Guide · Tax, VAT, bookkeeping and payroll

TFR in Italy: Severance Pay for Employers and Founders Abroad

By Federica Conti · Reviewed by Lorenzo Gatti · Updated 9 October 2026

Law as in force in 2026, for an employer with staff in Italy.

A person signing a document at a desk

TFR, the trattamento di fine rapporto, is Italy's statutory employment severance: every employee accrues it on any ending of employment, each year's quota is the pay for the year divided by 13.5 and the balance is revalued every year. The money sits with the company, the INPS Treasury Fund or a pension fund (Art. 2120 c.c.).

This guide explains the rule, then what a company run from abroad does about it. The tax side of hiring is on the detailed tax advisory page.

Table of contents

  • What is TFR, and is it the same as severance pay in Italy?
  • Who accrues TFR, and does a foreign founder or director?
  • How is TFR calculated?
  • Where does the TFR money sit?
  • When does a company have to pay TFR to INPS?
  • What changed on 1 July 2026 for first hires, and what are the 60 days?
  • What does a company run from abroad do, from the first hire to the last payout?
  • What tax does the company pay on TFR?
  • How is the employee taxed when TFR is paid out?
  • Can an employee take TFR early?
  • What is the TFR calendar for the year?
  • What happens to TFR if the employer is insolvent?
  • Who may lawfully run TFR formalities for a company abroad?
  • What changes on 1 January 2027?
  • From our practice
  • Sources
  • Frequently asked questions

What is TFR, and is it the same as severance pay in Italy?

TFR is the allowance an employee accrues over the whole of a subordinate employment (rapporto di lavoro subordinato, the relationship between an employee and an employer) and receives when it ends. Art. 2120 of the Civil Code gives the right on every termination, whatever its cause: resignation, dismissal, retirement or the end of a fixed term.

English calls it severance pay or severance indemnity, and that is only a gloss. Because TFR is owed on every ending, including a resignation, it is not a dismissal payment. It is deferred pay that the employer sets aside year by year.

Compensation for an unlawful dismissal is a separate regime. This guide does not cover it and gives no figure for it. After this section the page says "TFR".

Who accrues TFR, and does a foreign founder or director?

The right attaches to employment. A self-employed contractor accrues no TFR, and neither does a director who has no employment contract (Art. 2120 c.c.).

A foreign founder who owns an Italian company and holds office as director, with no employment contract, therefore accrues nothing on that office. Two questions sit outside this page: whether a director can also hold an employment contract that accrues TFR, and the separate end-of-office allowance. We have not answered them here, and they go to our contact page before any appointment is drafted.

How is TFR calculated?

For each year of service the quota equals the pay due for that year divided by 13.5, and never more (Art. 2120 c.c.). INPS reads this month by month: 7.41% (1/13.5) of the month's pay that counts for TFR, less the 0.50% contribution of Art. 3, last paragraph, L. 297/1982 for workers who owe it (Circolare INPS 12 of 5 February 2026, section 3).

The balance accrued at 31 December, without the current year's quota, is then revalued at 1.5% fixed plus 75% of the rise in the ISTAT consumer-price index.

  • Yearly quota: pay for the year divided by 13.5.
  • Monthly quota: 7.41% of the month's pay that counts for TFR, less 0.50% where it applies.
  • Yearly revaluation: 1.5% plus 75% of the consumer-price rise, on the balance at 31 December.

Searchers look for a TFR calculator. We found no official one among the sources read, so the page shows the formula and offers no tool. It gives no worked example, because the revaluation coefficient of a given year was not read.

Where does the TFR money sit?

The accrued TFR sits in one of three places, and the place depends on conditions, not on a preference we can recommend.

With the company: the accrual stays on its books as a liability. This is the position of a company outside the Treasury Fund scope (decree of 30 January 2007, Art. 1).

With the INPS Treasury Fund: the company pays the accruing TFR to INPS each month once it meets the size test explained in the next section (Circolare INPS 12/2026).

With a pension fund: if the worker is enrolled in a supplementary pension scheme, the TFR goes there (Art. 8 D.Lgs. 252/2005).

TFR accruedOne yearly accrual per worker (Art. 2120 c.c.)
The companyAccrual stays on its books as a liability; outside the Treasury Fund scope
INPS Treasury FundCompany pays monthly once the size test is met: 60 (2026 and 2027), 50 (2028 to 2031), 40 (from 1 January 2032)
A pension fundIf the worker is enrolled; first hires have 60 days to refuse (Art. 8 D.Lgs. 252/2005)
The three destinations of the accrual and the size thresholds of the Treasury Fund.

When does a company have to pay TFR to INPS?

