The Minister of the Economy and Finance, in conjunction with the Minister of Labour and Social Policy, issued a Ministerial Decree dated 25 June 2024, which effectively brings into force the major tax relief set out in the Budget Law.
Specifically, for business owners and self-employed professionals for the tax period following the one ending on 31 December 2023, the tax reform provides for the right to an increased deduction of 120% of labour costs in the case of an increase in the number of employees with permanent contracts. The tax deduction raise up to 130% – if the people who are hired on permanent employment contracts are classified as “workers deserving extra protection” (people with disabilities, minors of working age in situations of family hardship, women with at least two underage children, young people eligible for youth employment incentives and people who used to receive the so-called citizen’s income welfare benefit who do not fulfil the conditions for access to the integration allowance government aid).
Eligibility for the relief is dependent on two conditions linked to employment levels actually increasing.
Firstly, the relief is available if the number of permanent employees at the end of the tax period following the one ending on 31 December 2023 is higher than the average number of permanent employees in the previous tax period.
At the same time, at the end of the tax period following the one ending on 31 December 2023, the above-mentioned increase in employment must mean a number of workers (including temporary workers) higher than the average number of workers employed in the previous tax period.
In short, the relief is only available if, at the end of the tax period in which the relief is available, the increase in the number of permanent employees is accompanied by an increase in the total number of employees.
In terms of actually making the calculation, the Ministerial Decree notes the following:
- Employment increases due to a reorganisation (e.g. mergers or divisions)or business transfers are considered neutral
- Employees posted abroad are not counted, even if they are hired on a permanent basis for the duration of the secondment
- A contract that is converted from fixed-term to permanent is included Part time workers should be included in the calculation proportionally to the number of hours worked.
The personnel costs actually incurred by the company include:
- Wages and salaries
- Social security contributions payable by the company to the various social security and insurance institutions (INPS and INAIL)
- Contributions to any supplementary pension funds other than severance pay (TFR) that are generally provided for by collective agreements.
Finally, the following income statement items are excluded from quantifying the cost:
- Meal vouchers
- Expenses for employees training
- Expenses for accommodation and meals for employees who travel on business
- Costs for company cars provided to employees for personal and business use
