2026 Budget Law: Overview of the Main Tax, Employment and Social Security Measures

The 2026 Budget Law (Law No. 199 of 30 December 2025) was published in the Official Gazette on 30 December 2025 and entered into force on 1 January 2026. The measure introduces a wide range of provisions concerning, among others, personal income tax (IRPEF), certain forms of substitute taxation applicable to specific components of remuneration, measures supporting parenthood, hiring incentives, and social security regulations.

Main Tax Provisions of the 2026 Budget Law

Among the most significant changes is the revision of the IRPEF regime. The 2026 Budget Law modifies the IRPEF rate applicable to the second income bracket (from €28,000 to €50,000), reducing it from 35% to 33%.

With specific regard to employment income, the Law also introduces, for the year 2026 only, a 5% substitute tax on salary increases granted to employees under national collective bargaining agreements (CCNL) renewed between 1 January 2024 and 31 December 2026. The relief applies automatically—unless the employee opts out—and is available only to workers whose employment income in 2025 did not exceed €33,000.

In the same area, changes are also introduced regarding productivity bonuses and profit-sharing schemes: for 2026 and 2027, the substitute tax rate on these amounts is reduced to 1%, with an increase in the annual ceiling eligible for tax relief to €5,000, while maintaining the requirement that the incentive be linked to second-level collective bargaining.

Continuing with tax relief measures, for the 2026 tax year, a 15% reduced tax rate is introduced—up to an annual limit of €1,500—to be applied to amounts paid as bonuses and allowances for night work, work performed on public holidays or weekly rest days, and shift allowances provided under collective agreements. The benefit is granted to workers whose 2025 employment income is below €40,000.

In addition, the 2026 Budget Law raises the tax exemption threshold for electronic meal vouchers, increasing it from €8 to €10 per day as of 1 January 2026.

Incentives for Stable Employment and Measures Supporting Parenthood

Regarding incentives for stable employment, the 2026 Budget Law allocates substantial resources for the 2026–2028 period, aiming to promote youth employment, support disadvantaged female workers, and strengthen employment growth within the special SEZ for Southern Italy. The funds will be used to grant an exemption from employer social security contributions for permanent hires and for fixed-term to permanent contract conversions carried out between 1 January and 31 December 2026, for a maximum duration of 24 months. The implementing rules and eligibility criteria will be defined by a decree of the Ministry of Labour, issued in agreement with the Ministry of Economy and Finance, which will also consider the impact of the exemptions introduced by the “Cohesion Decree” (Decree-Law 60/2024) on employment trends.

In parallel, the Law introduces measures supporting parenthood. While awaiting implementation of the contribution relief for working mothers provided by the 2025 Budget Law (postponed to 2027), the so‑called “bonus mamme” is confirmed for 2026. It consists of a monthly payment of €60 for employed and self‑employed women with two or more children and annual income not exceeding €40,000.

The Law also introduces contribution reliefs for hiring mothers with at least three minor children who have not had regular paid employment for at least six months, as well as an incentive linked to converting full‑time employment contracts into part‑time arrangements for working parents of at least three children.

Further measures supporting families include an extension of the eligibility period for parental leave, with the child’s age limit rising from 12 to 14 years. Additionally, the maximum number of days that can be taken for a child’s illness between ages 3 and 14 increases from 5 to 10 days.

Finally, the Law provides for the extension of fixed‑term contracts (including agency work contracts) entered into to replace employees on maternity or parental leave: such contracts may now be extended to allow a handover period until the child’s first birthday.

Reforms Concerning Pensions, Severance Pay (TFR), and NASpI

On the pension front, the 2026 Budget Law implements the adjustment of pension age requirements to life expectancy, providing for a gradual three‑month increase in retirement age: one month from 2027 and the remaining two months from 2028.

With regard to supplementary pensions, from the 2026 tax year the deductible limit for contributions paid into supplementary pension schemes is increased to €5,300 per year. Furthermore, starting 1 July 2026, newly hired workers will be automatically enrolled in supplementary pension schemes unless they opt for a different allocation within 60 days from the start of employment.

Also noteworthy is the expansion of employers required to transfer severance pay (TFR) to the INPS Treasury Fund. The 2026 Budget Law lowers the threshold to companies with more than 50 employees, calculated on the average workforce of the previous calendar year (60 employees for 2026–2027). The expansion of the employer base required to make such payments will follow a gradual path, reaching a threshold of 40 employees by 2032.

Lastly, the Law modifies the rules on the early payment of NASpI for self‑employment initiatives. From 1 January 2026, NASpI will be paid in two instalments: a first instalment equal to 70% of the total amount, paid under existing procedures, and a second instalment covering the remaining 30%, disbursed at the end of the benefit period and in any event no later than six months from the date of the application for advance payment.