The Italian government has officially published Legislative Decree No. 117 of June 19, 2026, in the Official Gazette (Serie Generale, No. 152) on July 3, 2026, establishing the new Consolidated Act on Income Taxes (Testo Unico delle imposte sui redditi). This comprehensive regulatory framework will take effect on January 1, 2027, as mandated by Article 377, streamlining tax legislation by separating permanent rules from temporary measures and codifying recent fiscal adjustments.
Structural Changes to the Income Tax Code
The new decree marks a significant reorganization of Italian tax law. By separating permanent tax regulations from temporary provisions, the government aims to improve the readability and application of the code. Previously, legislative drafts often bundled structural rules with short-term extensions, creating ambiguity for taxpayers and professionals.
The finalized text separates the standard deduction regime for building renovations—governed by Article 17—from temporary tax measures. This distinction ensures that the code’s primary articles remain focused on long-term fiscal policy rather than becoming cluttered with annual prorogations.
New Rules for Building Bonuses
Under the new Consolidated Act, the temporary discipline for building bonuses is now located in a distinct section at the end of the document. According to the decree, the tax deduction for eligible building interventions is set at:
- 36 percent for expenses incurred in 2025 and 2026.
- 30 percent for expenses incurred in 2027.
For interventions specifically targeting primary residences, the deduction is elevated to 50 percent for 2025–2026 and 36 percent for 2027. By isolating these percentages from the permanent text, the government has created a clearer distinction between standard housing tax relief and time-limited incentives.
Coordination with the 2026 Fiscal Decree
The new Consolidated Act incorporates the fiscal changes introduced by Decree-Law No. 38 of March 27, 2026, which was converted into Law No. 88 on May 22, 2026. This coordination was necessary to align the new tax code with the restoration of previous regimes regarding dividends and the Participation Exemption (PEX).
Regarding dividends, the finalized text dictates that these now contribute directly to the formation of total income at a rate of 58.14 percent. This replaces the previous, more complex system of qualified and non-qualified thresholds that had been proposed in earlier drafts (Schema AG 398).
The decree also clarifies the treatment of corporate income:
- PEX (Participation Exemption): Article 96 confirms that capital gains are exempt at a rate of 95 percent, provided standard requirements are met.
- IRES-subject entities: Article 98 excludes 95 percent of dividends distributed by entities subject to IRES from the recipient’s taxable income.
Implementation Timeline
While the decree was published in the Official Gazette on July 3, 2026, its provisions remain deferred. Taxpayers and businesses will continue to operate under existing rules through the remainder of 2026. The new, consolidated regulatory regime will become the primary reference for income tax compliance starting January 1, 2027. This transition period allows the Italian Revenue Agency and tax practitioners time to adjust to the reorganized structure of the Consolidated Act.