What is the Tax Equalisation (Conguaglio Fiscale) in Italy?

At Horizons, we understand that taxation can be complex, especially when you change employers mid-year. One key concept you should be aware of is Tax Equalisation (Conguaglio Fiscale).

What is Tax Equalisation?

Tax Equalisation in Italy is a system that ensures you pay the correct amount of income tax over the year, even if you change employers. If you start a new job partway through the year, your new employer must account for your previous earnings and taxes to ensure fair taxation. This process helps prevent over- or under-taxation by adjusting your tax payments based on total earnings for the year.

How Does It Work?

1. Certificazione Unica (CU) Submission

You must obtain your Certificazione Unica (CU) from your previous employer. This document outlines the earnings and taxes already paid.
Action Required: Send your CU document to Horizons as soon as possible after joining.

2. Request Tax Equalisation Application

Tax Equalisation is not automatic. If you wish to apply, please notify Horizons before your first tax payout, ideally during your first month after signing your employment agreement with Horizons.
Action Required: Submit a request to Horizons to apply Tax Equalisation for you.

3. Employer’s Annual Tax Declaration

By February of the following year, Horizons submits a tax declaration including your earnings from all employment sources during the year.

4. Lump-Sum Tax Adjustment (if applicable)

If there is a tax discrepancy due to your salary increase, your December payslip may include a lump-sum tax payment to adjust for the correct tax rate.
This amount will be displayed under the "Anno" section of your payslip.

How This Affects You

Lump-Sum Tax Payment

If Tax Equalisation applies to you, your December net salary may be reduced significantly or even be zero, depending on the tax owed.

Impact on Cash Flow

Since the tax adjustment happens at the end of the year, it is essential to plan ahead for potential deductions from your December income.

Frequently Asked Questions (FAQs)

Q1: Why might I need to pay a lump-sum tax in December?

If your total earnings for the year have increased due to your new job, the lump-sum payment ensures you pay the correct tax amount for the year.

Q2: Will I receive zero net income in December?

In some cases, the tax adjustment may result in little or no net salary in December. The actual amount depends on your total earnings and tax obligations.

Q3: What is the Certificazione Unica (CU)?

The CU is a certificate from your previous employer that details your taxable earnings and the taxes paid before joining your new company. This document is crucial for accurate tax calculations.

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Italy