Budget law 2027: what the bill provides and what changes

Contract renewals: 5% substitute tax

Status: Under discussion (bill)

Pay rises resulting from collective agreement renewals would be taxed at a 5% substitute tax, instead of personal income tax and surtaxes. It concerns private-sector employees whose 2026 employment income was no more than 33,000 euro.

Start date: Year 2027

Source: Art. 6, budget bill

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Night, holiday and shift work: 15% tax

Status: Under discussion (bill)

Amounts paid up to 1,500 euro a year as supplements and allowances for night, holiday or shift work, provided for by collective agreements, would be taxed at 15%. It applies to private-sector employees whose employment income in the previous year was no more than 40,000 euro.

Start date: Temporary measure, year 2027

Source: Art. 7, budget bill

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Young workers: 1% substitute tax

Status: Under discussion (bill)

In 2027 employment income of private-sector workers born after 31 December 1997, with income of no more than 28,000 euro, would be taxed at 1% on a share equal to the increase over the previous year’s income, adjusted for days worked, up to 2,500 euro. Workers can choose the ordinary rules.

Start date: Year 2027

Source: Art. 44, budget bill

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Fringe benefits 2027: 1,000 euro, 2,000 for young people and families

Status: Under discussion (bill)

For 2027, goods and services provided to employees, and amounts for household utilities, rent or mortgage interest on the main home, would not count as income up to 1,000 euro. The limit rises to 2,000 euro for employees who have not turned 31 and for those with dependent children. The Government press release refers to workers up to 30 years old.

Start date: Tax year 2027

Source: Art. 45, budget bill; Government press release no. 195 (in Italian)

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New hires: more deduction for mothers and young people

Status: Under discussion (bill)

For hires in the tax year following the one in progress on 31 December 2026, the increase in the deductible cost would rise to 80% for working mothers and 40% for young people under 36. It does not affect advance payments for that year.

Start date: Tax year 2027

Source: Art. 43, budget bill

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Social security exemptions for hiring: extended to 31 December 2027

Status: Under discussion (bill)

The deadlines now set at 31 December 2026 in articles 1, 2 and 3 of decree-law 62/2026, on social security exemptions for permanent hires, would be extended to 31 December 2027. According to the Government, they concern women, young people and workers in the special economic zones (ZES).

Start date: Until 31 December 2027

Source: Art. 42, budget bill; Government press release no. 195 (in Italian)

Learn more: Labour cost and net pay calculator · Employment incentives register

Fund for leaving the labour market

Status: Under discussion (bill)

A fund of 850 million euro a year for 2027, 2028 and 2029 would be set up for measures supporting exit from the labour market. The actual measures will be decided by a later law.

Start date: Years 2027-2029

Source: Art. 52, budget bill

Working mothers bonus from 2027

Status: Under discussion (bill)

INPS would grant, on application, 100 euro a month tax-free to working mothers with two or more children and employment income up to 40,000 euro a year, whether employees (excluding domestic work) or self-employed enrolled in professional funds or the separate scheme. It lasts until the month the second child turns 10 (with two children) or the youngest child turns 18 (with more than two children).

Start date: From 2027

Source: Art. 57, budget bill

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Fund “Value of newborns”

Status: Under discussion (bill)

From 1 January 2027 INPS would set up, within three months of birth, an individual savings position for each newborn, with 100 euro a year paid by the State until age 18. Parents and relatives can add voluntary payments. The Government also mentions a tax deduction for payments by families.

Start date: Children born from 1 January 2027

Source: Art. 58, budget bill; Government press release no. 195 (in Italian)

Parental leave: more months paid at 80%

Status: Under discussion (bill)

The additional period paid at 80% would go from one month to two months, three for a second child and four from the third. According to the Government press release, overall leave at 80% rises from three to four months (five for a second child, six from the third). It applies to those who end maternity or paternity leave on the dates set by the text.

Start date: From 1 January 2027, on the dates set by the text

Source: Art. 59, budget bill; Government press release no. 195 (in Italian)

Childcare voucher for self-employed parents

Status: Under discussion (bill)

Self-employed parents enrolled with INPS or the separate scheme could receive a contribution of up to 500 euro a month, for a maximum of three months within the 11 months after maternity or paternity leave, as an alternative to parental leave. The Government links it to babysitting and educational services. Spending limit: 15 million euro a year from 2027 to 2029.

Start date: Years 2027-2029

Source: Art. 60, budget bill; Government press release no. 195 (in Italian)

A 300 euro card for older people’s health costs

Status: Under discussion (bill)

A fund of 1,645 million euro for 2027 would be set up for a 300 euro card for health expenses not covered by the National Health Service. The Government identifies as recipients people over 75 with a pension of up to 28,000 euro a year.

Start date: Year 2027

Source: Art. 53, budget bill; Government press release no. 195 (in Italian)

Renovation and energy-saving deductions in 2027

Status: Under discussion (bill)

For expenses incurred in 2027 the deduction for building renovation works would be 36%, raised to 50% for those who bear the cost on their main home as owner or holder of a real right of enjoyment. The spending limit is 96,000 euro per property. The text also rewrites the temporary rules on energy upgrades and seismic work.

