case Ireland. Italy is not discussing on that.
Another matter is the social security.
The new EU Reg 465/2012 is very clear in this, but also before that it was already applicable: the social security needs to be paid where the worker is based. In Italy the social security is roughly 25/30% of the gross salary on the employer, and about 10% on the worker. Having paid that you have the right to use all the Italia security system, including public health system (free in Italy), unemployment benefits, maternity and sick leave, state pension etcetera. In Ireland the social security is much lower, especially for non resident.
In conclusio it is very common and legal to be in the condition to pay the income taxes in one country and the social security in another country.
Having said that FR employees have "enjoyed" their salaries with the very low irish social security contributions.
No doubt that FR will now modify the contract in such a way that they have to fork out, between the worker and italian state, the very same amount of money they are spending now. No way they are gonna have their profits reduced after all...
The difference will be absorbed by the worker, that means for the pilot a paycut of more or less a 25/30%.
Not necessary only a bad thing, especially for those who want to continue to work in Italy or have a story of contribution in Italy: the Italian pension system is actually one of the best in Europe, despite the latest modifications, ad the same goes for the unemployment benefits and similar stuff.
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dirk,
you forgot to mention one thing of para. 14.3: INTERNATIONAL OPERATIONS.
I can guarantee this is being looked into by a pool of legal people with "powerful" connections....
And there are other things you forgot to mention like the effective place of management, with 40 aircraft and crews permanently based in Italy it will be hard to prove you are just "passing by".....and remember that if it was like FR claims then every airline would move their offices to Ireland and happily operate in Italy,Spain,Germany,Sweden etc. enjoying irish tax benefits.
Another thing is social security, you seem to know your stuff so please explain how in practice you can pay social security in Italy from say your Irish/Maletese/Cypriotic company.
you forgot to mention one thing of para. 14.3: INTERNATIONAL OPERATIONS.
I can guarantee this is being looked into by a pool of legal people with "powerful" connections....
And there are other things you forgot to mention like the effective place of management, with 40 aircraft and crews permanently based in Italy it will be hard to prove you are just "passing by".....and remember that if it was like FR claims then every airline would move their offices to Ireland and happily operate in Italy,Spain,Germany,Sweden etc. enjoying irish tax benefits.
Another thing is social security, you seem to know your stuff so please explain how in practice you can pay social security in Italy from say your Irish/Maletese/Cypriotic company.
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I agree is clear that FR has a lot of support offices in Italy, but the most common interpretation so far is that the nationality of the company is determined by where the main headquarter is based, where the administrator operate and take their decisions. I am pretty sure it is in Ireland in this case, but you never know of course.
Let's take a company with bases worldwide. It would be difficult and very expensive to pay taxes in every single country you have a base, with all the different legislations.
Or, like many, including myself, you can get the gross salary in your bank account, and once or twice a year pay the taxes where you are due to pay. Income taxes is after all on the worker, not on the company. In most circumstances the employer can pay the taxes on your behalf taking it from your payslip, but in all the country as far as I know there are provisions to leave this task to the worker, through a commercialist or by himself.
How to pay social security?
I know how it works in Italy for foreign companies.
If you have many employees the most convenient is to have an office, or even a company employee in Italy, that in from of Italian SS system acts on behalf of the employer, paying contributions and adhering to the local laws.
Smaller companies achieve the same result by delegating an Italian commercialist that will do the same things, paying the employer and the employee part of social security and everything else. It is not as difficult as it sounds in fact, and I am pretty sure that the same is in all the other countries...
In my case it is a Maltese company with employees in all Europe.
Let's take a company with bases worldwide. It would be difficult and very expensive to pay taxes in every single country you have a base, with all the different legislations.
Or, like many, including myself, you can get the gross salary in your bank account, and once or twice a year pay the taxes where you are due to pay. Income taxes is after all on the worker, not on the company. In most circumstances the employer can pay the taxes on your behalf taking it from your payslip, but in all the country as far as I know there are provisions to leave this task to the worker, through a commercialist or by himself.
