Manoeuvre, tax-free contract increases for 3.8 million employees
Salary increases for private sector employees in 2026, in implementation of contract renewals signed between 1 January 2024 and 31 December 2026, benefit from tax relief. The income ceiling is set at EUR 33,000
Key points
Approximately 3.8 million workers benefit from the 5% substitute tax on salary increases paid to private sector employees in 2026, in implementation of contract renewals signed between 1 January 2024 and 31 December 2026.
The estimate is contained in the technical report to the manoeuvre for the measure - modified during the Senate's examination that broadened the number of beneficiaries -, which applies to private sector workers with employee income in 2025 of no more than €33,000 (in the original text it was €28,000). At the end of June, according to ISTAT, there were 5.7 million workers awaiting contract renewal, but the quota of civil servants and persons with employment income over 33 thousand euro was subtracted from this audience. It is estimated that Irpef and additional tax revenues on accrual will be reduced by €781.8 million and substitute tax by €138.9 million. The total shortfall in accrual revenue amounts to EUR -642.9 million.
1% tax deduction on performance bonuses and profit distribution
Another novelty in the text that got the first green light from the Senate is the reduction of the rate from 5% to 1% and the increase in the upper limit of the amount that rises from €3,000 to €5,000 on both performance bonuses and employee profit-sharing shares, in continuity with the discipline provided for this year only by Law No. 76 of 2025.
As is well known, the current rule only provides for the application of the 5% substitute tax on performance bonuses or on amounts paid for profit-sharing within EUR 3,000 for employees in the private sector with employment income up to EUR 80,000. For the 2024 tax year, the facilitated amounts amounted to approximately EUR 2,973 million, for 2026 it is estimated that the amount of the amounts subject to facilitated taxation will increase by approximately 10% or EUR 297.4 million, for a total taxable base of approximately EUR 3,271.1 million. It is estimated that the potential number of persons affected by the regulatory change is approximately 250,000 workers. The overall effect is -170.8 million euro in accrual terms. The manoeuvre confirms for next year another measure of Law No. 76, the exemption of 50% of the amount of dividends paid to workers and deriving from shares granted in lieu of performance bonuses, for an amount not exceeding €1,500 per year, with costs estimated at €21 million for 2026.
15% dry deduction on night and holiday work
In addition, for the 2026 tax period, for private employees with incomes of less than EUR 40,000, sums paid as bonuses and allowances for night work, holiday work and weekly rest days identified by collective bargaining agreements, shift allowances and other shift work-related emoluments provided for by collective bargaining agreements are subject to a 15% flat rate, up to an annual limit of EUR 1,500. An estimated 2.3 million workers are affected, with lower tax revenues for the year 2026 estimated at EUR 621 million.
