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21.012021

The 2021 Budget Law: social security contribution exemptions overview

The 2021 Budget Law continues to focus on social security contributions, to generate employment and ensuring greater company liquidity. Below is a brief overview of the main legal exemptions.

Social security contribution exemption for companies that do not apply for COVID-19 emergency wage subsidies.

The August Decree introduced a social security contribution exemption, available until 31 December 2020, for private employers, excluding the agricultural sector, who:

  • had not applied for the emergency wage subsidies under the August Decree; and
  • had already benefited from the Covid-19 emergency wage subsidies in May and June 2020.

This exemption was calculated up to double the hours of wage subsidy already obtained in May and June 2020, excluding INAIL premiums and contributions.

The 2021 Budget Law grants the same employers an exemption from the payment of social security contributions up to eight weeks. This must be used by 31 March 2021, up to the hours of wage subsidies already obtained in May and June 2020,  excluding INAIL premiums and contributions.

This exemption is exactly half of the exemption under the August Decree.

New contribution exemption for permanent hires under 36 years of age

To reduce social security contributions to be paid by employers when hiring, a contribution exemption has been introduced for permanent hires of those under 36 years of age for the 2021-2022 two-year period.

Managers or domestic workers are excluded. In addition to the age requirement, those hired must not have had permanent employment relationships with other employers.

The contribution exemption is 100 per cent of the contributions due by the employer up to a maximum of €6,000 annually, excluding lNAIL premiums and contributions.

The exemption’s duration is 36 months, which is increased to 48 months for employers with headquarters or production units located in the regions of Abruzzo, Molise, Campania, Basilicata, Sicily, Puglia, Calabria and Sardinia.

Employers who have dismissed employees with the same qualifications as the hired employee for justified objective reasons in the six months prior to recruitment are not eligible for the exemption.

The period during which the exemption may not be granted for individual redundancies for justified objective reasons or collective redundancies of persons in the same production unit with the same qualifications as the hired employee is increased from six to nine months after hiring.

Tax exemption for hiring women

The 2021 Budget Law modified the existing exemption for hiring women. This included some features and enhanced its benefits.

Two essential changes have been introduced (albeit experimental because they are limited to the 2021-2022 two-year period), namely:

  • Extending the contribution exemption for hiring women under certain conditions under the Fornero reform (Law 92/2012) to all female workers hired in the same two-year period, and
  • increase from 50 to 100 per cent of the reduction in employer contributions.

Similar to the exemption for those under 36 years of age, the contribution exemption for hiring female workers is 100 per cent and up to a maximum amount of €6,000 annually.

The exemption’s duration is 12 months for fixed-term hires, which can be increased to 18 months for permanent hires or change from fixed-term to permanent contracts.

A necessary and sufficient condition to benefit from the exemption is that the hiring results in a net increase in employment calculated based on the difference between the number of employees recorded in each month and the average number of workers employed in the previous twelve months.

Contribution reduction for Southern Regions

Following the provisions of the August Decree, the legislator is looking at the contribution reduction for Southern regions again. The European Commission gave its authorisation and INPS already provided some initial operational clarifications with circular no. 122/2020.

The measure’s objective is to ensure employment levels in some regions of central and southern Italy (Abruzzo, Molise, Puglia, Campania, Basilicata, Sicily and Sardinia) during the pandemic crisis.

The Southern Regions’ contribution reduction includes an exemption from private employer contributions other than those in the agricultural sector or using domestic work contracts, without prejudice to pension benefit calculation rate.

The exemption concerns private employers (including professional firms, moral and religious bodies, and associations), other than those in the agricultural sector or using domestic work contracts.

All subordinate employment relationships are included provided that the geographical requirement is met, i.e. work must be carried out in one of the following regions: Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily.

Since this measure will be operational until 2029, the exemption during the different years is:

  • 30 per cent until 31 December 2025;
  • 20 per cent for 2026 and 2027;
  • 10 per cent for 2028 and 2029.

The exemption from social security contributions is cumulative with other benefits up to the total social security contribution rates owed by the employer.

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The 30 per cent contribution exemption for Southern regions will be granted for hires until 30 June, in compliance with the European Commission’s “placet” which already took place for the exemption that concerned the last months of 2020, under art. 27, paragraph 1, of the August Decree.

The effectiveness of the above exemptions and benefits for subsequent periods is subject to a new decision of the European Commission, under art. 108, of the EU Treaty.