The Treasury Fund covers all private employers except household employers, for workers whose TFR is governed by Art. 2120 c.c. It applies whenever the worker has not joined a pension fund and the employer meets the size test (Circolare INPS 12/2026, section 1).

Treasury Fund size test by period, in force since L. 199/2025 amended L. 296/2006 Art. 1(756).

PeriodMinimum yearly average headcount of the previous calendar yearNote
2026 and 202760First application of the new threshold
2028 to 203150The law is silent; INPS applies the ordinary requirement
From 1 January 203240Set by L. 199/2025
Year activity starts50A new company reaching 50 pays from the month it started

Source: Circolare INPS 12 of 5 February 2026, sections 2 and 4; L. 296/2006 Art. 1(756) as amended by L. 199/2025 Art. 1(203).

Headcount is the yearly average of the previous calendar year. Only months of actual activity count, every employee counts, part-timers pro rata to hours (Art. 9 D.Lgs. 81/2015), and a later fall in headcount does not end the obligation. For a newly formed company the pre-2026 criterion governs the year activity starts, and the 60, 50, 40 schedule applies to the years after.

Staff who pass to an employer in scope by a business transfer or merger bring the duty from the pay period of the acquisition. An employer that accrues Art. 2120 TFR for workers employed abroad also pays to the Fund. Groups that restructure their Italian holdings can start from our page on a holding company in Italy.

What changed on 1 July 2026 for first hires, and what are the 60 days?

From 1 July 2026 the automatic-enrolment rules of Art. 8 D.Lgs. 252/2005 apply (L. 199/2025 Art. 1(202) and (205)). A first hire in the private sector, household workers excluded, joins a supplementary pension scheme automatically unless they opt out (Normattiva). COVIP, the pension-fund supervisor, adapts its instructions for the start.

The fund that receives the TFR is the collective fund named by the applicable national, local or company agreement. Where several exist, it is the one most of the company's workers have joined, unless a company agreement says otherwise. With no agreement, the residual fund of Ministerial Decree 85/2020 takes the whole TFR.

The worker has sixty days from first hire to refuse. They may send the whole accruing TFR to another fund of their choice, or keep it with the employer under Art. 2120 c.c., and they can later revoke that choice in favour of a fund.

If the worker stays silent, the employer notifies the fund and starts paying from the month after the sixty days expire, with arrears from the hiring date included.

What does a company run from abroad do, from the first hire to the last payout?

The sequence below follows the statutes in their order. "Consultant" means an enrolled professional under the rule explained further down. We coordinate the consultant and never sign the formalities ourselves.

  1. Register the company as an employer

    The Comunicazione Unica of the incorporation can carry the INPS registration and the opening of the INAIL position (Registro Imprese). The agencies notify their outcome within 7 days of the filing.

  2. Engage the consultant and fix the collective agreement

    The CCNL, the national collective agreement, sets the pay levels on which TFR accrues. No statutory term applies; this is the order we work in.

  3. Send the hiring notice

    The UniLav notice goes to the employment service by the day before work starts, and the worker receives the pension information at the hire.

  4. Collect the worker's choice

    It falls within 60 days of the hire. The company keeps the signed declaration and hands the worker a copy.

  5. Start paying the fund if the worker is silent

    Payments begin from the month after the 60 days, arrears included.

  6. Pay the Treasury Fund if TFR stays under Art. 2120

    In scope, the company files the SC34 declaration, obtains authorisation code 1R and pays by the 16th of each month through UniEmens and F24 (Circolare INPS 12/2026).

  7. Re-run the size test every January and pay the 17% each year

    The test uses the previous calendar year's average. The tax dates are in the section on company tax below.

  8. Settle on termination

    The company pays the TFR with income tax withheld under Art. 19 TUIR and issues the Certificazione Unica (CU) within 12 days of a request.

Hands resting on a signed contract on a table
The hiring moment starts the 60-day clock for the worker's pension choice.

What a non-resident founder produces:

  • The company's codice fiscale, with its INPS and INAIL positions and its PEC. See getting an Italian tax code from abroad.
  • A delegation to the consultant. Its form, and whether a signature made abroad needs an apostille, is open and we state it per case.
  • For each worker: the pension-choice declaration and the worker's codice fiscale.
  • For a company in scope: the SC34 declaration to INPS.
  • An account able to pay the F24 online.

The company also keeps its payroll records. Our note on conservazione a norma rules points to the digital archiving rules, and we make no claim here about which records they cover.

What tax does the company pay on TFR?

A substitute income tax of 17% applies to the income from each year's revaluation of TFR funds (Art. 11(3) D.Lgs. 47/2000). The employer applies it as withholding agent and the tax reduces the fund. It applies to revaluations from 1 January 2015 under L. 190/2014 Art. 1(625).

