Summary

Italy operates a comprehensive social security system which provides a range of old age, invalidity, sickness, unemployment and other social benefits, including family allowances and income guarantees. Entitlement to benefits generally derives from and individual’s contribution history, although some benefits arise due to residence in Italy.

The Italian social security system is extremely bureaucratic – it has industry and regional differences and various branches overseen by difference government institutions, which add a further layer of complexity. 

Details

Contributions

Individual contributions vary according to industry and qualification level, but are generally around 10% of total remuneration up to a ceiling of €122,295 for most employees. Employer contributions are generally between 28% and 33% of earnings up to the same level, with contributions of around 5% on earnings above that level. A different set of rates apply to ‘executives’ (‘dirigenti’) – these are slightly higher and do not have the same earnings caps

Treaties

Italy has social security agreements with all European Economic Area countries and more than 25 non-EEA countries, including the US, Canada, Japan, Australia and Brazil. These agreements determine which country has the right the levy social security contributions, has the obligation to provide benefits, and prevent social security being levied twice on the same income. The US/Italian agreement differs slightly from the normal international treaty models in that it is not time limited and not all branches of social security are covered. Special rules apply to individuals working in Italy and other EEA countries (plus the UK) on a regular basis.

Most businesses sending individuals to Italy avoid paying local contributions through having a certificate of coverage or A1 – this is beneficial from both cost and administrative points of view. Certificates under the US/Italian agreement do not prevent all Italian contributions from being payable.

Exemptions

A reduction in total social security contributions of up to €50,000 per year can be obtained by companies with certificated gender pay gap status (‘bollino rosa’). There are reductions to the employer social security contributions due on certain approved bonus schemes, and some approved ‘in-kind’ bonus schemes can be completely exempt from social security.

Administration

All contributions to the social security system are made through payroll for those employed in Italy – mainly to INPS (the Italian Social Security authority), but also to other institutions for occupational insurance and the state severance fund. The different contribution rates payable for different employees under the various collective bargaining agreements adds an extra level of complexity.

Benefits

Although benefits for the various branches of Italian social security are administered by different institutions, INPS provides access to and pays most of the amounts due. 20 years of total contributions (in Italy or a treaty partner) are required to access Pension benefits in Italy.

Other

 Employee social security contributions are generally tax deductible in Italy, as are contributions to certain complementary pension funds. Mandatory social security contributions paid abroad are also tax deductible in Italy. 

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