Italy: Changes to productivity bonus taxes and INPS pension withholdings

In Italy, changes to productivity bonus taxation and new pension withholdings are set to impact workers and retirees.

Under current legislation, productivity bonuses will face a highly favorable 1% tax rate on amounts up to 5,000 euros during the 2026-2027 period. However, this is a temporary measure; without further parliamentary intervention, the tax rate is scheduled to return to 10% with a 3,000 euro cap starting in 2028.

Separately, the National Social Security Institute (INPS) has announced that certain state pensioners will face withholdings of up to one-fifth of their monthly payments. This measure targets former public employees who received excessive amounts in 2024 via the fourteenth-month payment or survivor pensions due to income calculation errors. Affected individuals will be notified via PEC, and the recovery of funds can be spread across up to 60 monthly installments. These deductions are expected to begin in December 2026 for the fourteenth-month payment and January 2027 for survivor pensions.