Italy: The "Monti’s Measure" (Law Decree No. 201 Dated December 6th) - Italian Regional Tax (IRAP) Deduction From Individual And Corporate Income Tax (IRPEF/IRES) And New IRAP’s Deductions

Last Updated: 9 January 2012
Article by Batini Colombo Saottinis' Tax Team


The Law Decree no. 201 dated December 6th 2011, the so-called "Monti's measure", includes some news for:

  • Italian Regional Tax – IRAP – deductions foreseen for employers using unlimited time employees aimed to reduce the so called "fiscal employment's charge";
  • IRAP's deductibility from Individual and Corporate Income Taxes (IRPEF and IRES).

However, both modifications will not be effective for 2011 (and related tax return "UNICO 2012" form), but they will start on tax year 2012 (therefore with relation to tax return "UNICO 2013" form).

In the following pages we analyse those news, considering also the variations brought to the Law Decree introduced during its conversion.


The Financial Law for year 2007 introduced two different Regional Tax (IRAP) deductions for employers with personnel employed for un unlimited period of time, with the aim of decreasing the incidence of improper charges on employment's cost (the so-called "fiscal wedge").

In particular, for every employee hired with an unlimited time employment agreement during the tax year, the following deduction have been introduced:

  • Pension and social security contribution have become deductible for IRAP taxable income;
  • A forfeited tax allowance of Euro 4.600,00 on a yearly basis for each employee.

For employees hired with an unlimited time agreement in the following Italian regions Abruzzo, Molise, Campania, Basilicata, Puglia, Calabria, Sardinia and Sicily, the said forfeited allowance has been increased to Euro 9.200,00 euro, always on a yearly basis.

2.1.  News Under the "Monti's Measure"

The Regional Tax deduction described above will be increased for employers hiring women (despite of their age) and employees younger than 35 (despite of their sex).

Under the above-mentioned conditions, the deductible amount is increased, on a yearly basis, up to:

  • Euro 15.200,00 euro, for undetermined time employees hired within the above mentioned disadvantaged regions;
  • Euro 10.600,00 euro, for all others.

In order to take advantage from this increase the employee hasn't necessarily to be hired in 2011, since the new deductions are applied to all employees having the required characteristics detailed above even if hired before 2011.

2.2. Effective Date

The increase will become applicable starting from the fiscal year following the one ending on December 31st 2011 (that is year 2012 for subjects having the tax year coincident with the calendar year).

Therefore, until the UNICO 2012 form, the forfeited deduction has to be calculated following the "old" amounts.

2.3.  Confirmation of Other Aspects Regurding Tax Deductions

The other aspects of the mentioned deductions are confirmed as they are, that are the beneficiary subjects and calculation's methods (i.e. adjustment of the deduction in case of starting, transformation or cessation of the employment relationship during the year).


IRAP's deduction from IRPEF and IRES, introduced by article 6 of the Law Decree 185/2008 (converted in the Law 2/2009) has been modified as well.

Under effects of the introduced news, will become deductible from IRPEF and IRES:

  • The part of IRAP related to the taxable amount referred to expenses for employees, netted from deductions set by the law;
  • An additional 10% of residual IRAP paid during the year, forfeited on the tax due on the taxable part of negative interests and related accessories, netted by active interests and similar incomes.

3.1. Effective Date

The new rules will become applicable from the tax year in due course at December 31st 2012 (therefore from 2012 for subjects having their tax year coincident with the calendar year). Therefore, until UNICO 2012 form, the said deduction has to be calculated with the "old" method.

In practice, from 2012 we could have the three following situations:

  • Tax payer that, with reference to the tax year when the deductions has to be operated, has suffered both employment costs and negative interests: in this case IRAP's deduction will become applicable on the taxable part of employment expenses, netted by deductions foreseen by the law, and the additional 10% deduction of the remaining IRAP paid in the tax period;
  • Tax payer that, with reference to the tax year when the deductions has to be operated, has suffered only employment costs: in this case the applicable deduction will be the just the one paid on personnel expenses, netted by deductions foreseen by the law;
  • The tax payer that, with reference to the tax year when the deductions has to be operated, has suffered just negative interests: in this case, the applicable deduction will be just the 10% of the IRAP paid in the tax year.

3.2.  Confirmation of Other Aspects Regarding Tax Deductions

The other aspects of the deductions should be confirmed as they are, among which beneficiary subjects and deductible amount's calculation method.

With reference to these last ones, we deem that the so-called "tempered cash principle" will remain applicable: in practice, the base on which calculate the deductible amount should be always made by the amounts paid during the tax year, confirmed that prepayments count under the limits of the tax effectively paid during the tax period.

I.e., assuming that in 2012 the following amounts have been paid for IRAP:

  • IRAP 2011 balance due Ý 100.000,00 euro;
  • 1° IRAP 2012 prepayment Ý 48.000,00 euro;
  • 2° IRAP 2012prepayment Ý 72.000,00 euro;
  • Total IRAP due for 2012 Ý 105.000,00 euro;
  • IRAP 2012 balance equal to a tax credit of Ý 15.000,00 euro.

Since the tax due for 2012 is 105.000,00 euro and is lower than the two prepayments paid in the same year (48.000,00 + 72.000,00 = 120.000,00), the deductible amount to be considered will be 205.000,00 euro, deriving from the following sum:

  • Balance due for 2011 (100.000,00 euro);
  • The prepayments paid in 2012 within the amount of the tax due for the same 2012 (105.000,00 euro).

The deductible amount will be therefore calculated on 205.000,00 euro, according to the above mentioned specifications.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Batini Colombo Saottinis' Tax Team
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions