2022 Budget Act

News . 04/2022

The 2022 Budget Law, No. 234 of December 30, 2021, was published in Gazzetta on December 31, 2021. It includes important changes regarding employment, families, and businesses.

Let’s summarize the most important ones:

1. New income tax rates and methods for calculating tax deductions;

2. IRAP Updates;

3. Simplifications regarding the “Patent Box”;

4. Repeal of Decree-Law No. 157 of November 11, 2021;

5. Tax credits;

6. Contribution exemptions and reductions to promote stable employment and pilot programs;

7. Reform of social safety nets;

8. Measures aimed at promoting corporate social responsibility and dialogue in the management of industrial crises;

9. Extracurricular internships;

10. Basic Income and LEPS for those who are not self-sufficient;

11. Social Ape.

With regard to other new measures (such as, for example: tax credits for renewable energy systems and composting facilities, subsidies for producers of DOP, IGP, and organic wines, the Sustainable Practices Fund, the Superbonus for the construction sector, the Facade Bonus and other construction tax credits, urban regeneration initiatives, tax collection notices, extension of the capital goods tax credit, amendments to the regulations on revaluation and realignment, extension of the effective date of VAT provisions, reduced IMU for non-resident pensioners, and much more), please refer to the text of the Law for anything not expressly indicated in this News.

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1. New income tax rates and calculation of tax deductions

The following amendments are made to the Consolidated Income Tax Law, No. 917 of December 22, 1986:

The gross tax is calculated by applying the following tax rates, based on income brackets, to the total income, net of deductible expenses:

1. Up to 15,000 euros, 23%;

2. Over €15,000 and up to €28,000, 25%;

3. Over €28,000 and up to €50,000, 35%;

4. Over 50,000 euros, 43%.

Therefore, the main change concerns the tax rates to be applied to the relevant income brackets, which are being reduced from 5 to 4.

The method for calculating tax deductions is changing; as of January 1, 2022, it will be calculated as follows, according to the summary table below:

a) Deductions for income from employment and similar sources (as per the new Article 13 of the TUIR) (summary table)

Annual deduction (in euros)	Annual income limit (in euros)
1.880	Up to 15,000 (the amount of the tax deduction cannot be less than 690 euros, or 1,380 euros for fixed-term contracts)
1,910 + ((1,190 * (28,000 – RC) / 13,000))	Over 15,000 to 28,000
1,910 * (50,000 - RC) / 22,000	Over 28,000 to 50,000
0	Over 50,000
Tax deduction due + 65 euros	Greater than 25,000 but less than 35,000

(b) New deduction for pension income (Article 13, paragraph 3, subparagraphs (a), (b), and (c) of the TUIR)

Annual deduction (in euros)	Annual income limit (in euros)
1.955	For income up to 8,500 (the amount of the deduction cannot be less than 713 euros)
700 + ((1,255 * (28,000 - RC) / 19,500))	Over 8,500 but not 28,000
700 * (50,000 - RC) / 22,000	Over 28,000 to 50,000
0	Over 50,000
Tax deduction due + 50 euros	More than 25,000 but not more than 29,000

c) New deduction for income treated as employment income and other income (Art. 13, para. 5, letters a) and b) if the total income includes one or more of the types of income referred to in Article 50, para. 1, letters e) (remuneration for in-house freelance professional activities by National Health Service employees, etc.) and f) (allowances, attendance fees, and other compensation paid by the State, regions, provinces, and municipalities for the performance of public functions, etc.), g) (allowances received by members of Parliament, etc.), h) (life annuities and fixed-term annuities established for consideration other than those serving a social security function), and i) (other periodic payments), excluding those arising from the periodic payments listed in Article 10, paragraph 1, letter c), among deductible expenses, 53, 66, and 67, paragraph 1, letters i) and l)

Annual deduction (in euros)	Annual income limit (in euros)
​1.265	Up to 5,500
500 + ((765 * (28,000 - RC) / 22,500))	Over 5,500 to 28,000
500 * (50,000 - RC) / 22,000	Over 28,000 to 50,000
0
Over 50,000 euros in tax credits + 50 euros	Greater than 11,000 but not greater than 17,000

d) Tax deductions for dependents

The reform regarding tax deductions for dependent family members is governed by Legislative Decree No. 230 of December 21, 2021, which introduced the Universal Child Allowance as a form of support for families with dependent minor children and, under certain conditions, for adult children up to the age of 21. The payment of the Allowance, which will begin on March 1, 2022, will result in the elimination of household allowances and deductions for dependent children from paychecks, as they will be replaced by the Universal Child Allowance, which will be paid directly by INPS.

Both the bridging allowance and the tax deductions for the aforementioned dependents will continue to appear on pay stubs through February 28, 2022. Effective March 1:

• tax deductions for dependent children aged 21 or older will remain in place;

• No additional deduction (in the amount of €400) will be granted for each child with a disability as defined by Law No. 104/1992, nor for those with more than three dependent children (an increase of €200 for each child starting with the first);

• The additional deduction for households with at least four dependent children will be eliminated.

• Please refer to our News Universal Child News for further details.

e) Tax-related supplementary benefits

With regard to the supplementary allowance for income from employment and similar sources provided for—pending a review of income support measures—by Decree-Law No. 3 of February 5, 2020, converted with amendments into Law No. 21 of April 2, 2020, is granted for income up to 15,000 euros (provided that the gross tax, calculated in accordance with the provisions of the law and with the applicable exclusions, exceeds the amount of the deduction due pursuant to Article 13, paragraph 1, of the TUIR).

The supplementary allowance is granted even if the total income exceeds 15,000 euros but does not exceed 28,000 euros, provided that the sum of the deductions referred to in Articles 12 and 13(1), the deductions referred to in Article 15(1)(a) and (b) and (1-ter) of the TUIR, limited to expenses incurred in connection with loans or mortgages contracted up to December 31, 2021, and the installments relating to the deductions referred to in Articles 15(1)(c) and 16-bis of the TUIR, as well as those relating to the deductions provided for by other regulatory provisions, for expenses incurred up to December 31, 2021, whether exceeding the gross tax.

The additional deduction is recognized for an amount not exceeding 1,200 euros, calculated as the difference between the sum of the deductions listed above and the gross tax.

By way of example, here is a list of the deductions to be taken into account for the purposes of the calculation:

• Tax deductions for dependents (limited to those that remain in effect);

• Deductions for income from employment and similar sources;

• “for interest expense and ancillary charges incurred in connection with agricultural loans or mortgages (limited to charges incurred in connection with loans or mortgages taken out on or before December 31, 2021);

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