The substitute tax on the revaluation, its payments and TFR advances

In 2025 the TFR fund of a workshop in Brescia was revalued by 1,000 €. In December 2026 the owner pays an advance of 170 €, worked out on the whole revaluation. 153 € would have done: the Agenzia's page has the advance computed on 90% of the revaluations. The extra 17 € is not lost: it comes back in the February balance, which is net of the advance.

A tax on the revaluation alone

The Agenzia delle Entrate page, updated on 30 July 2026, describes the tax in one sentence: revaluations of TFR funds bear a tax in place of income taxes, borne by the employer or pension body, at the rate of 17%.

The base is narrow and has to be drawn carefully. The tax falls on the revaluation, not on the fund and not on the yearly accrual. A business holding a fund of 50,000 € does not pay 17% of 50,000 €: it pays it on the growth of the fund produced by that year's revaluation rate.

The word substitute means that the tax takes the place of income taxes on the part of TFR that comes from revaluation. The linked calculator accordingly shows, beside the revaluation, the tax at 17% and the revaluation net of that tax.

The same page names two cases where the tax is not due. It is not due on portions paid in full into supplementary pension schemes, which do not stay in the business and are not revalued. Nor is it due for an employee who joins a pension fund with all of their TFR, since no fund remains with the employer.

The advance: historical or forecast method

The tax is paid in two steps, an advance and a balance. For the advance, the page on computing the first instalment offers two alternative methods, and the choice belongs to the employer or pension body. Both work on 90% of the revaluations; what changes is the year those revaluations relate to.

Under the historical method the advance is computed on 90% of the revaluations accrued in the previous calendar year, counting also those on any TFR paid out during that year. It is the simpler method, because it rests on figures already closed and already known.

Including TFR paid out has its own logic. An employee who left during the previous year generated a revaluation up to the month of leaving, and that revaluation is part of the revaluations accrued in that year. The historical method counts it, even though that employee will be gone by the time the advance is paid.

Under the forecast method the advance is computed on 90% of the revaluations accruing in the same year for which it is paid. The base is TFR accrued up to 31 December of the previous year for employees still on the payroll at 30 November of the current year.

The forecast method pays off when the workforce has changed a lot: if several employees with sizeable funds left during the year, the historical revaluations overstate those of the current year. The cost of choosing it is an estimate, since in November the December index is not yet known.

The page provides for a special case. Where every employee has left before 16 December, the advance may be based not on the previous year's revaluation but on the one accrued in the year of payment itself. That is the typical position of a business winding down.

The February balance

The balance is worked out by reference to the end of the year: the 17% rate is applied to the TFR revaluations actually determined in that year. The amount to pay is net of what was already paid as an advance.

The balance is therefore the moment of truth. The advance was an estimate, historical or forecast; the balance uses the December index, by then published, and each employee's actual fund. The gap between the two corrects any difference, in one direction or the other.

The record from the first module supplies the balance figure with no further work. The total of the year's revaluations, over funds kept in the business only, multiplied by 17%, is the year's tax. The linked calculator gives it employee by employee: add up the results and take off the advance.

Deadlines and tax codes

The page on how and when to pay fixes two dates: 16 December each year for the advance and 16 February of the following year for the balance. Both payments are made on form F24, each under its own tax code.

Where employment ends during the year, the payment deadlines stay the same. An employee's departure changes the revaluation, which is then worked out with the index of the month of leaving, but it does not move either of the two tax dates.

The TFR calendar thus slots into the rest of the firm's tax year. In mid-December the advance on the current year is paid; in mid-February the balance settles the previous year. Marking both dates in January, for the whole year, avoids a last-day scramble.

Paying by offset

The payment need not leave the bank account. The page allows employers to offset the substitute tax directly on form F24 against any credits accrued on other taxes or contributions.

The page also mentions a particular credit: the one arising from the advance levy on severance payments under article 3 of law no. 662 of 1996. It may be used up to the amount of tax due, and the sum offset in this way does not count towards the annual ceiling on offsetting.

Mergers and demergers

When the business changes shape, the page says who pays. Where a merger or demerger extinguishes the pre-existing entities, they pay advance and balance up to the effective date of the operation; after that date the absorbing, beneficiary or resulting company pays.

Where the operation does not extinguish the pre-existing entities, the original entity pays for the staff who remain with it, and the new employer pays for the employees who move across without a break in employment, together with the TFR they have accrued. The tax follows the fund.

The employee's side, briefly

The substitute tax concerns the revaluation and falls on the employer or pension body. How the TFR the employee receives at the end is taxed is another matter, which the same page touches on when it mentions a separate taxation regime, and which this course does not cover.

The page does flag one limit a business should know. Separate taxation does not apply to severance amounts above one million euros, which are added to overall taxable income; the rule also applies to fees and severance paid to directors of capital companies.

For a small business that threshold is far from an ordinary employee's TFR, but not necessarily from a director's exit package. When a large settlement is being prepared, the net amount is for the labour consultant to compute under that year's rules.

TFR advances

TFR is paid when employment ends, but article 2120 allows an exception at the employee's request. An employee with at least eight years of service with the same employer may ask, while still employed, for an advance of no more than 70% of the payment they would receive if they left on the date of the request.

The employer need not grant every request. The Code sets a yearly cap: requests are met within 10% of those eligible and in any case within 4% of the total headcount. In a small business the second limit is often the one that bites first.

The request must be justified. The consolidated text lists medical costs for exceptional treatment and operations recognised by the competent public bodies, and buying a first home for oneself or one's children, evidenced by a notarial deed. The Constitutional Court also admitted a purchase under way, if proven.

An advance can be obtained only once during employment and is deducted, for all purposes, from the final payment. Collective agreements or individual arrangements may provide more favourable terms and set priority criteria for granting requests.

The 4% limit calls for caution in a business with few employees. Applied to a small headcount, it yields less than one request a year. The text read does not say how to round it: before answering an employee, check what the applicable collective agreement provides, since it may be more favourable.

For the employer an advance also affects the in-house fund. Once paid, the fund kept in the business shrinks, and with it the base for future revaluations and for the substitute tax. The TFR record must therefore show the advance in the year it was paid.