Law 21/2020 (converting Law Decree 3/2020) has introduced two new IRPEF reduction mechanisms, applicable according to the amount of the total annual income earned:
a) an additional income treatment, for incomes up to €28,000, with tax greater than zero, calculated net of the only deduction of work. The measure in question will apply from 1 July 2020 and constitutes a "structural" intervention (therefore recognizable also in the year 2021 and later).
b) a "further" tax deduction for incomes over €28,000 and up to €40,000, applicable only for the period 1 July 2020 - 31 December 2020. This second measure is temporary, pending the announced revision of the IRPEF tax and related deductions.
Additional Income Treatment
The benefit referred to in point a of the above is expressly qualified as an "income support", with the function of integrating the net income received by employees with total income not exceeding €28,000.
For the purpose of perception, the worker must receive an income (of employed or assimilated work) whose gross tax, less the deduction of dependent work only, is greater than zero (this is, therefore, those who have an annual income of dependent work or assimilated higher than €8,145.00, threshold below which the gross tax is zeroed from the deductions from employment). The total income must be assumed net of the income of the real estate unit used as a main residence.
With regard to the particular tax regime aimed at facilitating the return to Italy of workers from abroad, the total income must be assumed gross of the exempt quota envisaged. The benefit in question is subject to the re-proportioning of the amount based on the work period of the year (days of employment).
Additional Tax Deduction
Awaiting a structural review of the personal income tax and related deductions, for the period 1 July 2020 - 31 December 2020, a further tax deduction will be applicable for income from employee and assimilated work over €28,000 and up to €40,000. In relation to the deduction in question, the total income useful for recognition is to be considered net of the value of the main home.
The determination of income must be taken gross of the exempt share provided for by the particular tax regime aimed at facilitating the return to Italy of workers from abroad.
The measure follows the general rule of deductions which provides for the re-proportioning of the amount due based on the work period.
The amount due by way of further deduction will not be fixed but will vary as the amount of total income increases, according to the rules below:
- Income over €28,000 and up to €35,000: the deduction will be equal to the result of the following algorithm: 480.00 + 120 × (35000 - Total income) / 7000;
- Income over €35,000 and up to €40,000: the deduction will decrease as the income increases, up to zero, according to the formula: 480.00 × (40,000.00 - Total income) / 5000.
In relation to the deduction referred to in this paragraph, in the event of non-entitlement, the installment recovery mechanism is envisaged. When the amount not due is of an amount greater than €60, the recovery through eight installments withheld by the substitute tax starting from the month in which the debt adjustment is made.
For more information on Italian tax and social security measures, consult our Global Insight Guide to Italy.