How to pay social security?
I know how it works in Italy for foreign companies.
If you have many employees the most convenient is to have an office, or even a company employee in Italy, that in from of Italian SS system acts on behalf of the employer, paying contributions and adhering to the local laws.
Smaller companies achieve the same result by delegating an Italian commercialist that will do the same things, paying the employer and the employee part of social security and everything else. It is not as difficult as it sounds in fact, and I am pretty sure that the same is in all the other countries...
In my case it is a Maltese company with employees in all Europe.
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Dirk,
I hate to bring bad news but very recently these dodgy employment practices have been investigated by professionals connected to the associations and to the labor courts.
By the way I think one of the above setups, the Maltese one, has been specifically looked into by professionals (not accountants but lawyers and labor experts).
What you say about the difficulty of having multiple bases across Europe with different tax,social and contract issues is what FR is claiming and making you believe but in fact our direct competitor Easyjet does just that with extreme ease.
Under the Italian legislation pilots are not self employed nor can be directors of companies that perform as pilots for a third party but , as you also mentioned, they are employees.
Now the question is: whose employees are they?According to you and BRK/FR they are eventually employees of all those different companies/LTDs that BRK forced them to set up across the EU.
Well according to the experts that is not true for various reasons linked to bits of the Italian legislation dealing with contract workers who cannot be subcontracted to a third party company for such long periods of time as per the BRK/Strm contracts (5 years), making them in fact FR employees.
Another huge problem, even if it was possible to subcontract workers for such long periods of time, is the fact that contract agencies are a highly regulated sector in Italy and must be officially registered as such making any "foreign" company not complying with the above national laws an illegal business on Italian turf.This also brings in another threat for those,like you, who operate in Italy through foreign companies: sanctions for the company itself , therefore you.
Let's say now then your Maltese company was to comply with the above regulations and was registered in Italy as a contract agency , well now it would have to hire you locally therefore with a local contract in order to be fully compliant.
This is just an overview of the briefing that was given by these professionals.
I hate to bring bad news but very recently these dodgy employment practices have been investigated by professionals connected to the associations and to the labor courts.
By the way I think one of the above setups, the Maltese one, has been specifically looked into by professionals (not accountants but lawyers and labor experts).
What you say about the difficulty of having multiple bases across Europe with different tax,social and contract issues is what FR is claiming and making you believe but in fact our direct competitor Easyjet does just that with extreme ease.
Under the Italian legislation pilots are not self employed nor can be directors of companies that perform as pilots for a third party but , as you also mentioned, they are employees.
Now the question is: whose employees are they?According to you and BRK/FR they are eventually employees of all those different companies/LTDs that BRK forced them to set up across the EU.
Well according to the experts that is not true for various reasons linked to bits of the Italian legislation dealing with contract workers who cannot be subcontracted to a third party company for such long periods of time as per the BRK/Strm contracts (5 years), making them in fact FR employees.
Another huge problem, even if it was possible to subcontract workers for such long periods of time, is the fact that contract agencies are a highly regulated sector in Italy and must be officially registered as such making any "foreign" company not complying with the above national laws an illegal business on Italian turf.This also brings in another threat for those,like you, who operate in Italy through foreign companies: sanctions for the company itself , therefore you.
Let's say now then your Maltese company was to comply with the above regulations and was registered in Italy as a contract agency , well now it would have to hire you locally therefore with a local contract in order to be fully compliant.
This is just an overview of the briefing that was given by these professionals.
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I don't know what kind of weird ideas you have built in your mind when you talk about my case.
I work for a Maltese general aviation company, with headquarter, AOC, office and whatnot in Malta. The planes and the crew are based where the owners of the planes want them to be based.
I, Italian resident, based in Italy, pay the income taxes in Italy. Every single cent of it. The company, and in part me, pay the social security in Italy.
To be noted that I could have paid income taxes in Malta, according to Malta-Italy agreement, but Malta oddly enough doesnt have any provision in its legislation to tax non residents in the context of international traffic.