Start date: Expenses incurred in 2027

Source: Art. 4, budget bill

Flat-rate rental tax: agreed rents and shops

Status: Under discussion (bill)

For agreed-rent contracts signed in 2027 the flat-rate rental tax (cedolare secca) would fall to 5%, and to 1% with a young tenant (up to 35 years old according to the Government). It would extend to shops (cadastral category C/1, up to 200 square metres) with contracts signed in 2027: 21% rate, reduced to 10% in the capital cities of metropolitan cities.

Start date: Contracts signed in 2027

Source: Art. 5, budget bill; Government press release no. 195 (in Italian)

Vehicle tax: exemption for specific vehicles

Status: Under discussion (bill)

From 1 January 2027 individuals meeting the requirements of the text would be exempt from the vehicle tax and the circulation tax for specific types of vehicles, motorcycles and mopeds. According to the Government, the exemption for vehicles up to 80 kW becomes permanent.

Start date: From 1 January 2027

Source: Art. 3, budget bill; Government press release no. 195 (in Italian)

Tax credit for the single ZES: more funds

Status: Under discussion (bill)

The tax credit for investments in the single special economic zone (ZES) of Southern Italy would get more funds: 2,400 million euro for 2027 (now 1,000) and 1,250 million for 2028 (now 750).

Start date: Years 2027 and 2028

Source: Art. 85, budget bill

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Tax credit for cloud computing

Status: Under discussion (bill)

Businesses would receive a tax credit of up to 30% of 2027, 2028 and 2029 costs for subscriptions to cloud computing services tied to the intangible capital assets in annex F of the code, within a limit of 30 million euro a year.

Start date: Years 2027-2029

Source: Art. 12, budget bill

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Revaluation of business real estate

Status: Under discussion (bill)

Limited companies and partnerships that do not use international accounting standards could revalue business real estate, excluding building land. The substitute tax for corporate income tax (Ires) and regional production tax (Irap) would be 10%. To recognise the revaluation surplus for tax purposes, 8% would be paid on depreciable property and 4% on non-depreciable property.

Start date: From 1 January 2027, the entry-into-force date in the bill (art. 157)

Source: Art. 14, budget bill

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Sales agents: more deductible cars

Status: Under discussion (bill)

For sales agents and commercial representatives the share of deductible costs for cars would rise to 90% for electric or hybrid vehicles and 80% for others. The cost ceiling would rise to 35,000 euro for electric and hybrid cars and 25,822.84 euro for others. The ceiling for leasing and rental would rise to 5,164.57 euro.

Start date: From 1 January 2027, the entry-into-force date in the bill (art. 157)

Source: Art. 22, budget bill

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Personal income tax 2027: three rates

Status: Under discussion (bill)

For 2027 personal income tax (Irpef) would be calculated with three rates: 23% up to 28,000 euro, 33% from 28,000 to 55,000 euro and 43% above 55,000 euro. The 33% rate would therefore apply up to 55,000 euro of income.

Start date: Tax year 2027

Source: Art. 9(1), budget bill

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Flat-rate regime: limit raised to 100,000 euro

Status: Under discussion (bill)

For income tax and surtaxes, the revenue or fee limit to enter the flat-rate regime would rise to 100,000 euro. The regime would end in the same year if 115,000 euro is exceeded for income tax purposes and 100,000 euro for VAT purposes. For VAT, according to the Government, the entry threshold stays at 85,000 euro pending authorisation from the European Union.

Start date: From 1 January 2027, the entry-into-force date in the bill (art. 157)

Source: Art. 9(2), budget bill; Government press release no. 195 (in Italian)

Learn more: Flat-rate or ordinary regime calculator

Flat-rate regime: limit on employment income

Status: Under discussion (bill)

For 2027 the limit set by letter f) of art. 233(1) of the new income tax code, among the requirements for the flat-rate regime, would rise to 35,000 euro.

Start date: Year 2027

Source: Art. 9(3), budget bill

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Withholding tax on payments between businesses

Status: Under discussion (bill)

The withholding on payments between businesses (business to business), already provided for in the consolidated act on payments and collection, would be set at 1% for 2028 and 2% from 2029. The current text provides 0.5% for 2028 and 1% from 2029.

Start date: Years 2028 and 2029

Source: Art. 35, budget bill

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Offsetting of tax credits: threshold at 30,000 euro

Status: Under discussion (bill)

Among the measures against undue offsetting, in art. 5(7) of the consolidated act on payments and collection the 50,000 euro threshold would fall to 30,000 euro.

Start date: From 1 January 2027, the entry-into-force date in the bill (art. 157)

Source: Art. 36, budget bill

Learn more: Tax and social security deadlines calendar

Building bonus credits from 2023: ten instalments

Status: Under discussion (bill)

For expenses incurred in 2023 with credit transfer or invoice discount (article 119 of the Relaunch Decree), the annual shares usable in offset in 2027 would in turn be split into ten equal annual instalments. Shares for which the option under art. 9(4) of decree-law 176/2022 was exercised are excluded.

Start date: Shares usable in 2027

Source: Art. 37, budget bill

Learn more: Tax and social security deadlines calendar

Plastic tax and sugar tax from 1 July 2027

Status: Under discussion (bill)

The effectiveness of the tax on single-use plastic products (plastic tax) and of the tax on sweetened soft drinks (sugar tax) would be postponed from 1 January to 1 July 2027.

Start date: 1 July 2027

Source: Art. 40, budget bill