How Italy's finalised 2024 budget will affect your finances
The Italian Chamber of Deputies has finally passed the government's budget law for 2024, which includes tax cuts and increased spending in the public health sector.
The lower house - the larger of the two chambers in Italian parliament - gave final approval of the budget on December 29th - two and a half months after the draft was announced back in mid-October. The current government won the vote 200 to 112 with a right-wing majority and it was approved by the upper house senate two weeks ago.
Italian Prime Minister Giorgia Meloni's second budget drives up next year's fiscal deficit to 4.3 percent of gross domestic product (GDP) from 3.6 percent forecast in September, allocating almost €16 billion ($17.60 billion) in tax cuts and increased spending.
Alongside increased spending to fund the health service and renewing public sector contracts, the budget aims to increase the take-home pay of middle and low income employees through temporary cuts to welfare contributions.
Here's an overview of what to expect and the incoming measures Italy's residents need to be aware of.
Income tax reform
The 2024 budget has outlined a shift in income taxes. Instead of four bands (as in 2023), 2024 will have three bands. Previously, Italy's tax bands were:
- 23 percent for incomes up to €15,000.
- 25 percent for incomes up to €28,000.
- 35 percent for incomes up to €50,000.
- 43 percent above €50,000.
However, under the new budget, a tax rate of 23 percent is to apply for incomes up to €28,000, 35 percent for incomes up to €50,000 and 43 percent for incomes equating to €50,000 and more.
The budget confirmed that, as expected, the bottom two previous bands will merge, so that anyone with an income of up to €28,000 would pay the 23 percent rate.
The measure - which is expected to cost around €4.1 billion - is only financed for one year, news agency Ansa noted, meaning from 2025 further funds would need to be found to keep the reform in place.
Tax cuts
As announced, the draft confirmed cuts to the ‘tax wedge’ (cuneo fiscale), i.e. the difference between the amount workers are paid by their employer and the amount they take home after taxes, will continue next year.
The plan is to renew a reduction in salary tax contributions for those earning up to €35,000 a year, at a cost of around €10 billion.
"It's a paycheck increase which on average corresponds to around 100 euros per month for around 14 million citizens," Meloni said in October.
The National Health Fund
The National Health Fund will be increased by €3 billion for 2024, €4 billion for 2025 and €4.2 billion starting from 2026.
Public contracts
The fund for the renewal of public contracts will be increased by €3 billion in 2024 and another €5 billion in 2025.
'Tampon tax'
In the published draft it emerged that the government plans to reverse previous cuts to the so-called ‘tampon tax’ or VAT rate on feminine hygiene products, as well as on baby food and infant formula.
The plan stated that VAT will go back up to 10 percent on these and other items from July 2024, after it was cut to five percent last year.
Italy’s standard VAT (known as IVA) rate is 22 percent, with lower rates applied to certain essential goods. Car seats are also back up to 22 percent.
Electricity social bonus
The allocation of a social bonus for domestic customer for this years first quarter between January and March amounts to €200 million.
Tourist tax
The budget contained a provision allowing - not requiring - local councils to hike any existing taxes on overnight stays by tourists by up to two euros a night during the 2025 Holy Year celebrations, which are expected to bring millions of tourists to Italy, and especially Rome.
Introduced in Italy at the start of the last decade, the tourist tax differs from city to city and according to accommodation type.
In Rome it currently ranges from a minimum of three euros per night to a maximum of €10 per night for up to 10 consecutive days.
Earthquake and flood insurance
The budget contained a new obligation for businesses to take out insurance against damage from natural disasters by 2024, from earthquakes to floods and volcanic eruptions.
The measure was included after the state spent over €100 billion on damage caused by natural disasters in recent years, Corriere reported.
TV licence fee
Italy's mandatory licence fee or canone for households with at least one television will be reduced from €90 a year to €70.
Benefits for families
The government has pledged to tackle the problem of Italy's falling birth rate by increasing financial support for larger families.
In her press conference in October, Meloni said women employees with at least two children would no longer be required to pay their own social security contributions under the budget.
READ ALSO: What is Italy’s government doing about the falling birth rate?
"We want to establish that a woman who gives birth to at least two children has already made an important contribution to society, and therefore the state partly compensates them by paying their social security contributions," she said.
Working mothers will have total exemption from social security contributions, provided the contributions don't surpass €3,000 euros a year.
However, the mother has to have at least two children with the youngest one being no older than age 10.
Nursery bonuses
The nursery bonus increases for babies born next year. The contribution to support nursery registration, for families with ISEE up to €40,000 who will welcome a new born, increases by €2,100, bringing the ceiling from €3,000 to €3,600. Specifically, the increase is only for families with children born after January 1st 2024, provided that at least one other child under the age of 10 is present in the family unit.
Pensions
The budget includes an end to a current requirement that workers on a contributory pension scheme may retire at an age of their choosing (within a certain bracket) only if their pension benefit amounts to 1.5 times their 'social pension'.
"In our opinion, this is not a correct measure and we have removed it," Meloni said in October.
The Maroni Bonus, the incentive which provides a contribution reduction of around 10 percent for those who decide to stay at work, has been renewed.
For the pension advance with Quota 103, the requirements of being 62 years of age with 41 of contributions remain, but the recalculation of the allowance has been revised along with the contributory method. For the Social Ape pension advance, an increase in the age requirement is expected from 63 years to 63 years and 5 months. The threshold for accessing the Woman Option also rises by one year, to 61 (which drops to 60 with one child and 59 with two or more children).