It is perfectly legal, also after consultancy with local autorities, and the best way to do it, considering that crews are based in different countries. We are talking about small numbers, and it would make no sense in our case to have X local contracts, with X accountants taking care of local legislations.
I am lucky enough not to work for Ryanair.
Got it?
As per FR I agree the whole construction is an absolute disgrace, meant since the beginning to minimise the rights of the pilots, that are employees de facto, but with none of the right they should be entitled to have.
But nobody pointed a gun at their heads, and I did not hear any of them complaining when getting money almost tax free and with no contributions.
I would find it extremely amusing if now they would be complaining of the imminent paycut they are going to receive, when in fact they should only thank the politicians for what they are doing now. For once...
I work for a Maltese general aviation company, with headquarter, AOC, office and whatnot in Malta. The planes and the crew are based where the owners of the planes want them to be based.
I, Italian resident, based in Italy, pay the income taxes in Italy. Every single cent of it. The company, and in part me, pay the social security in Italy.
To be noted that I could have paid income taxes in Malta, according to Malta-Italy agreement, but Malta oddly enough doesnt have any provision in its legislation to tax non residents in the context of international traffic.
It is perfectly legal, also after consultancy with local autorities, and the best way to do it, considering that crews are based in different countries. We are talking about small numbers, and it would make no sense in our case to have X local contracts, with X accountants taking care of local legislations.
I am lucky enough not to work for Ryanair.
Got it?
As per FR I agree the whole construction is an absolute disgrace, meant since the beginning to minimise the rights of the pilots, that are employees de facto, but with none of the right they should be entitled to have.
But nobody pointed a gun at their heads, and I did not hear any of them complaining when getting money almost tax free and with no contributions.
I would find it extremely amusing if now they would be complaining of the imminent paycut they are going to receive, when in fact they should only thank the politicians for what they are doing now. For once...
Last edited by dirk85; 6th Oct 2012 at 19:34.
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Dirk is correct. EU 465/2012 dictates that SOCIAL SECURITY has to be paid in the country where your base is situated. Usually the pilot is a director of an umbrella company which in turn provides services to Fr via Storm or Brookfield. It is the umbrella company who employs the pilot which has to pay the employers contribution.
TAXES are as per double tax treaty between the country of residence of the pilot and the country of residence of the umbrella company. These are international agreements which have priority over national tax lax and Italy can not change them unilaterally.
TAXES are as per double tax treaty between the country of residence of the pilot and the country of residence of the umbrella company. These are international agreements which have priority over national tax lax and Italy can not change them unilaterally.
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Dear Sarah,
you should get your facts right and don't take everything you hear from BRK/FR as what the law and regs say.
The BRK setup in Italy is illegal and there is no double tax treaty that can over rule labor LAW.
If you were well informed you would also know that one of the trusted BRK accountant has been in Italy seven times in rider to setup an Italian branch.
And you know very well that FR/BRK wouldn't do anything like that unless absolutely needed.
you should get your facts right and don't take everything you hear from BRK/FR as what the law and regs say.
The BRK setup in Italy is illegal and there is no double tax treaty that can over rule labor LAW.
If you were well informed you would also know that one of the trusted BRK accountant has been in Italy seven times in rider to setup an Italian branch.
And you know very well that FR/BRK wouldn't do anything like that unless absolutely needed.
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Danny,
You are the one mixing things up! Labor law has nothing to do with taxation. The Italians can force FR to follow Italian labor eg maternity leave, duty times... BUT the can NOT change European social security regulations nor foreign tax matters.
I didn't recieve any advice from FR/brookfield but paid international advisors who are experts on the matter.
If eg a Belgian resident works on a FR contract in Rome, he can continue to pay his social security in Ireland for another 10 years according to EU 465/2012. He will pay his taxes in Ireland till the Irish-Belgian tax treay changes. Nothing the Italians can do.
The umbrella septup is dodgy, but there again it is the taxman from your country of residence who has the authority.
If the guy works via Brookfield the Belgian taxman can sue him for fake self employment, but once again nothing the Italians can do.
