Main Novelties of the 2025 Budget Law
The Budget Law 2025, introduced by Law No. 207 of December 30, 2024, presents a range of fiscal, employment, and incentive measures. Significant updates include reduced IRES rates, initiatives under Transition 4.0 and 5.0, regulations for crypto assets, revaluation of shareholdings and land, and building-related incentives.
Direct Taxes
IRPEF Reduction:
The reduction from four to three IRPEF brackets has been confirmed for 2025, with an expansion of the no-tax area to €8,500 for employment income. The new IRPEF rates are 23%, 35%, and 43%.
Deductions for Other Expenses:
A cap on deductions applies for taxpayers with incomes exceeding €75,000. Exceptions include deductions for medical expenses, mortgage interest for primary residences, investments in start-ups and innovative SMEs, and insurance premiums.
Family Tax Deductions:
Starting in 2025, a tax deduction of €950 is available for each dependent child aged 21 to 30.
Wage Tax Relief:
A bonus has been introduced to reduce the tax wedge for employees earning up to €40,000 annually.
Fringe Benefits:
The non-taxable threshold for fringe benefits, as established in 2024, has been extended to 2025.
Housing Expense Allowance:
Employees on permanent contracts earning up to €35,000 per year who relocate their residence by more than 100 km for work are exempt from taxes on up to €5,000 annually for rent and maintenance costs during their first two years of employment.
Productivity Bonuses:
The reduction of the substitute tax on productivity bonuses from 10% to 5% for private-sector employees has been extended to the years 2025, 2026, and 2027.
Cross-Border Workers:
In line with the Italy-Switzerland agreement, individuals working remotely from their residence for up to 25% of their total working time maintain their cross-border worker status.
Flat-Rate Tax Regime:
The income threshold for accessing the flat-rate tax regime for employees is raised from €30,000 to €35,000, effective from 2025.
Web Tax:
The minimum revenue threshold for digital services tax remains at €750 million globally, with the removal of the prior €5.5 million minimum for domestic revenues in Italy.
Crypto Activities:
From January 1, 2026, the tax rate on capital gains and other income from crypto activities will increase from 26% to 33%, with the elimination of the previous €2,000 exemption threshold.
Stock Option Plans:
Costs associated with stock option plans can now only be recognized in financial statements upon the actual allocation to plan beneficiaries.
VAT and Other Taxes
Reverse Charge:
The reverse charge mechanism is extended to service providers in the transport, freight handling, and logistics sectors.
VAT on Waste Disposal:
The VAT rate for waste disposal services involving landfilling or incineration without efficient energy recovery is increased to 22%.
Excise Duty Products:
The mandatory use of the e-DAS (simplified accompanying document) for the transport of excise-duty products is extended to all commercial warehouse operators handling energy products.
Mandatory Certified Email (PEC) for Company Directors:
All directors of corporate entities are required to have a certified email (PEC) address.
Incentives
Revaluation of Shareholdings and Land:
The tax regime for the revaluation of shareholdings (both listed and unlisted) and land (agricultural and building) is stabilized. The substitute tax rate increases from 16% to 18%.
Reduced IRES Rate:
A temporary reduction in the IRES rate from 24% to 20% applies for the 2025 tax year, subject to conditions including:
- Allocation of at least 80% of profits to a reserve;
- At least 30% of the allocated profits, and no less than 24% of 2023 profits, invested in new Transition 4.0 or 5.0 assets for production facilities in Italy by the tax filing deadline for the 2025 tax period;
- No reduction in annual full-time equivalent (FTE) workforce compared to the previous three-year average;
- New permanent hires representing at least a 1% increase in headcount.
Facilitated Asset Transfers to Shareholders:
Commercial companies transferring or assigning non-instrumental assets to shareholders by September 30, 2025, are subject to an 8% substitute tax (10.5% for non-operational companies) on the difference between the normal value and the tax-recognized cost of the assets.
Additional Measures
Transition 5.0:
Expansion of eligible beneficiaries and increased deductible investment percentages.
Transition 4.0:
Revised timelines for the recognition of the Transition 4.0 tax credit.
SME Listing Tax Credit:
Renewed for expenses incurred for listing SMEs, with a tax credit equal to 50% of expenses up to a maximum of €500,000, valid through 2027.
ZES Investments:
The tax credit for investments in Special Economic Zones (ZES) is extended to 2025 for investments made between January 1 and November 15, 2025, with a spending limit of €2.2 billion.
New Sabatini Measure:
The “New Sabatini” incentive program is extended for the years 2025 through 2029.
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