On 30 December 2023, Italian Law no. 213/2023, entitled “State budget for the financial year 2024 and multi-year budget for the three-year period 2024-2026” (so-called “2024 Budget Law”), approved by the Council of Ministers on 16 October 2023 and by Parliament on 29 December 2023 was published in the Italian Official Gazette.
Cutting the “tax wedge”
Among the main innovations in the employment field is the extension for 2024 of the cut in the “tax wedge” (“cuneo fiscale”) already introduced by Italian Decree-Law no. 48/2023 (the so-called “Employment Decree”). Therefore, the reduction of the partial contribution exemption of the old-age/survivor’s pension (indennità vecchiaia e superstiti, ‘IVS’) rate for employees in the public and private sectors, with the exception of domestic workers, is confirmed. Specifically, this reduction is 6% if a worker’s monthly social security taxable amount is less than EUR 2,692, or 7% for a social security taxable amount less than EUR 1,923.
For 2024, however, this measure will not apply to the thirteenth month’s salary, consequently the additional monthly payment relating to 2023 will have an exemption rate of 2% while that relating to 2024 will be subject to the ordinary contribution rate.
Fringe benefits exemption
The 2024 Budget Law also provided for the raising of the exemption limit for fringe benefits, derogating from the provisions of Article 51, paragraph 3, of the Italian Income Tax Consolidation Act (Italian Presidential Decree No 917/1986, Testo unico delle imposte sui redditi, ‘TUIR’). The provision sets out that, under the conditions set out therein, fringe benefits are excluded from the calculation of employment income and, moreover, remain excluded from the payment of employer contributions. The tax and social security exemption applies to fringe benefits as long as they have an overall value of less than EUR 258.23 in the tax period in which they were received. If this threshold is exceeded, then the entire value of the sums received must be considered fully taxable.
The aforementioned Employment Decree had provided, for 2023 only and only for workers with dependent children for tax purposes, for an increase in this exemption limit to EUR 3,000, which remained unchanged for all other workers.
In this regard, Article 1, paragraph 16, of the 2024 Budget Law established that, limited to the 2024 tax period, and within the overall limit of EUR 1,000, the value of the goods sold and services provided, as well as the sums paid or reimbursed to the same workers by employers for the payment of domestic water utilities, electricity and natural gas, the costs of renting the first home or interest on the mortgage relating to the first home, do not contribute to the calculation of income.
This limit is raised to EUR 2,000 for workers with dependent children, including recognised children born out of wedlock, adopted or foster children. In this regard, in line with what is already required in 2023, in order to benefit from the increase in the exemption limit, it will be necessary for the worker to provide the employer with a specific self-certification relating to the dependent children for tax purposes.
Parental leave allowance
The 2024 Budget Law changes the allowance due during the period of parental leave (so-called “optional”). In particular, in addition to the increase of up to 80% of the allowance for the first month used, introduced by the 2023 Budget Law, there is also an increase to 60% of the allowance for the second month of parental leave.
The legislation also specifies that, for 2024 only, this allowance is raised to 80% also for the second month, it being understood that the allowance for the following months remains 30% of salary.
To benefit from the increase described above, the original conditions remain valid, i.e. (i) the parental leave must be used during the first six year of the child’s life (or entry into the family) and (ii) the mandatory leave must end after 31 December 2023.
Reduction of contributions for working mothers
Finally, the Budget Law introduces, limited to 2024-2026, for female permanent employees with three or more children, a 100% reduction in IVS contributions up to when the youngest child is 18 (within the annual limit of EUR 3,000 apportioned on a monthly basis).
For 2024, that provision is extended, on an experimental basis, to working mothers of two children, until the youngest child is 10. The exemptions do not apply to domestic work relationships.