The Revenue Agency, with the answer no. 225 of 21 November 2024, states that the partial tax relief of the end-of-service indemnity, provided for byarticle 24 of Legislative Decree no. 4/2019, does not extend to severance pay and, furthermore, that the maximum tax relief limit, equal to 50 thousand euros, refers to the overall taxable amount, regardless of whether the payment takes place in a single solution or in installments (article 12paragraphs 7 and 8, Legislative Decree no. 78/2010).
These are the solutions provided to an entity, withholding tax, which requests clarification on the operation of the limit on which to recognize the benefit. In particular, in the case of payment in installments, he wants to know whether the maximum amount of 50 thousand euros should be considered on each individual installment or on the total sum of the same. Then, with a further question, relating to the recipients of the tax discount, he asks for the possibility of tax exemption in the same way also for severance pay (TFR), accrued by employees at the time of termination of the employment relationship with the organisation/administration of membership.
On this point, the Administration explains, in great detail, that the technical report of the conversion into law of the aforementioned Legislative Decree no. 4/2019 clearly states that the rule in question (article 24) establishes a reduction in the rate, which increases according to the years from the termination of the employment relationship to the disbursement of the Tfs, and, in the second period , limits the application of the benefit to the taxable amount of the allowance up to 50 thousand euros. For taxable amounts of a higher amount, it states, the full rate is applied. Having said this, the Agency believes that the amount of 50 thousand euros constitutes the maximum limit within which to apply the rate reduction, regardless of the overall amount of the TFS paid.
In relation to the second question, it must be said that the law under observation expressly provides for partial tax relief exclusively for the Tfs institution, without making any reference to the TFR. On this topic, in line with the Court of Cassation, which has repeatedly affirmed the exceptional nature of tax relief provisions, for which they are of strict interpretation and do not allow analogical or extensive interpretation, the Agency believes that this regime cannot also be applied to the cases of disbursement of severance pay.
Here are two PAA-related questions based on the provided text:
## World Today News Interview: Understanding Tax Relief on Termination Benefits
**Introduction:**
Welcome to World Today News. Today, we’re diving deep into the complexities of tax relief surrounding termination benefits in Italy, exploring a recent clarification by the Revenue Agency. Joining us are two experts: [Guest 1 Name & Credentials], a leading tax advisor specializing in employment law, and [Guest 2 Name & Credentials], representing employee rights and advocacy groups.
**Section 1: The 50,000 Euro Limit: A Clarification**
* **Host:** The Revenue Agency’s recent response (Risposta n. 225) clarifies the application of the 50,000 euro limit on tax relief for end-of-service indemnities (TFS).
[Guest 1], can you explain the nuances of this limit, particularly in cases of installment payments? Does the 50,000 euro threshold apply to each individual installment or the cumulative total?
* **Guest 1 Response:**
* **Host:** [Guest 2], how do you see this clarification impacting employees who are receiving TFS payments? Are there potential concerns or unintended consequences arising from this interpretation?
* **Guest 2 Response:**
**Section 2: TFS vs. TFR: Distinct Treatment Under the Law**
* **Host:** The Revenue Agency explicitly stated that the tax relief provisions apply solely to TFS, not severance pay (TFR). [Guest 1], why this distinction? What are the arguments for and against extending this tax benefit to TFR as well?
* **Guest 1 Response:**
* **Host:** [Guest 2], what are your views on this disparity in treatment? Do you believe the current legislative framework adequately supports employees facing financial challenges upon termination? Would expanding tax relief to TFR be beneficial for workers?
* **Guest 2 Response:**
**Section 3: Broader Implications and Future Outlook**
* **Host:** Looking forward, what are the potential implications of this Revenue Agency clarification for both employers and employees? [Guest 1], do you foresee any legal challenges or legislative changes stemming from this interpretation?
* **Guest 1 Response:**
* **Host:** [Guest 2], what advice would you give to employees who are negotiating termination packages? What steps can they take to ensure they fully understand the tax implications and potential benefits?
* **Guest 2 Response:**
**Concluding Remarks:**
* **Host:** We thank both our guests for their insightful perspectives on this important topic. The complexities surrounding tax relief on termination benefits highlight the need for clear communication and ongoing dialog between employers, employees, and policymakers.
This interview framework aims to encourage a nuanced discussion on the taxation of termination benefits. It delves into the recent clarification by the Revenue Agency, exploring its impact on employees and employers while raising critical questions about policy implications and future directions.
