Economy Archives - Farrelly-Caizzone & Associates

CHANGES IN PERSONAL INCOME TAX (IRPEF) RATES AND DEDUCTIONS IN ITALY’S 2026 BUDGET LAW

by Redazione | Nov 6, 2025 | Economy

Italy’s 2026 Budget Law, approved on the 17th of October, introduces in Article 2 a modification to the Personal Income Tax (IRPEF) rates. The main measure concerns the revision of the rate for the second income bracket, with the aim of reducing the tax burden on the “middle class”, following previous reforms that focused on lower-income groups, and continuing the process of simplification of the tax system.

Currently, the following rates are in force:

23% for incomes up to €28,000
35% for incomes over €28,000 up to €50,000
43% for incomes exceeding €50,000

Under the 2026 Budget Law, the second rate will be reduced from 35% to 33%, a measure that will affect approximately 12.5 million taxpayers. This change, which will take effect on the 1st of January 2026, continues the reforms already introduced in 2024, when the first and second Personal Income Tax (IRPEF) brackets were merged, setting the tax rate at 23% for incomes up to 28,000 euros.

In addition to the rate modification, the measure includes the neutralization of the tax benefit for incomes exceeding 200,000 euros. In practical terms, taxpayers in this income range will have to reduce their deductions by an amount equal to the tax benefit resulting from the new 33% rate, that is, 440 euros per year (corresponding to around 36 euros per month).

In summary, the measure aims to simplify the tax system, reduce the burden on middle-income earners and maintain a fair distribution of benefits among taxpayers.

By The Editorial Team

Sources: Il Sole 24 Ore

NEW AUTOMATIC PROCEDURE FOR VAT SETTLEMENT IN ITALY’S 2026 BUDGET LAW

by Redazione | Oct 31, 2025 | Economy

Article 25 of the draft of 2026 Italy’s Budget Law introduces a new automatic settlement procedure whereby the Revenue Agency determines and notifies taxpayers of the amount of tax debt due in cases where the annual VAT return has not been filed.

This procedure enables the Revenue Agency to calculate the tax due based on the available digital documentation, including issued and received electronic invoices, transmitted electronic payments, and communications of periodic VAT settlement data. Once these procedures are completed, the taxpayer will receive a notice of irregularity containing the outcome of the settlement and the calculation of the tax due. At this point, the taxpayer may either proceed with the payment of the amounts or provide clarifications regarding the assessment.

The payment will be made not only for the tax due, but also for the interests and for the administrative penalty equal to 120% of the tax due for the relevant tax period. If the amounts are paid within 60 days of the notification, the penalty will be reduced to one third of its ordinary amount. Otherwise, the settled sums will be directly registered as final amounts due.

If the taxpayers believe that certain elements have been incorrectly assessed or not taken into account, they may respond to the Office, providing the necessary documents and clarifications. If the provided documentation results in a different tax amount being due, the taxpayer will receive a new notice and will have 60 days to make the corresponding payment. Also in this case, if the explanations are deemed insufficient, the amounts will definitively enter in the tax register.

In conclusion, the draft of 2026 Budget Law strengthens the control capability of the Revenue Agency and enables to accelerate the procedures and the recovery of taxes due.

By The Editorial Team

Source: Il Sole 24 Ore

TAXES ON SHORT-TERM RENTALS IN ITALY: RECENT UPDATES ON FLAT-TAX RATE

by Redazione | Oct 28, 2025 | Economy

The draft of the Italian Budget Law 2026 includes some new features on short-term rentals for tourist purposes. A change made in the last days introduces an increase in the flax-tax rate which, starting from the 1st of January 2026, will rise from 21% to 26% for the rentals made through real estate intermediaries or online platforms. However, the rate will remain at 21% for landlords who rent out their property directly.

The previous system involved a base rate of 26% on incomes from short-term rentals, with the option to opt for a reduced rate of 21%, when filling the tax return, for only one property. Essentially, those renting two properties could apply for the 21% rate for the first property and for the 26% from the second and subsequent properties.

In the draft of Budget Law 2026 a general increase of the rate to 26% has been proposed. However, the final certified version of the economic measure introduces a new regulation which allows the application of the 21% rate, only if the rental agreement was not made through real estate intermediaries or online portals. Therefore, those who rent out via Airbnb, Booking or real estate agents will be subject to the rate of 26%.

According to the technical report by the State General Accounting Office, 90% of households (516 thousand in 2024) are rented through these platforms. Therefore, the adjustment affects only a limited number of taxpayers, as most will continue to use such platforms due to the simplified procedures and faster transactions. In 2024, landlords paid 956 million euros in taxes; following the entry into force of the new regulation, starting from next year, tax revenues are expected to increase by around 102 million annually.

In conclusion, the reformulation of the provision eliminates the general increase but maintains the application of the 26% rate for the majority of short-term rentals. In the next days, the certified draft will arrive in Parliament, where it will be subject to political debate that will determine the final structure of the provision.

Sources: Il Sole24Ore and Il Corriere della Sera

EXTENTION ON BUILDING BONUSES 2026

by Redazione | Oct 24, 2025 | Economy

The draft for the Budget Law of 2026 confirms the extension on the system implemented last year regarding building bonuses. The system involves two requirements to access the highest level of discount of 50 per cent: the first is to have the main home, that is the residence, in the renovated real estate, while the second is to be owner or holder of another real right on that real estate. The ones without those requirements will receive the lower bonus of 36 per cent.

This framework will apply on three different types of discounts with the same rate: the basis discount for renovations, applied for operations like the renewal of systems, the displacement of partitions or the laying of floors; the Ecobonus for the energetic efficiency, used in interventions such as the replacement of fixtures, the installation of heat pumps or hybrid heating systems; and, finally, the Sismabonus, devoted to seismic retrofitting.

The distinctive feature of this framework is that each discount will have its fulfillment procedure with the related ceilings. For example, the sending of the notice to the Enea (The National Agency for New Technology, Energy and Sustainable Economic Development) will be needed for the Ecobonus, while a bank statement linked to an invoice will be required for the Restoration Bonus. A further feature concerns the extension of the system which will be granted for only one year. On this respect, from 2027, the reductions of 36 per cent for main homes and 30 per cent for second homes will be implemented as scheduled.

The package of extensions for 2026 also includes the furniture bonus, dedicated to the purchase of furniture and large appliances, for which a 50 percent discount will be available on a maximum of 5,000 euros of purchases. In this case, there is no difference between first and second homes, as for the other deductions.

In conclusion, the extension of the current scheme is of interest mainly for the owners of second homes, for whom the reduction to 30 per cent was more likely, especially due to the intentions expressed by the Minister of Economy, Giancarlo Giorgetti, on the primary protection of main homes.

Source: Il Sole24Ore