Straight to the point
- Making the tax return – usually with form 730 – is one of the employees’ obligations, but it is also indirectly of interest to you: in fact, thecompany may have to repay credits or withhold debts from employees on their paycheck, depending on what their 730 shows
- You can repay a credit to an employee only up to the limit of how much you must withhold as income tax that month from all employees. For example, if you have to pay €1000 of IRPEF on behalf of employees that month, you will only be able to repay a credit up to the limit of €1000
- Making the 730 is mandatory only for employees with multiple employers or with different incomes in a year; when it is mandatory, the deadline is September 30th
A little context
The company is a “tax withholding agent”: but what does this mean? It means that the company replaces the employee in relations with the tax authorities. In other words, the company is a tax withholding agent because it pays taxes to the State on behalf of the employee. Once a year, with the tax return (form 730), the actual calculation of the taxes owed by the employee is made and, therefore, it is verified whether he is in credit, in debt or whether he has paid the right amount during the year.
What is 730 and what is it for
It is a form used to declare to the State how much income was received in the previous year the compilation (e.g. form 730/2024 refers to 2023 income). Employees and pensioners do it.
Basic, serves to obtain a refund of excess taxes paid by the employee during the year and which, in reality, were not due, because the employee was entitled to more “discounts” on taxes (“deductible charges” or “deductible expenses”, such as medical expenses, university fees, etc.)
Here’s how it works:
- During the year, you calculate how much tax the employee has to pay, without knowing for sure how many “discounts” he will be entitled to (“deductions”), and you pay them to the State on his behalf;
- when the worker presents his tax return (form 730), he communicates which “discounts” he is entitled to and recalculates the tax actually due, which could be lower than what you have already withheld;
- If so, the employee has a credit because he or she paid more taxes during the year than he or she owed
Is it possible for the 730 to show a debit instead of a credit?
Yes, it is possible especially in the case of multiple employment relationships in the same year. Since taxes are calculated on the total of all incomes, when there are multiple employment relationships it is possible that the individual company withholds taxes only on the basis of the salary of which it is aware, and therefore the employee pays less taxes than those due. In these cases, the extra payable will be deducted from your salary but can be paid in installments.
Jet HR Advice: if you have had multiple work relationships during the year, make the declaration as soon as possible so you can ask for a greater number of installments!
When is it mandatory to do the 730
Making the 730 is mandatory only in these cases:
- if in the same year the employee has different working relationships1
- if the employee has different types of income (e.g. employee salary + rent of a home)
- when you have an employer who is not a tax withholding agent (because he cannot). For example in the case of domestic workers/caregivers who are paid by private individuals and therefore receive their gross salary because no one has paid taxes for them during the year
In all other cases it is not mandatory to do so: if, however, the employee prefers, he can do it anyway and, if the 730 is zero (i.e. there are no credits or debits), he can not send it.
How the 730 refund works
Basically, the employee can choose whether be reimbursed by the company o by the Revenue Agency. If you choose the company, you must:
- repay the employee’s credit the month after you send the 730, based on how much IRPEF tax you must withhold from workers that month. It means that, if in a month the company has to withhold and pay €1000 in taxes for all employees, €1000 is the maximum it can reimburse in that month to employees who are in credit;
- if the credit of one or more employees is too high, you will reimburse it over several months, depending on your capacity;
- if you don’t have enough “capacity” to make a full refund, in December you will have to communicate the remaining credit to the employee and he will include it in the next tax return
Refund example
Employee credit: €5,000 from 730
IRPEF to be withheld and paid: €1,000
What you need to do:
Step 1: refunds to the employee only €1,000
Step 2: repay the remaining €4,000 in the following months, at the latest by December
Step 3: if you were unable to repay everything in December, you will inform the employee of the remaining credit, which he can include in the next tax return
The Jet HR Board
If an employee with high debts assumes that the company does not have the necessary “capacity” to make the reimbursement, to be sure of obtaining it in the year, he would be better off using the individual model. In this way the refund will arrive directly from the Revenue Agency: it will take a little more time, but the refund will arrive in a single solution.
When do you have to reimburse the employee?
Typically, you must reimburse the employee in the first paycheck following the month in which you received that employee’s 730-4 form from the Internal Revenue Service. There are variables that could cause delays (read employee questions below!)
What is meant by “income received”?
The concept of income does not only include “pure economic gain” (from employment, self-employment or business), but also that deriving from:
- buildings or land (e.g. if you own your own house),
- capital income (e.g. from investments or interest on current accounts)
- various incomes (everything that does not fall into the previous categories! eg prizes and allowances or capital gains from real estate sales)
What employees ask for
What does the 730 look like?
It is possible to present it independently by accessing the appropriate portal via spid, CIE or CNS (link), or have it presented to an authorized person (eg Caf, accountant, etc.)
When should the 730 be done?
It is the Revenue Agency that indicates the date from which it can be done. Generally, returns can be submitted from May (e.g. in 2024 starting from April 30). It must be done by September 30th of each year.
What is the difference between 730 and tax return?
The 730 is a type of tax return intended for employees and pensioners.
What is the difference between 730 and mod. PF income?
These are two different ways of filing your tax return. Since employee tax returns are usually credited, the 730 is easier to file independently (“pre-filled 730”). Furthermore, if you use the 730 form, any credit is reimbursed directly by the company with your pay slip. If, however, the Income model is presented, the credit is reimbursed by the Revenue Agency which takes longer. It makes sense to use the PF Income model when the employee has a very high credit and thinks the employer will not be able to repay it, or when he has a debt and does not want to pay through the pay slip.
If I am an employee, but I also have a VAT number, can I present the 730?
No! Those who have a VAT number must necessarily present the PF Income form.
I submitted the 730, but I don’t see the refund on my pay slip, why?
It could be for various reasons:
- delays in the management of refunds by the Revenue Agency due to high demand in the same period;
- any changes and/or additions by you or the accountant/CAF;
- problems in sending the 730 and/or incorrect indication of the withholding agent;
- company incompetence.
If I have received Naspi, do I have to present the 730?
In the event that that employee has a debt, even if not obligated, it is in his interest to present it to “recover” that debt. However, the obligation is triggered if during the year he received other income (eg if he worked for part of the year and had Naspi for part of the year).
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