Italy Tax Agency Clarifies Taxation of Compensatory Payments Made for Social Security Regime Changes

The Italian Revenue Agency July 30 issued Letter No. 198/2025, clarifying the tax treatment of compensatory payments made due to social security regime changes. The taxpayer, a public authority, established a new social security regime with different severance pay provisions. The taxpayer would pay employees in service on April 7,2020, and who didn’t opt for the new regime, a compensatory payment relating to Jan. 1, 2020, to Dec. 31, 2024, when paying them severance pay. The payment was intended to neutralize the regime change. The taxpayer sought clarification as to whether the compensatory payments qualified for the separate taxation regime. ...