Key Highlights of the 2025 Budget Law
On December 31, 2024, the 2025 Budget Law (Law No. 207/2024) was officially published in the Official Gazette. Below is a summary of the key updates effective from January 1, 2025, for employers and payroll professionals.
New Tax and Social Security Relief Mechanism
The 6% or 7% social security contribution relief introduced in 2024 will no longer apply from 2025. A new tax relief system has been established as follows:
- Non-Taxable Allowance
Employees earning up to €20,000 annually will benefit from a decreasing allowance on employment income:
- 7.1% for income up to €8,500
- 5.3% for income between €8,500 and €15,000
- 4.8% for income between €15,000 and €20,000
Employers will recover the allowance via F24 form compensation.
- Additional Tax Deduction
For total annual income above €20,000, the deductions are as follows:
- €1,000 for income between €20,000 and €32,000
- A proportional amount for income between €32,000 and €40,000, calculated by multiplying €1,000 by the ratio between €40,000 minus the total income, and €8,000
Updated Limits for Tax Deductions
From 2025, deductions for eligible expenses will be calculated by multiplying a base amount (which decreases as income increases) by a coefficient:
- €14,000 for income between €75,000 and €100,000
- €8,000 for income exceeding €100,000
Coefficients will vary depending on the number of dependent children:
- 0.50 without dependent children
- 0.70 with one dependent child
- 0.85 with two dependent children
- 1.00 with more than two children or a child with disabilities
Excluded Expenses
The following expenses remain unaffected by the new deduction regime:
- Deductible healthcare expenses
- Loan or mortgage expenses contracted before December 31, 2024
- Expenses for building renovations and energy efficiency improvements
Non-resident taxpayers without EU/EEA citizenship cannot claim deductions for dependents residing abroad.
Updates to Family Tax Deductions
- The €950 deduction for children aged 21 and older will now apply up to age 30 (except for children with disabilities).
- The €750 deduction for other dependents will only apply to cohabiting ascendants (parents, grandparents).
Fringe Benefits
The exemption threshold for fringe benefits will remain in place until 2027:
- €1,000 for employees without dependent children
- €2,000 for employees with dependent children
Newly hired employees in 2025 may benefit from a tax exemption for payments or reimbursements of rent and maintenance expenses up to €5,000 annually, provided:
- Indefinite-term employment contract
- Annual income not exceeding €35,000 in the previous year
- Residence relocation to a municipality over 100 km from the previous residence
Parental Support
- Extended parental leave: Employees will be entitled to three months of parental leave at 80% of pay, available until the child reaches six years old.
- Social contribution relief for mothers: Available for employees and self-employed women with at least two children under 10 (from 2027, limited to those with three or more children under 18).
Exclusions:
- Domestic workers
- Recipients of full contribution exemptions for 2025-2026 as per the 2024 Budget Law
- Employees with annual taxable income above €40,000
Pensions and NASpI Updates
- Early Retirement: Employees under a fully contributory pension system can retire at age 64 with 25 years of contributions (increasing to 30 years from 2030).
- NASpI Eligibility: From 2025, eligibility will require at least 13 weeks of contributions during the last employment for resignations followed by dismissal within 12 months.
Contribution Relief for Southern Italy
The contribution relief has been extended until 2029, with progressively reduced rates:
- 2025: 25% (maximum monthly exemption of €145)
- 2029: 15% (maximum monthly exemption of €75)
Company Vehicle Valuation
From January 1, 2025, the taxable value of company vehicles for mixed use will be determined based on fuel type, maintaining the 15,000 km annual mileage limit:
- 10% for electric vehicles
- 20% for plug-in hybrids
- 50% for traditional internal combustion or non-plug-in hybrid vehicles
Productivity Bonuses
The reduced 5% tax rate on productivity bonuses has been extended until 2027, subject to the following conditions:
- Bonuses stipulated in company or territorial agreements
- Annual gross bonus amounts not exceeding €3,000
- Employee income in 2024 not exceeding €80,000
Travel Expense Tax Exemption
From 2025, travel expenses, including meals, accommodation, and transport, will be tax-exempt if paid through traceable methods.