Of course the story is totally different for Italian residents, they could indeed be in big trouble very soon.
You are the one mixing things up! Labor law has nothing to do with taxation. The Italians can force FR to follow Italian labor eg maternity leave, duty times... BUT the can NOT change European social security regulations nor foreign tax matters.
I didn't recieve any advice from FR/brookfield but paid international advisors who are experts on the matter.
If eg a Belgian resident works on a FR contract in Rome, he can continue to pay his social security in Ireland for another 10 years according to EU 465/2012. He will pay his taxes in Ireland till the Irish-Belgian tax treay changes. Nothing the Italians can do.
The umbrella septup is dodgy, but there again it is the taxman from your country of residence who has the authority.
If the guy works via Brookfield the Belgian taxman can sue him for fake self employment, but once again nothing the Italians can do.
Of course the story is totally different for Italian residents, they could indeed be in big trouble very soon.
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It is no secret that FR already have a special contract ready for all their "italian based" pilots..
it has been ready for well a year... so I guess their pilots will one day have a new contract as required reading... with a nice little reminder that they will be removed from flying duties if contract is not signed within 1 week...
Only MRS was to be a shadow base i guess...
it has been ready for well a year... so I guess their pilots will one day have a new contract as required reading... with a nice little reminder that they will be removed from flying duties if contract is not signed within 1 week...
Only MRS was to be a shadow base i guess...
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Sarah,
Labor law can not only change taxation and social security but it can also take you to court if you dodge it.
Labor law in Italy clearly states that agency workers must abode by the specific regulations that apply to that sector, if BRK or any other company does its business in Italy through its workers (be it directors or pilots it doesn't matter) then this company will be subject to Italian labor law.
In Italy It is illegal for an agency to lease workers to a third party without being registered and abiding by specific and strict laws, even more so if this agency (BRK or storm) leases workers through contracts they sign with umbrella companies like the many LTDs they forced people to be directors of de facto adding an additional illegal intermediary between the actual worker (the pilot) and the actual employer (FR).
It is illegal for Italian companies, why should it be legal for Irish /Maltese/Cypriotic companies to do it on Italian soil?
Some consideration to the concept of residency should also be given: if you are a Belgian resident but you permanently work for an Irish LTD in Italy then it will not be up to you to tell the authority where you reside but it will be for the authority to determine according to several different criteria like where you have family ties, where you spend most of your time, where you carry out your work and so on.
If they determine that you in fact reside in Italy then your claimed residency won't help you with the tax man nor the social security office because for them you are fiscally and socially resident where they say.
Slightly different story for FR employees since the double tax treaties specifically deal with airlines and their place of effective management,their employees and international operations. But even in this case there is an ongoing debate which is at an official level because the authorities have already started asking FR for millions of unpaid social security for its Italian based crews, and this claim has been filed well before the newest EU law and it is based purely on the double tax treaties.Pretty much the same as the French case in MRS.
Some bases in Italy mostly fly domestic and all of them in general have a good 50% of domestic flights which makes it a huge business that has nothing to do with the definition of “international traffic” and its meaning in the tax treaties.
If you then investigate the technical details of being resident in Italy for social security reasons (as explained this is the case even before the new law especially for crews not on a permanent FR contract) then you’ll find out that you cannot divide social security from tax due to the fact that your Irish/maltese/whatever LTD (which is not an AOC holder therefore not comparable to an airline) is operating in Italy with workers based in Italy who must therefore abode by Italian labor law, beginning with an Italian compliant contract.
You'll be surprised at how not ready FR is in this matter....
Labor law can not only change taxation and social security but it can also take you to court if you dodge it.
Labor law in Italy clearly states that agency workers must abode by the specific regulations that apply to that sector, if BRK or any other company does its business in Italy through its workers (be it directors or pilots it doesn't matter) then this company will be subject to Italian labor law.
