Italy

Italy uses a progressive income tax system (IRPEF) with four brackets in 2025: 23% on income up to EUR 28,000, 35% up to EUR 50,000, 43% up to EUR 100,000, and 43% above EUR 100,000. Regional surcharges add 1.23-3.33%, and municipal surcharges add 0-0.9%, making the effective top rate approximately 47%. Social security contributions (INPS) are significant. Employee contributions are approximately 9.19% of gross salary. Employer contributions total approximately 30% of gross salary, covering pension, unemployment insurance, illness, and other social funds. This makes the total employment cost substantially higher than gross salary. Italy mandates a thirteenth salary (tredicesima mensilita) and, in many sectors, a fourteenth salary (quattordicesima). The TFR (Trattamento di Fine Rapporto) is a mandatory severance provision equal to approximately one month's salary per year of service, accrued and paid upon termination. Tax deductions include a progressive employment income deduction, deductions for dependent family members, and various credits for medical expenses, education, and building renovations. Capital gains on financial instruments are taxed at 26% (12.5% for government bonds). VAT is 22% with reduced rates of 10%, 5%, and 4%. The corporate tax rate is 24% (IRES) plus regional IRAP of 3.9%.