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Domestic and International Tax Reform: disclosed the initial Law Decrees envisaged by the Government Decree

The Government Decree discloses initial reforms on national and international fiscal matters.

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During its meeting of 16th October 2023, the Council of Ministers, by initiative of the Minister of Economics and Finance, approved, for the time being at a preliminary stage, two relevant law decrees aimed at implementing the Government Decree on tax matters – Law N.111 of 9th August 2023:

  1. A Law Decree to implement a first step in the reform of IRPEF (income tax for individual taxpayers), with further provisions on income tax.
  2. A Law Decree to implement a tax reform in international taxation.

Reform of Personal Income Tax

The draft Law Decree envisages new regulations aiming at revising the overall personal income taxation system, gradually reducing IRPEF, following principles of progressivity, horizontal equity and other guiding criteria.

The Decree provides for new regulation in respect of personal income tax, as far as tax rates and income brackets are concerned, to apply when calculating the Income gross tax. This changes only applies to year 2024.

More specifically, the income brackets and corresponding tax rates are reduced to three, as shown below:

  • 23% tax rate for income up to €28.000;
  • 35% tax rate for income over €28.000 and below €50.000;
  • 43% tax rate for income over €50.000.

Other significant changes are envisaged for 2024, namely:

  • Increased deduction applied for wage-earners, leading to an increase in the tax exemption threshold (no tax area) for employed workers;
  • Restructuring of the rules and regulation in respect of regional and municipal personal income taxes;
  • Remodeling of the system of tax deductions re specific expenses borne by taxpayers with a personal income over €50.000.
  • New incentives for companies hiring additional personnel.

Remodeling of International tax system

The Law Decree, still at a preliminary review stage, provides new rules and regulation in this area:

  • Redesign the concept of residence for tax purposes, to be applied to private taxpayers, companies and other organizations, in respect of income tax : the aims is to introduce regulations more in line with international practice and with the Tax Treaties for the Avoidance of Double Taxation;
  • Remodeling the Italian Tax system to make it more competitive internationally, including regulations for inpatriate workers and companies/production activities that invest in Italy. The envisaged new tax regime for inpatriates however foresees a restriction in the scope of this tax incentive, with new rules. As of 1st January 2024, the new rules should include repeal of Art 16, Law Decree N.147/2015 for inpatriate already applying the tax regime, repeal of Art 5, paragraph 2-bis, 2-ter and 2-quarter, Law Decree N.34/2019 concerning the extension of the tax regime. The old regulations would still operate for individuals who moved their tax residence to Italy in the year 2023
  • Implementing the Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union (global minimum tax);
  • Simplification and streamlining of the regime applied to controlled foreign companies.

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Regulatory Framework

Government Decree on Tax Matters- Law 9th August 2023, N.111


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