The Main Changes in the Italian Budget Law

On December 29th, 2022, Law No. 197 was published in the Official Gazette, which came into effect on January 1st, 2023 and referred to as both the “State Law Budget for the Financial Year 2023 and Multi-Year Budget for the Three-Year Period 2023/2025,” containing several provisions related to the new instruments for the benefit of companies and workers. The main features and innovation of which will be discussed below.

What is the Budget Law?

Firstly, it is necessary to define what is meant by “Budget Law.” This is provided for in Article 81 of the Constitution and its main objective is to ensure a balance between state budget revenues and expenditures. It must be submitted annually by the incumbent government by September 27th and approved by both Parliament and the Senate, together with the final statement of accounts by December 31st.

Outlook for 2023

The Budget Law 2023, consisting of 21 articles and 1017 paragraphs, envisages the implementation of measures mainly in the fiscal, social security and labor spheres amounting to about €35 billion.

Going in order, in the tax area, the main innovation concerns the flax tax: it will be extended from €65,000 to €85,000 and will be applied to self-employed workers in the VAT account. In addition, the measures for tax relief will also be expanded to employee bonuses up to €3,000. It is important to note however that this regime will cease when revenues and remuneration received are more than €100,000 annually.

Regarding the use of cash, the threshold for cash transfers has been raised from € 1,000 to €5,000, while the POS will remain mandatory for merchants, who will not be able to refuse to receive electronic payments.

In addition, in order to counteract the inexorable rise in energy and gas costs, a tax credit has been recognized for the first half of 2023, provided for the benefit of so-called “energy-intensive” companies, i.e., those with high electricity consumption, equal to 45 percent of the expenses incurred for the energy component purchased and actually used. Likewise, the same will apply to natural gas-intensive enterprises.

However, it is not only businesses that are plagued by the drastic increase in energy and gas costs, but also families: in order to support families in their daily expenses, a “social bill bonus” has been planned, with an increase in the ISEE (Indicator of the Equivalent Economic Situation) threshold from €12,000 to €15,000, so as to allow access to an increased number of families, as well as a reduction in VAT from 10 to 5 percent for baby and feminine hygiene products.

With a view to green transition, a VAT deduction has been provided for the purchase of green real estate, as purchasers will be able to deduct 50 percent of the VAT paid in connection with the purchase of residential real estate units of energy class A or B, which must be sold directly by the companies that build them.

Regarding pensions, the so-called “Quota 103” is introduced: it will now be possible to retire with 62 years of age and 41 years of contributions. In addition, an increase in minimum pensions to €600 per month only for retirees over 75 has been planned for 2023.

Finally, in labor matters, for employees, a 5 percent rate has been provided for productivity bonuses up to € 3,000 as well as concessions to permanent employment with a contribution threshold of up to € 6,000 for those who already have a fixed-term contract, especially for women under 36 and citizenship income recipients.

In conclusion, it is also necessary to mention the reform of the Citizenship Income, an economic support measure for unemployed workers, which will be provided in the new maximum limit of 7 monthly payments for all those considered employable. Recipients will then have to comply with the new obligation for training by taking part in retraining courses to bring them closer to the world of work, and it will be revoked for those who do not accept the first job offer made for which the suitability requirement is waived. Employers who hire citizenship income recipients will also be provided with a contribution waiver of €8,000 annually.

In light of all the above, the Budget Law 2023 has brought numerous innovations with the aim of combating high utility bills and rising commodity costs, going further to support the most economically disadvantaged groups of workers and individuals. For more information on these aspects and to learn more, please do not hesitate to contact us at info@dandreapartners.com