In Italy It is illegal for an agency to lease workers to a third party without being registered and abiding by specific and strict laws, even more so if this agency (BRK or storm) leases workers through contracts they sign with umbrella companies like the many LTDs they forced people to be directors of de facto adding an additional illegal intermediary between the actual worker (the pilot) and the actual employer (FR).
It is illegal for Italian companies, why should it be legal for Irish /Maltese/Cypriotic companies to do it on Italian soil?
Some consideration to the concept of residency should also be given: if you are a Belgian resident but you permanently work for an Irish LTD in Italy then it will not be up to you to tell the authority where you reside but it will be for the authority to determine according to several different criteria like where you have family ties, where you spend most of your time, where you carry out your work and so on.
If they determine that you in fact reside in Italy then your claimed residency won't help you with the tax man nor the social security office because for them you are fiscally and socially resident where they say.
Slightly different story for FR employees since the double tax treaties specifically deal with airlines and their place of effective management,their employees and international operations. But even in this case there is an ongoing debate which is at an official level because the authorities have already started asking FR for millions of unpaid social security for its Italian based crews, and this claim has been filed well before the newest EU law and it is based purely on the double tax treaties.Pretty much the same as the French case in MRS.
Some bases in Italy mostly fly domestic and all of them in general have a good 50% of domestic flights which makes it a huge business that has nothing to do with the definition of “international traffic” and its meaning in the tax treaties.
If you then investigate the technical details of being resident in Italy for social security reasons (as explained this is the case even before the new law especially for crews not on a permanent FR contract) then you’ll find out that you cannot divide social security from tax due to the fact that your Irish/maltese/whatever LTD (which is not an AOC holder therefore not comparable to an airline) is operating in Italy with workers based in Italy who must therefore abode by Italian labor law, beginning with an Italian compliant contract.
It is no secret that FR already have a special contract ready for all their "italian based" pilots..
it has been ready for well a year... so I guess their pilots will one day have a new contract as required reading... with a nice little reminder that they will be removed from flying duties if contract is not signed within 1 week...
it has been ready for well a year... so I guess their pilots will one day have a new contract as required reading... with a nice little reminder that they will be removed from flying duties if contract is not signed within 1 week...
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It has been reported that the following news item was printed in the Sunday Times on 7 October 2012:
HM Revenue & Customs is putting the squeeze on pilots and air stewards who avoid income tax by saying they do not reside in the country. Some 2,300 aircrew do this on the basis of the time they spend mid-air and in other time zones, although most have homes, bank accounts and even children in Britain.
HM Revenue & Customs is putting the squeeze on pilots and air stewards who avoid income tax by saying they do not reside in the country. Some 2,300 aircrew do this on the basis of the time they spend mid-air and in other time zones, although most have homes, bank accounts and even children in Britain.
Djerba
I suspect that story has been triggered by the fact that HMRC have recently written to all "flying" ex-pats asking them to confirm their status so I'm not sure it's related to the subject of this thread.
I also suspect
that a lot of the ex-pats the Times is referring to, whilst perhaps working for UK airlines, simply don't live in the UK and therefore pay their tax elsewhere, there's a bit more to their claims of being non-resident than simply " the time they spend mid-air and in other time zones".
FWIW having any of those does not automatically disqualify you from being non-resident for tax purposes, it depends on the exact circumstances ( though to be fair using your house in the UK as your own home might just cause a few problems..).
That said there's no doubt HMRC is looking harder at everybody.
I suspect that story has been triggered by the fact that HMRC have recently written to all "flying" ex-pats asking them to confirm their status so I'm not sure it's related to the subject of this thread.
I also suspect
that a lot of the ex-pats the Times is referring to, whilst perhaps working for UK airlines, simply don't live in the UK and therefore pay their tax elsewhere, there's a bit more to their claims of being non-resident than simply " the time they spend mid-air and in other time zones".
.... most have homes, bank accounts and even children in Britain
That said there's no doubt HMRC is looking harder at everybody.
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The Belgian Taxman can sue FR for False Self employment, NEVER the employee. European and Belgian law states that in case of false self employment, the employer is always the defendant.
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