Taxation of Severance Pay…

Back to All Thought Leadership

TAXATION OF SEVERANCE PAY (T.F.R.): SHOULD THE TAX ADMINISTRATION APPLY THE SEVERABILITY CLAUSE?

With regard to the recalculation of the tax due on severance pay liquidated by the employer, the Tax Administration is also required to consider the so-called “severability clause” set forth in Article 1, paragraph 9 of Law No. 296/2006 (2006 Finance Act), which provides that “For the purposes of determining the personal income tax due on severance pay … the rates and income brackets in force at December 31, 2006 shall be applied, if more favorable.

The judges of the Lombardy Regional Tax Commission recently affirmed this in Judgment No. 1114 of March 23, 2022, which annulled a notice of assessment by which the tax authorities had recalculated the tax due by the taxpayer for Personal Income Tax (IRPEF) purposes on the amounts received upon termination of employment without taking into account the severability clause.

In fact, the enforceability of…

Read more

Sign In

[login_form] Lost Password