What is the cuneo fiscale?
The cuneo fiscale, or tax wedge, is the gap between what an employer pays for an employee and what the employee takes home. In Italian payroll, the term also refers to the relief that reduces this gap for lower and middle earners. Since 2025, under Law 207 of 2024, it has been a tax measure, replacing the earlier cut in employee social security contributions.
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Employees with total income of up to €20,000 receive a sum that is not taxable, calculated on their employment income:
- 7.1% up to €8,500;
- 5.3% from €8,500 to €15,000;
- 4.8% above €15,000.
The band is chosen with employment income annualised. For example, an employee with €12,000 of employment income receives €636 for the year, and one with €20,000 receives €960.
Income from €20,000 to €40,000
Above €20,000 of total income, the employee receives an additional credit against income tax instead, in proportion to the period worked. It is €1,000 a year up to €32,000. Between €32,000 and €40,000 it tapers to zero: €1,000 multiplied by €40,000 minus the income, divided by €8,000. At €36,000 of income, the credit is €500.
How payroll applies it
Pensioners are excluded. The employer applies the relief automatically when it pays salaries and checks entitlement at the year-end conguaglio. If the relief turns out not to be due, the employer recovers it, in ten equal instalments if the amount is over €60. The employer recovers the tax-free sum it paid out by offsetting it on the F24 form. Both amounts are reported in the employee’s CU.
The cuneo fiscale when TopSource runs your payroll
When TopSource runs your payroll in Italy, we apply the right sum or credit each month, adjust it at the conguaglio, offset it on the F24 and report it in the CU.
Frequently asked questions
Who gets the cuneo fiscale relief in Italy?
Employees, but not pensioners, with total income of up to €40,000. The form of the relief depends on whether income is above or below €20,000.
Does the cuneo fiscale reduce the employer’s cost?
No. It increases the employee’s net pay. The employer advances the tax-free sum and recovers it on the F24.
What happens if the relief was not due?
The employer recovers it at the conguaglio, in ten equal instalments if it is over €60.
Related terms in Italy
- Comunicazione Obbligatoria (Italy)
- Libro Unico del Lavoro (Italy)
- Smart Working Agreement (Italy)
- ROL and Ex-Festività Permits (Italy)
- Patto di Non Concorrenza (Italy)
- Employee Categories (Italy)
- Mandatory Disability Hiring Quota (Italy)
- Cassa Integrazione (Italy)
- Decreto Flussi and Nulla Osta (Italy)
- Welfare Aziendale (Italy)
- F24 Payment Form (Italy)
- UniEmens (Italy)
- Certificazione Unica (Italy)
- Modello 770 (Italy)
- Busta Paga (Italy)
- Conguaglio Fiscale (Italy)
- Supplementary Pension Funds (Italy)
- Impatriate Tax Regime (Italy)
- IRAP (Italy)