TFR and new taxation rules from 2027: the effects of the abolition of the safeguard clause
Among the changes introduced by the new Consolidated Income Tax Act (Legislative Decree No. 117 of 12 August 2026) is a reform set to affect the finances of a very broad group of workers: the repeal of the so-called “safeguard clause” on the taxation of severance pay (TFR), which was introduced in 2006 and has remained in force ever since.
The legislative change and its impact
Article 376 of Legislative Decree No. 117/2026 repeals Article 1, paragraph 9, of Law No. 296/2006, which since 2007 has allowed the tax on TFR to be calculated using the IRPEF rates in force on 31 December 2006, whenever these were more favourable than those applicable at the time of termination of employment. The provision takes effect from 1 January 2027 and applies to employees whose employment relationship ends from that date onwards, whether due to retirement, resignation, or a change of job.
The effect is neither automatic nor uniform: taxation may increase especially for those who have accrued TFR over a long career and have medium-to-high incomes, as these were the cases in which the comparison with the old 2006 tax rates provided the greatest benefit. For lower-income earners, however, the impact remains limited.
The situation before the reform: the 2006 tax safety net
To understand the significance of the change, it is necessary to recall why the safeguard clause was introduced. With the 2007 IRPEF reform, tax rates and income brackets were changed, creating the risk of penalising TFR, a sum accumulated over many years and taxed only upon payment through the separate taxation mechanism.
To avoid this effect, the legislator introduced a comparison between two tax systems: the one in force at the time of termination of employment and the one applicable on 31 December 2006. When the latter was more advantageous, the worker was granted the more favourable tax treatment. The same rule also applied to equivalent indemnities and other amounts connected with termination of employment.
In practice, this was a protection measure designed to accompany the transition to the new IRPEF system, but it remained in operation over time as a structural safeguard for workers.
How taxation will work after the reform
With the repeal of Article 1, paragraph 9, of Law No. 296/2006, from 2027 the comparison with the 2006 tax rates will no longer be possible: TFR will be taxed solely according to the IRPEF rules in force at the relevant time for separate taxation, without any recovery of the historical treatment even when it would have been more favourable.
What matters is not the period during which the TFR amounts were accrued, but the date on which the employment relationship ends. Therefore, employees who have accumulated TFR even before 1 January 2027 will no longer benefit from the previous comparison if their employment relationship terminates after that date.
Particular attention should be paid to terminations occurring around the transition between 2026 and 2027: according to some initial interpretations, the new rules could also apply to employment relationships ending on 31 December 2026 if the right to receive the TFR arises from the following day. Official clarifications from the Italian Revenue Agency are still awaited on this point. Anyone close to the year-end transition should carefully verify both the termination date and the date on which entitlement to TFR arises.
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Centro Studi e Pianificazione Fiscale
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Dott. Valerio Locatelli
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Dott. Giancarlo Marengo
