Tax reform: three-tier IRPEF and other significant changes

10.3.2023

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The government's tax reform intervention touches on many points, from direct to indirect taxation and taxpayer-taxpayer relations

One of the most relevant aspects of the reform concerns the revision of the Irpef tax brackets

In the VAT field, the rationalization of rates and exempt transactions is being considered

Although it is still a non-final document, the draft of the enabling act on taxation hints at wide margins of certainty about the country's future scenario from a tax perspective.
Awaiting approval by the Council of Ministers by the end of the month, the draft of the enabling act consists of 21 articles, designed, among other things, to pander to the expectations of those who have long been waiting for cost relief for businesses, forfeit new revenue and say goodbye to some tax burdens.

What are the main changes?

Among the many changes in the draft are:

the possibility of applying the favorable regime of the dry coupon for non-housing properties as well
introduction of the new two-rate IRES (at 15 percent and 24 percent) for businesses that allocate a share of income to hire or invest
Introduction of the single tax instead of stamp duty, cadastral tax, and mortgage tax
Introduction of incremental flax tax for income that is added to income from the previous tax period
Reformulation of income of a financial nature, with the grouping of capital income and miscellaneous income of a financial nature and application of the cash method of taxation
Introduction of new reliefs on supplementary pensions and social security funds
overcoming the current discipline provided for shell companies
rationalization of reporting obligations with reduced requirements and harmonized tax, reporting, and payment deadlines.

Irpef

The government also plans to reduce the tax burden by providing only 3 Irpef brackets and lower rates.
There would be a shift from 4 to 3 brackets through the union of the two central brackets (25% and 35% rates) while keeping the rate for those who declare over 50,000 euros annually unchanged at 43%.
The "crasis" between the two central brackets would affect the bracket of those who declare incomes between 28 and 50 thousand euros: these individuals, in some ways, would be advantaged by the reform by being able to count on savings that increase as income increases.
Therefore, three rates would be maintained by extending the following:

The incremental flat tax to employees
the so-called no-tax area for employees and retirees.

Also, in the field of Irpef, for employees, there is the simplification of the rules on fringe benefits.

Vat

Among the hypotheses is also the idea of reducing VAT on basic necessities, reducing rates or even zeroing them. However, Vat is a harmonized tax, and although European regulations contemplate zero Vat concerning specific categories of products, the issue of reformulating value-added tax also needs to be discussed, considering Brussels' findings.