Budget Law 2022: tax changes

To reduce the tax burden on taxpayers, the Budget Law 2022 (Law no. 234/2022) has introduced important changes effective from 1 January 2022.

These include reducing the number of personal income tax (IRPEF) rates from five to four, reshaping the tax deduction system and supplementary payments.

Below are these changes.

New IRPEF rates

From 1 January 2022, the tax brackets and rates are:

• up to €15,000, 23%;
• More than €15,000 and up to €28,000, 25%;
• More than €28,000 and up to €50,000, 35%;
• More than €50,000, 43%.

To benefit those with average income, the rates for taxable income between €15,000 and €50,000 have been reduced and the tax rate for income above €50,000 has been increased (until 31 December 2021, the 43% rate was applied to income above €75,000).

Tax deductions

Equally important was the impact of the tax deduction measure under Art. 13, of Presidential Decree no. 917/1986 ( Consolidated Law on Income Tax – TUIR). These reduce the gross tax payable by the taxpayer for the time worked during the year. The deduction from gross tax decreases proportionally to the income increase until it is cancelled when the income reaches the annual threshold of €50,000.

The deduction applicable to the income bracket between €25,000 and €35,000 is increased by €65.

The additional deduction applicable until 31 December 2021 for workers with income above annual €28,000 and up to a €40,000 has been abolished.

Supplementary payment

The Budget Law has lowered the income threshold for which the supplementary payment introduced by Law no. 21/2020 is due.

The maximum amount of the supplementary payment of €1,200 annually is no longer payable to taxpayers with a taxable income of €28,000 but €15,000.

The credit is available to those whose income is between €15,000 and €28,000 only if the value of the following deductions is higher than the gross tax:

• for dependent family members;
• for employment, similar income and pensions;
• for agricultural and real estate mortgages for purchasing a first home, limited to charges connected to loans or mortgages taken until 31 December 2021;
• for charitable donations;
• for healthcare expenses within the limits set by Article 15, Consolidated Law on Income Tax – TUIR;
• for instalments for building renovation and energy requalification works and other regulatory provisions, for expenses incurred until 31 December 2021.

The supplementary payment is based on the difference between the sum of the deductions listed above and the gross tax, but not exceeding € 1,200.