Italy’s Flat Tax on Contractual Increases to Deliver Paycheck Boosts in 2026
Italian employees are set to receive a potential paycheck bonus of up to 850 euros starting in the spring of 2026, thanks to the application of a flat tax on contractual increases. The benefit stems from a measure outlined in Italy’s 2026 Budget Law and clarified by a recent circular from the Italian Revenue Agency 1.
How the Flat Tax Works
The flat tax, set at 5 percent, applies to salary increases resulting from the renewal of national collective labor agreements (CCNLs) signed between January 1, 2024, and December 31, 2026. This applies to employees with an annual income of up to 33,000 euros. The aim is to incentivize work and boost income by reducing the tax burden on wage increases 1.
Impact Varies by Sector and Collective Agreement
The actual amount of the paycheck bonus will depend on the specific collective agreement and the size of the salary increase negotiated. The Labor Consultants Study Foundation has provided simulations indicating that employees in the trade, telecommunications, and metalworking sectors are likely to see the largest benefits, ranging from 250 to 850 euros annually.
Sector-Specific Benefits (2026 Estimates)
- Trade (Level II): A gross annual salary of 31,412.17 euros, combined with a 2.698.73 euro increase subject to the flat tax, could result in a net advantage of approximately 851.13 euros per year.
- Metalworking Industry (Level B1 – Full-time): Employees with a gross annual salary of 30,529.34 euros and an 841.89 euro increase could see a benefit of around 249.91 euros.
- Telecommunications (Level 6): An increase of 1,709.96 euros on a 30,248.99 euro salary could yield a benefit of approximately 507.59 euros.
The following table provides a more detailed breakdown of potential benefits by CCNL and level:
| CCNL Trade – Level | RAL (Gross Annual) | CCNL increase (Taxable 5%) | Substitute Tax (5%) | Net Advantage 2026 |
|---|---|---|---|---|
| Level II | 31.412,17 € | 2.698,73 € | 134,94 € | + 851,13 € |
| Level IV | 25.048,52 € | 1.995,00 € | 99,75 € | + 592,19 € |
| Level VI | 21.640,97 € | 1.618,17 € | 80,91 € | + 482,66 € |
| Level IV (PT 60%) | 15.029,11 € | 1.197,00 € | 59,85 € | + 182,30 € |
| CCNL Metalworking Industry Level | RAL (Gross Annual) | CCNL increase (Subject to 5%) | Substitute Tax (5%) | Net Advantage 2026 |
|---|---|---|---|---|
| Level B1 (Full-time) | 30.529,34€ | 841,89€ | 42,09 € | + 249,91 € |
| Level D1 (Full-time) | 22.989,67 € | 633,96 € | 31,70 € | + 188,18 € |
| Level B1 (Part-time 60%) | 18.317,60 € | 505,13 € | 25,26 € | + 125,69 € |
| Level D1 (Part-time 60%) | 13.793,80 € | 380,38 € | 19,02 € | + 57,93 € |
| CCNL Telecommunications – Level | RAL (Gross Annual) | CCNL increase (Subject to 5%) | Substitute Tax (5%) | Net Advantage 2026 |
|---|---|---|---|---|
| Level 6 | 30.248,99 € | 1.709,96 € | 85,50 € | + 507,59 € |
| Level 5 | 25.953,49 € | 1.400,00 € | 70,00 € | + 415,57 € |
| Level 2 | 20.357,58 € | 995,12 € | 49,76 € | + 247,62 € |
| Level 5 (PT 60%) | 15.572,09 € | 840,00 € | 42,00 € | + 127,93 € |
Holidays and Existing Superminimums
The Labor Consultants Study Foundation has clarified that holiday pay should be included in the calculation of the flat tax benefit, aligning with rulings from the Court of Cassation and the EU Court of Justice. If an employee already receives a superminimum, the contractual increase can be used to reduce the superminimum amount, with the increase still benefiting from the 5 percent flat tax.
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