Revenue Agency Operational Guidelines on the Substitute Tax on Contract Renewals, Night Work, Holiday Work, and Shift Work

News No. 8/2026

In its “ News ” No. 2/E of February 24, 2026, the Italian Revenue Agency provided clarifications on the new provisions introduced by Budget Law No. 199/2025 regarding the application of the substitute tax on salary increases resulting from contract renewals and on premiums and allowances for night work, on holidays, on weekly days off, and shift allowances.

The changes in this area stem from the legislature's desire to adjust wages to the cost of living and strengthen the link between productivity and wages.

In this document News , we provide clarifications, breaking down the two topics of interest as follows:

1) Wage Increases Under Contract Renewals

2) Premium pay and allowances for night work, work on holidays, and work on weekly days off, as well as shift allowances

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1

Taxation of Pay Increases Resulting from Contract Renewals

Article 1, paragraph 7, of the 2026 Budget Law provides that pay increases paid to private-sector employees in 2026 are subject to a substitute tax in lieu of IRPEF and regional and municipal surtaxes, equal to 5%, unless the employee waives this right in writing.

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