Prepared by Marzio Scaglioni and Antonio Giardina
After years of awaiting, the Agreement on Social Security signed between Italy and Japan (hereafter the “Agreement”) finally and fully enters into force, allowing the enhancement not only of commercial trades but also of know-how between the two countries. Beyond that, the main benefit of this deal will be to exempt posted workers to and from Japan from social security contribution obligations in the country where the work is being carried out – by de facto – ceasing the double social security taxation applied up to now by reducing the labor costs of posted personnel.
This Agreement – undersigned on an open-ended basis – was signed in Rome in February 2009 and ratified by Italy in June 2015, however, only on January 16th of this year with a press release, the Italian Ministry of Labor announced the effectiveness of this agreement as of April 1st, 2024.
The Italian Social Security Institute (hereinafter “INPS”) issued administrative instructions on the management of the Agreement within its Circular No. 52/2024. The Institute, within the framework of this circular, has addressed several topics going to address, on the one hand, the different categories of workers involved in the light of our legal framework, and on the other, defining some case scenarios in administrative terms. Below is a summary of the most relevant points included within the document issued by INPS.
Sphere of application
As a preliminary point, INPS, recalling Article 2 of the Agreement and Article 2 of the Administrative Agreement, specified that the above provisions – in the Italian context – applies to pension systems that include (i) the General Compulsory Pension Scheme for Invalidity, Old-Age and Survivors, (ii) the Special Schemes of the General Compulsory Pension Scheme for the Self-Employed, (iii) the special social security fund for self-employed workers according to Article 2, paragraph 26, of Law No. 335/1995, (iv) the substitute and exclusive management schemes of the General Compulsory Pension Scheme. The Institute also specified that the Agreement also applies to members of the Public Employment, similar to the provisions of the Agreement with the State of Israel and the Agreement with the Republic of Turkey on Social Security.
Subsequently, INPS, also specified that the recipients of this Agreement will be all individuals who are or have been subject to the legislation of one of the contracting states, as well as other people (family members and survivors) who have derived rights regardless of their citizenship. Finally, individuals residing in the territory of a contracting state are entitled to the same treatment as nationals of that state.
Principle of Territoriality and Applicable Legislation.
The Circular, as well as the Agreement under review, invokes the general principle of territoriality, according to which a person carrying out an employed or self-employed activity on the territory of a Contracting State is exclusively subject to the legislation of the State in which that activity is carried out. Nevertheless, the Agreement has provided exceptions for the following categories of workers:
- Subordinate Workers
- Self-employed workers
- Workers employed on board ships
- Civil servants and assimilated employees
Indeed, individuals in the above categories who are employed in either of the two contracting states will continue to be subject to the social security legislation of their country of origin for a maximum period of five years. This period is further extendable for an additional 5 years subject to receiving an authorization from the competent authorities.
The INPS further clarified that the applicable legislation provisions only cover compulsory insurance under the legislations of both contracting states. In addition, it was also specified that the Agreement includes certain clauses aimed at avoiding double contribution coverage with regard to unemployment insurance. Indeed, in the light of these clauses, a worker, insured against the risk of unemployment under the legislation of one Contracting State, who is posted to the territory of the other Contracting State, remains subject only to the legislation of the first Contracting State throughout the duration of the posting and any extension thereof.
Therefore, in the case of a worker insured in Italy against the risk of unemployment who is posted to Japan, for the entire duration of the posting he or she is exempt, vis-à-vis Japanese legislation, from the obligation to contribute to the insurance coverage of this risk. Similarly, the worker already insured in Japan against the risk of unemployment, if posted to Italy, is exempted vis-à-vis Italian legislation, from the obligation to pay the contribution due for the said risk.
Certificates that can be used for administrative compliance purposes
INPS – attached to its circular – has also issued a special form – “IT/JPN 101” – which must be duly filled out and sent to the territorially competent INPS offices as well as also to the Japanese Operation Office.
In case of extension, the request aimed at benefit of Italian social security provisions must be submitted to the Italian Ministry of Labor, as the competent authority for Italy. The “IT/JPN 101” form originally issued by the territorially competent Structure of INPS for the first period of secondment (not exceeding 5 years) must be attached to the application for extension of the secondment.
Transitory Regime
INPS also provided important clarifications regarding the transitional regime for Japanese workers posted by a Japanese employer and employed in Italy on the Agreement’s effective date. More in detail, workers from Japan who, at the time of the entry into force of the Agreement, are working in Italy for a Japanese employer and who wish to avail themselves of the posting rules in order to be exempted from the application of Italian social security charges, are required to submit an appropriate application to the competent Japanese authority in order to obtain the issuance of the “JPN/IT 101” contribution coverage certificate.
Access to the contribution benefit, therefore, can be granted from April 1st, 2024, the date of entry into force of the Agreement, only if the posting application is submitted within the transitional period, agreed upon by the contracting states, of 6 months (i.e., October 1, 2024) plus an additional month (i.e., November 1, 2024) from the date of entry into force of the Agreement; conversely, for posting applications submitted to the Japanese authority after this deadline, the exemption is granted from the date of submission of the application. In any case, the exemption from the application of the Italian legislation may concern only the periods of work that are temporally from the date of entry into force of the Agreement.
Final Provisions
The INPS ends its circular by specifying that in the case of a person whose posting or self-employment-which is carried out in the other contracting state-has begun before the entry into force of the Agreement, the period of such posting or self-employment is considered to have begun from the date of entry into force of the Agreement.
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