2027 Budget Law: The Main Measures in the Bill Approved by the Government

An initial overview pending the official text

On 28 October 2026 the Council of Ministers approved the 2027 budget bill, a package worth around €26 billion that extends the measures expiring at the end of 2026 and introduces new ones. As the text is not yet available, we set out below a summary of the main measures as presented by the Government and discussed in the specialist press, leaving more detailed analysis to dedicated articles based on the clarifications that emerge during the parliamentary process, which must in any event be completed by 31 December.

Personal income tax (IRPEF): a wider 33% bracket

The 33% rate, which currently applies to income between €28,000 and €50,000, would be extended up to €55,000, so that the 43% rate would apply only above that threshold. The resulting maximum saving would be €500 a year and, according to the press, the measure applies to 2027 only. It remains to be seen whether higher incomes will be excluded, as happened last year, when the benefit of the reduction from 35% to 33% was cancelled out above €200,000 of total income by reducing certain tax deductions.

Employees and young workers

The 5% substitute tax on pay increases under private-sector collective agreement renewals would be confirmed, together with the 1% tax on productivity bonuses and the 15% tax on supplements for night, public holiday and shift work.

For workers under 30, a 1% substitute tax would be introduced for 2027 on increases in employment income. Although presented as a €2,500 "bonus", this would not be a sum paid by the State but rather reduced taxation on salary increases, such as seniority increments or promotions, up to €2,500 a year. Income limits and the reference period for measuring the increase will in any event be clarified by the text.

Fringe benefits: €2,000 tax-free for under-30s

Fringe benefits are goods and services provided in kind by the employer to the employee in addition to cash remuneration. Their value is not subject to tax or social security contributions if it does not exceed €1,000 in the year, or €2,000 for employees with dependent children (art. 51, para. 3, TUIR); above the threshold, the entire amount becomes taxable.

The budget would raise the tax-free limit to €2,000 for all workers up to the age of 30, even without children. For businesses this would be a useful tool, as it would allow them to grant younger employees up to €2,000 a year free of tax and social security contributions, as an alternative to a salary increase.

Flat-rate regime: threshold raised to €100,000

The revenue and fee threshold for the flat-rate regime (regime forfettario) is set to increase from €85,000 to €100,000, but for income tax purposes only: EU rules allow VAT exemption only for businesses with turnover up to €85,000, a limit that remains in force pending authorisation from the European Union. According to initial reports, those falling between €85,000 and €100,000 would continue to pay the 15% substitute tax (or 5% for new businesses), but would have to charge VAT on their invoices, with the related compliance obligations.

Real estate: reduced flat-rate rental tax and its return for shops

For agreed-rent leases (canone concordato), the flat-rate rental tax (cedolare secca) would be reduced from 10% to 5%, and to 1% where the tenant is no older than 35, with the aim of making these contracts more attractive than market-rate and short-term lets. The 21% flat-rate tax is also extended to commercial property: according to the press, it would apply to shops of up to 300 square metres let by individuals, reviving the 2019 measure, which however applied only to contracts entered into in that year. It remains to be seen whether, in this case, the relief will also apply to existing contracts and, if so, on what terms and within what limits.

Real estate: building-related deductions

For 2027 the deductions for renovation works would be confirmed at 50% for the main residence and 36% for other properties, avoiding the reduction scheduled from 1 January, together with the furniture bonus with its €5,000 limit. The return of the 65% energy-efficiency bonus (ecobonus) does not, however, appear in the official statement and, according to the press, would depend on the European Commission approving the use of the flexibility provided for energy.

Vehicle tax: the exemption becomes permanent

The vehicle tax exemption for petrol, diesel or hybrid cars of up to 80 kW and for motorcycles, introduced in September for 2027 only, would become permanent. It applies to one vehicle per registered owner and, according to the Parliamentary Budget Office, would cover around 45% of vehicles, 65% of owners and 73% of households with at least one vehicle.

Businesses and hiring

Since 2024, employers that increase their permanent workforce have been able to deduct 120% of the cost of new hires, or 130% for certain categories, such as mothers with at least two minor children. The relief, already extended to 2027, would be increased to 140% for the permanent hiring of young people under 36 and to 180% for the permanent hiring of working mothers. Social security contribution exemptions for hiring women, young people and workers in the Single Special Economic Zone (ZES unica) would also be extended to 31 December 2027.

The tax credit for the Single Special Economic Zone is set to rise to €2.4 billion in 2027, of which €1.4 billion is additional, and to €1.25 billion in 2028. The main new measure for investment would be a tax credit for cloud-based (i.e. subscription) software, currently excluded from the enhanced depreciation scheme (iperammortamento), whose rules are yet to be published. The Energy Release scheme for energy-intensive businesses would be confirmed, while the plastic tax and sugar tax would be postponed to 1 July 2027.

Families, healthcare and pensions

Parental leave paid at 80% would increase from three to four months, five for the second child and six from the third. As this leave applies to employees, a voucher of up to €500 a month, for a maximum of three months, is planned for self-employed parents to cover babysitting and early childhood education services.

The mothers' bonus would also become permanent and be increased. This is the monthly contribution for working mothers, whether employed or self-employed, with at least two children and employment income of up to €40,000, which in 2026 amounts to €60 a month until the youngest child turns 10. The amount of the increase will be known once the text is available.

A birth-rate fund is also planned, although little information is available so far. According to the official statement, every child born from 2027 will have an individual savings account, a kind of piggy bank, with a State contribution of €100 a year until the age of majority and tax-deductible payments by family members.

Lastly, there would appear to be a €300 voucher for over-75s with pensions of up to €28,000, for healthcare expenses not covered by the National Health Service, and an €850 million fund for flexible early retirement for those retiring under the contribution-based system, with rules still to be defined.

Business requests left out

Two measures eagerly awaited by businesses would, for the time being, be left out. The first is the extension of the enhanced depreciation scheme (iperammortamento), currently available for investments made by 30 September 2028: the Ministry of Enterprises had proposed extending it by one year, but the Government merely noted that it is already funded until 2028.

The second is the business combination bonus (bonus aggregazioni), announced by the Prime Minister and requested by Confindustria and Assonime, which would allow the deduction of the value of intangible assets arising from the acquisition of businesses or controlling interests between independent companies, along the lines of a relief in force from 2019 to 2022 for mergers, demergers and contributions in kind. The Prime Minister expressed the hope that it will be reinstated in Parliament, and it will be among the measures we follow most closely.

Next steps

This overview will need to be checked against the official text, and the parliamentary process is likely to bring amendments or reinstate some of the excluded measures. The Firm will follow the progress of the bill, including in order to verify which of the above measures are confirmed in the final text and which further provisions may subsequently be introduced, publishing detailed analyses of the individual measures, starting with the flat-rate regime and the changes to the flat-rate rental tax, through to fringe benefits and hiring incentives.