TAX AUTHORITY: NEW CLARIFICATIONS ON TAX BENEFITS PROVIDED BY 2026 BUDGET LAW
With circular no. 3 of 24 June 2026, the Italian Tax Authority provided again clarifications on the scope of application of the tax relief provided by Law No. 199 of 30 December 2025 (the so-called 2026 Budget Law) concerning salary increases resulting from contract renewals as well as bonuses and allowances for night work, work on public holidays, work on weekly rest days or shift work.
Specifically, with regard to the taxation of salary increases in contract renewals signed during the three-year period 2024–2026 and paid between 1 January and 31 December 2026, these are subject to a 5% substitute tax, as well as regional and municipal surcharges totaling 5%, which also applies to salary increases:
- relating to allowances paid monthly in connection with the performance of duties (e.g., cash allowances or variable allowances);
- relating to financial years prior to the 2024–2026 three-year period, except for one-off payments;
- paid on the basis of an individual agreement between the employee and the employer as a “superminimo” or similar remuneration components;
- paid in relation to remuneration for cancelled annual leave days and public holidays, any holiday bonus provided for in National Collective Bargaining Agreements (NCBAs), as well as any additional payment provided for in individual NCBAs for the cancelled public holiday on 4 November.
Moreover, with reference to the tax benefit dedicated to surcharges and allowances for night work, work on public holidays, work on weekly rest days or shifts up to a maximum limit of €1,500 of the relevant taxable income (art. 1 paras. 10 and 11 of the 2026 Budget Law), the Authority has specified that the substitute tax at a rate of 15% applies also to:
- the premium provided for in the NCBA for work carried out on a Sunday, even if this does not coincide with the weekly rest day provided for in the contract;
- the full remuneration paid for night-time overtime or overtime on public holidays;
- the overnight allowance pursuant to article 117 of the NCBA for the Credit Sector;
- in the case of vertical part-time working, only where work is carried out on the rest day agreed by the parties (and does not apply, however, in the case of additional work on days not identifiable as rest days or where flexible working arrangements are in place, for which ad hoc premium rates apply);
- the on-call allowance, even where the employee has not actually carried out the related work.
Finally, the circular clarified that neither of the aforementioned substitute taxes applies where the employer does not apply a NCBA, whilst they apply in full to workers who benefit from the new preferential scheme for repatriated workers and for lecturers and researchers resident abroad who relocate to Italy.
