Italy implements tax reforms for income assessments and TFR

Italy is implementing fiscal reforms that impact how multi-year income components and severance pay (TFR) are taxed and audited.

The Omnibus Corrective Decree introduces new rules regarding the statute of limitations for tax assessments on multi-year income components. Previously, judicial precedents allowed the tax administration to contest annual portions of a cost many years after its initial entry in a balance sheet, forcing taxpayers to maintain documentation for decades. The new reform aims to set the expiration term for assessments starting from the tax period in which the generating event occurred, except for cases involving non-existent operations.

Additionally, starting January 1, 2027, changes to the taxation of the Trattamento di Fine Rapporto (TFR) will take effect. The current mechanism, which allows workers to choose between 2006 tax rates or current IRPEF rates if the former is more advantageous, will be abolished. This change may result in lower net severance payments for some employees, particularly those with higher liquidations, as the tax protection provided by the older rules will no longer exist.