The measure for indexing pensions to inflation, which should protect those with the lowest pensions, has been confirmed for 2024.
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The lower house - the larger of the two chambers in Italian parliament - gave final approval of the budget on December 29th - two and a half months after the draft was announced back in mid-October. The current government won the vote 200 to 112 with a right-wing majority and it was approved by the upper house senate two weeks ago.
Italian Prime Minister Giorgia Meloni's second budget drives up next year's fiscal deficit to 4.3 percent of gross domestic product (GDP) from 3.6 percent forecast in September, allocating almost €16 billion ($17.60 billion) in tax cuts and increased spending.
Alongside increased spending to fund the health service and renewing public sector contracts, the budget aims to increase the take-home pay of middle and low income employees through temporary cuts to welfare contributions.
Here's an overview of what to expect and the incoming measures Italy's residents need to be aware of.
Income tax reform
The 2024 budget has outlined a shift in income taxes. Instead of four bands (as in 2023), 2024 will have three bands. Previously, Italy's tax bands were:
- 23 percent for incomes up to €15,000.
- 25 percent for incomes up to €28,000.
- 35 percent for incomes up to €50,000.
- 43 percent above €50,000.
However, under the new budget, a tax rate of 23 percent is to apply for incomes up to €28,000, 35 percent for incomes up to €50,000 and 43 percent for incomes equating to €50,000 and more.
The budget confirmed that, as expected, the bottom two previous bands will merge, so that anyone with an income of up to €28,000 would pay the 23 percent rate.
The measure - which is expected to cost around €4.1 billion - is only financed for one year, news agency Ansa noted, meaning from 2025 further funds would need to be found to keep the reform in place.
Tax cuts
As announced, the draft confirmed cuts to the ‘tax wedge’ (cuneo fiscale), i.e. the difference between the amount workers are paid by their employer and the amount they take home after taxes, will continue next year.
The plan is to renew a reduction in salary tax contributions for those earning up to €35,000 a year, at a cost of around €10 billion.
"It's a paycheck increase which on average corresponds to around 100 euros per month for around 14 million citizens," Meloni said in October.
The National Health Fund
The National Health Fund will be increased by €3 billion for 2024, €4 billion for 2025 and €4.2 billion starting from 2026.
Public contracts
The fund for the renewal of public contracts will be increased by €3 billion in 2024 and another €5 billion in 2025.
'Tampon tax'
In the published draft it emerged that the government plans to reverse previous cuts to the so-called ‘tampon tax’ or VAT rate on feminine hygiene products, as well as on baby food and infant formula.
The plan stated that VAT will go back up to 10 percent on these and other items from July 2024, after it was cut to five percent last year.
Italy’s standard VAT (known as IVA) rate is 22 percent, with lower rates applied to certain essential goods. Car seats are also back up to 22 percent.
Electricity social bonus
The allocation of a social bonus for domestic customer for this years first quarter between January and March amounts to €200 million.
Tourist tax
The budget contained a provision allowing - not requiring - local councils to hike any existing taxes on overnight stays by tourists by up to two euros a night during the 2025 Holy Year celebrations, which are expected to bring millions of tourists to Italy, and especially Rome.
Introduced in Italy at the start of the last decade, the tourist tax differs from city to city and according to accommodation type.
In Rome it currently ranges from a minimum of three euros per night to a maximum of €10 per night for up to 10 consecutive days.
Earthquake and flood insurance
The budget contained a new obligation for businesses to take out insurance against damage from natural disasters by 2024, from earthquakes to floods and volcanic eruptions.
The measure was included after the state spent over €100 billion on damage caused by natural disasters in recent years, Corriere reported.
TV licence fee
Italy's mandatory licence fee or canone for households with at least one television will be reduced from €90 a year to €70.
Benefits for families
The government has pledged to tackle the problem of Italy's falling birth rate by increasing financial support for larger families.
In her press conference in October, Meloni said women employees with at least two children would no longer be required to pay their own social security contributions under the budget.
READ ALSO: What is Italy’s government doing about the falling birth rate?
"We want to establish that a woman who gives birth to at least two children has already made an important contribution to society, and therefore the state partly compensates them by paying their social security contributions," she said.
Working mothers will have total exemption from social security contributions, provided the contributions don't surpass €3,000 euros a year.
However, the mother has to have at least two children with the youngest one being no older than age 10.
Nursery bonuses
The nursery bonus increases for babies born next year. The contribution to support nursery registration, for families with ISEE up to €40,000 who will welcome a new born, increases by €2,100, bringing the ceiling from €3,000 to €3,600. Specifically, the increase is only for families with children born after January 1st 2024, provided that at least one other child under the age of 10 is present in the family unit.
Pensions
The budget includes an end to a current requirement that workers on a contributory pension scheme may retire at an age of their choosing (within a certain bracket) only if their pension benefit amounts to 1.5 times their 'social pension'.
"In our opinion, this is not a correct measure and we have removed it," Meloni said in October.
The Maroni Bonus, the incentive which provides a contribution reduction of around 10 percent for those who decide to stay at work, has been renewed.
For the pension advance with Quota 103, the requirements of being 62 years of age with 41 of contributions remain, but the recalculation of the allowance has been revised along with the contributory method. For the Social Ape pension advance, an increase in the age requirement is expected from 63 years to 63 years and 5 months. The threshold for accessing the Woman Option also rises by one year, to 61 (which drops to 60 with one child and 59 with two or more children).
The measure for indexing pensions to inflation, which should protect those with the lowest pensions, has been confirmed for 2024.
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