Tax reform 2023, new personal income tax and flat tax rates: what changes

Three personal income tax rates and flat tax. Ok from the Council of Ministers

Three personal income tax rates and flat tax. It is the objective of the 2023 tax reform which today received the green light from the Council of Ministers. According to the deputy minister for the economy Maurizio Leo, the three personal income tax rates will be operational “from next year” as he said during the registration of Porta a Porta. “I would be cautious about the numbers because the enabling law does not dictate precise numbers, the implementing decrees will then identify them as well as the resources without making a budget overrun”, he explained. “From January 2024 a reform module will come into force, we will find the necessary resources and coverage, we have indicated the priorities and we will stick to them”, he underlines.

IRPEF – A review of the entire personal income taxation mechanism is envisaged, so as to gradually implement the objective of “horizontal equity”, through the identification of a single tax exemption bracket and the same tax burden regardless of the different categories of income produced, favoring, in particular, the equation between employee income and pension income; the recognition of the deductibility, even in a lump-sum amount, of the expenses incurred for the production of employment and similar income; the possibility for all taxpayers to deduct the mandatory social security contributions when determining the category income and, in the event of inadequacy, to deduct the excess from the total income; the application, instead of the rates for income brackets, of a substitute tax of the Irpef and related surtaxes with a reduced rate on a taxable base commensurate with the increase in income in the tax period compared to the income for the highest period among those relating to the three previous tax periods, with the possibility of setting limits to the eligible income and a special regime for employee income which facilitates the income increase of the tax period compared to that of the previous tax period; the consequent overall revision of tax expenditures (currently 600 items and 125 billion euro of expenditure).

IRES – The review of the corporate and corporate income tax system will be based on the reduction of the IRES rate if both of the following conditions are met within the two tax periods following the one in which the income was generated: a sum corresponding, in whole or in part, to said income is used in investments, with particular reference to qualified ones, and in new hires; the profits are not distributed or destined for purposes unrelated to the exercise of the business activity. The condition, linked to the execution of the investments, has the clear purpose of promoting economic growth and the increase in the employment base, with particular reference to subjects who need greater protection, including people with disabilities, and without interfering with the current tax relief regimes. In this case, unlike what ordinarily occurs for the use of tax incentives, the reduction of the rate precedes the execution of the investments. The latter must be implemented within the two tax periods following the one in which the income subject to tax at the reduced rate was produced.

VAT – For the revision of the value added tax (VAT), the specific criteria envisage the revision of the definition of the assumptions of the tax in order to make them more compliant with the legislation of the European Union and with the rules of exemption; rationalization of the number and extent of tax rates; the revision of the discipline of the deduction; the rationalization of the discipline of the VAT group in order to simplify the measures foreseen for the access and application of the institution.

IRAP – A comprehensive review of Irap is ordered aimed at repealing the tax and at the same time setting up a surtax for Ires such as to ensure an equivalent tax revenue, to guarantee the financing of health needs, as well as the financing of Regions with health budget imbalances or that are subject to repayment plans.

TAXPAYER STATUTE – The Statute of the Taxpayer is reviewed, with a consolidation of the principles of the legitimate expectation of the taxpayer and of legal certainty, providing for the strengthening by the taxing body of the obligation to state reasons, specifying the evidence on which the claim is based, and the right of access to the documents of the tax proceeding, functional to the correct deployment of the right to be heard.