TFR taxation from 2027: no tax hike, but worth understanding how it works
For weeks the news has said TFR will be taxed more from 2027. It won't: the rule has moved, the result hasn't. Still, it's a good moment to understand how the tax on your severance pay is worked out.
What happened
Legislative Decree no. 117 of 19 June 2026, published in the Gazzetta Ufficiale on 3 July 2026, rewrites Italy's income tax code (TUIR) and applies from 1 January 2027. The 1986 text stays in force until then.
In September a partial reading of the new text suggested that the TFR safeguard clause had been scrapped. In fact the old rule (law 296/2006) is repealed because it has been carried over, with the same content, into the new code. According to the specialist press, the technical report shows no change in tax revenue: it is a tidy-up, not a tax rise.
How TFR is taxed
TFR left with the employer isn't added to the year's income: it has separate taxation. The tax authority works out an average rate on a "reference income" linked to your years of service. The safeguard clause says the tax is calculated in two ways and the more favourable result applies:
- with today's IRPEF brackets: 23% up to €28,000, 33% up to €50,000, 43% above;
- with those in force on 31 December 2006: 23% up to €26,000, 33% up to €33,500, 39% up to €100,000, 43% above.
The comparison is automatic: you don't have to ask for it.
Who gains and who doesn't
The 2006 brackets have an intermediate 39% band that today's don't. That is why the safeguard only matters for higher reference incomes. Here is the comparison of theoretical tax (simplified, before any tax credits):
| Reference income | Tax on 2026 brackets | Tax on 2006 brackets |
|---|---|---|
| €40,000 | €10,400 | €10,990 |
| €60,000 | €18,000 | €18,790 |
| €80,000 | €26,600 | €26,590 |
| €100,000 | €35,200 | €34,390 |
The figure that applies is in bold. Up to a reference income of about €80,000 today's brackets win; above that the 2006 rule saves money, around €800 at €100,000. Had the clause really disappeared, only these high incomes would have lost out: for everyone else nothing would have changed.
In short: if you receive your TFR in 2027 or later, it is taxed as it always has been. There is no reason to retire or resign before December to "save" your severance pay.
What about TFR in a pension fund?
Nothing changes here either. Pension fund benefits carry a flat 15% tax, reduced by 0.30 percentage points for each year of membership beyond the fifteenth, down to 9%. After 25 years of membership the rate is 12%; after 35 years it is 9%. For a tailored comparison of TFR at the company versus in a fund, use the pension fund vs ETF tool.
What to do in practice
- Don't decide on the back of a headline. An alarming title is no reason to change your retirement date or where your TFR goes.
- Estimate the tax in advance if your payout is near: you need to know what will really arrive, as explained in end-of-career TFR.
- Remember the adjustment. The tax authority can recalculate the tax after you are paid and ask for or refund the difference: keep part of the sum aside for a few months.
- If you're a new hire, the bigger TFR decision is a different one: stay in or leave the fund within 60 days, as explained in auto-enrolment.
The 2027 Budget Law is still under discussion: if it touches TFR or pension funds, we will update this guide.
Sources
Try the tool: Pension fund vs ETF: tax saving calculator. Income tax saving, employer contribution and final capital: pension fund versus ETF.
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Book a free callFor information and education only. This is not investment advice or a personal recommendation. Tax and pension rules change over time: always check current requirements with official sources (INPS, Agenzia delle Entrate).