The 4% Condominium Withholding on Works and Services

An Italian condominium is a withholding agent and, when it pays consideration for works and services rendered by a business under a contract, it must withhold 4 percent as an advance payment of the income tax due by the recipient. The obligation is set by Article 25-ter of Presidential Decree 600/1973 and falls on the condominium manager in office, who withholds at the time of payment, pays the amount to the State and certifies the sums withheld to the supplier.

The legal basis: Article 25-ter of DPR 600/1973

The 4% withholding was introduced by the 2007 budget law (Law 296/2006), which added Article 25-ter to Presidential Decree 600/1973. The rule states that the condominium, as a withholding agent, applies a 4% withholding with the right of recourse on consideration due for works and services contracts performed in the exercise of a business, even if rendered to or in the interest of third parties.

The purpose is to make payments to firms working for condominiums visible, reducing the risk of tax evasion. The withholding is an advance: the supplier recovers it when filing the income tax return, offsetting it against the tax due.

When it applies and when it does not

The withholding is triggered on consideration for works and services provided by businesses. It typically covers ordinary and extraordinary maintenance, cleaning, gardening, lift and system maintenance, and concierge services entrusted to a firm.

• It applies to suppliers acting in the exercise of a business (sole proprietors, companies, cooperatives)
• It covers works or services contracts, including continuous ones
• It is calculated on the taxable amount, net of VAT
• It does not apply to self-employed or professional services, which are instead subject to the 20% withholding under Article 25 of DPR 600/1973
• It does not apply to mere supplies of goods without a prevailing service component

A useful clarification concerns supplies of electricity, water and gas, and insurance or banking fees: not being works or services contracts within the meaning of Article 25-ter, they are not subject to this withholding. The distinction between supply of goods and service contract must be assessed case by case, looking at the prevailing performance.

How the withholding is calculated

The withholding applies to the taxable amount of the service, excluding VAT. If a maintenance firm invoices 1,000 euros plus 22% VAT, the condominium calculates 4% on 1,000 euros, that is 40 euros, withholds them and pays the supplier the invoice total reduced by those 40 euros. The withholding therefore does not affect the final cost borne by the condominium: it is part of the consideration that, instead of going to the supplier, is paid to the tax authorities on the supplier's behalf.

Tax codes and payment via the F24 form

Withholdings are paid using the F24 form, Treasury section, indicating the condominium's tax code as the withholding agent. There are two dedicated tax codes for the 4% withholding, distinguished by the type of recipient.

• Tax code 1019: recipients subject to personal income tax (sole proprietors and individual businesses)
• Tax code 1020: recipients subject to corporate income tax (companies and entities)

Since 2017 a specific payment rule applies to this withholding, introduced by the 2017 budget law with paragraph 2-bis of Article 25-ter. The condominium pays the withholding when the total amount withheld reaches 500 euros; in any case it must pay by 30 June and 20 December of each year, even if the threshold has not been reached. This half-yearly schedule avoids tiny monthly payments when the amounts withheld are modest.

Certification, CU and the 770 return

After withholding and paying, the condominium must issue the supplier the Certificazione Unica (single certification) stating the sums paid and the withholdings applied, and summarise the year in the 770 return. The CU must be sent to the Italian Revenue Agency and delivered to the recipient by 16 March of the following year, while the 770 is filed by 31 October. Keeping invoices, payments and withholdings well organised during the year makes these obligations far simpler.

The most common mistakes

Typical slips include failing to apply the withholding on invoices from firms wrongly considered exempt, confusing the 4% on contracts with the 20% on self-employment, and mixing up tax codes 1019 and 1020. Another sensitive point is late payment: in these cases you can remedy through voluntary correction (ravvedimento operoso), paying the tax with a reduced penalty and statutory interest.

Managing withholdings correctly means linking invoice, payment, tax code and certification without re-typing data. AmministraPro tracks suppliers, calculates withholdings and prepares the data for the F24, CU and 770 in a single flow: the features are described on the /funzioni page, while the plans and their costs are on /prezzi.