2 consequences for self-employed workers who refuse the preventive agreement

The Biennial Preventive Arrangement and its Implications for Self-Employed Workers

The biennial preventive arrangement could pose a significant issue for self-employed workers.
Refusing the Tax Office’s proposal could expose freelancers and professionals to tax penalties.

The Risks of Not Accepting the Preventive Arrangement

Initially, there were talks about facing tax audits for those unwilling to accept the preventive arrangement proposal.
However, a new provision included in the legislative decree reforming penalties introduces additional consequences.

Those who opt out of the biennial preventive arrangement could potentially face double penalties from the Tax Office.
In addition to increased scrutiny, there are now also sanctions with surcharges.

The new decree, currently finalizing its parliamentary process, states that if an administrative penalty for violations is imposed for tax periods where the preventive arrangement proposal was not accepted, the threshold for applying the penalty is halved.
This reduction also applies to those who, despite initially joining the arrangement, breach its regulations and are subsequently excluded.

Impact on Tax Penalties

Specifically, for non-accepting parties, the €50,000 limit is reduced by half to €25,000.
Additional penalties range from three to six months for amounts exceeding €25,000, extending up to 12 months for penalties over €50,000.

The National Council of Chartered Accountants had already highlighted the severity of the rules related to the preventive arrangement.

The increased scrutiny and halving of thresholds for additional penalties appear to pressure self-employed workers into accepting the biennial preventive arrangement, which was originally based on voluntary participation.
This diminishes the freedom of choice due to the significant pressures and penalties for non-participation.

An overarching issue is that the fiscal policy for the upcoming biennium heavily relies on revenues from the biennial preventive arrangement.
Deputy Minister Leo has repeatedly stated that these proceeds will finance the 2025 Personal Income Tax reform.

However, what is overlooked is that for self-employed workers, committing to the biennial preventive arrangement represents a gamble.
In many cases, it could lead to overpaying taxes, especially during periods of reduced earnings such as extended illness.

Self-employment earnings often fluctuate year to year due to variables like client loss or injury, making the Tax Office’s proposal less appealing.
Individuals should have the freedom to choose without the fear of penalties for not contributing to funding the planned Personal Income Tax rate reduction in 2025.