The balance is due by 16 February of the following year. An advance of 90% of the previous year's revaluations is due by 16 December, and payment follows the F24 system (Art. 11(4)).

The 17% does not apply to the part of the TFR sent to a pension fund (Agenzia delle Entrate). Art. 11 D.Lgs. 47/2000 is marked in force to 31 December 2026. The Guarantee Fund contribution is covered in its own section below.

Hiring in Italy and unsure who handles TFR?

Settle who runs the formalities before the first offer.

How is the employee taxed when TFR is paid out?

The payout is taxed separately from the year's other income. The TFR is income net of the revaluations already taxed at 17%. The rate is the one for the year the right arose, applied to the amount divided by the years of service and multiplied by twelve. The tax offices then re-settle the tax at the average rate of the previous five years (Art. 19(1) TUIR).

Advances are taxed at the same rate, subject to final adjustment on payout. When the TFR is paid on the employee's death under Art. 2122 c.c., those entitled owe the tax in proportion to what each receives (Art. 19(4) and (5) TUIR).

Above EUR 1,000,000 the excess is added to overall income, according to the Agenzia delle Entrate page; we cite no statute for the ceiling. Art. 19 TUIR is in force to 31 December 2026. The company withholds the tax, and this section states the rule, not what an employee should do.

Can an employee take TFR early?

After eight years' service with the same employer, an employee may ask once for an advance (anticipazione) of up to 70% of the TFR they would receive if employment ended on the date of the request (Art. 2120 c.c.).

The advance is allowed only for specified needs, among them extraordinary medical expenses and the purchase of a first home evidenced by a notarial deed. The employer must satisfy requests each year within 10% of those entitled, and the advance is deducted from the final TFR. Any further cap, and any variation by collective agreement, was not read.

What is the TFR calendar for the year?

Three rhythms govern an employer: the hiring, the month and the year. The table keeps the statutory terms apart from our own practice. The 48 hours we describe for incorporation cover none of these steps; the first TFR date a company meets is the 60-day window after the first hire.

TFR deadlines by actor, with the basis of each.

WhenWhatWho actsBasis
By the day before work startsUniLav hiring noticeConsultantD.L. 510/1996 Art. 9-bis(2)
Within 60 days of first hireWorker's choice on automatic enrolmentWorkerArt. 8(7-quater) D.Lgs. 252/2005
From the month after the 60 daysPayments to the fund, arrears includedCompanyArt. 8(7-quinquies) D.Lgs. 252/2005
By the 16th of the following monthTreasury Fund quota, if in scope, by F24CompanyCircolare INPS 12/2026
By 16 DecemberAdvance of the 17%, 90% of the previous year's revaluationsCompanyArt. 11(4) D.Lgs. 47/2000
By 16 FebruaryBalance of the 17%CompanyArt. 11(4) D.Lgs. 47/2000
Within 12 days of a request on terminationCU pay certificateCompanyD.P.R. 322/1998 Art. 4(6-quater)

Source: the instruments named in the last column.

Law statutory date · Practice the firm's own order of work

  1. First hireCompanyUniLav by the day before work starts
  2. Worker's 60 daysWorker chooses on automatic enrolment60 days (Art. 8(7-quater) D.Lgs. 252/2005)
  3. Fund payments startCompany, arrears includedMonth after the 60 days (Art. 8(7-quinquies))
  4. Treasury Fund quotaCompany, if in scope, by F24By the 16th of the following month
  5. Advance of the 17%90% of the previous year's revaluationsBy 16 December (Art. 11(4) D.Lgs. 47/2000)
  6. Balance of the 17%Company, by F24By 16 February (Art. 11(4) D.Lgs. 47/2000)

Practice, not law: we coordinate the enrolled consultant who runs these steps Firm's practice. The 48 hours of incorporation cover none of them.

The deadlines of a first hire and a TFR year, each tagged law or practice.

What happens to TFR if the employer is insolvent?

The INPS Guarantee Fund takes the employer's place in paying the TFR (L. 297/1982 Art. 2, read at the Gazzetta Ufficiale).

The fund is financed by an employer contribution of 0.20% of pay, or 0.40% for industrial executives, as INPS states it in 2026. It is reduced in proportion to the TFR sent to pension funds or the Treasury Fund, and the employer is also relieved of 0.28 points of other contributions (Circolare INPS 12/2026, section 5). How and when the fund pays the employee was not read.

Who may lawfully run TFR formalities for a company abroad?

Every labour, social-security and welfare formality for employees, when the employer does not handle it itself or through its own staff, may be taken on only by enrolled consulenti del lavoro, lawyers and dottori commercialisti (L. 12/1979 Art. 1). A provider qualified in another EU state under the free provision of services is exempt from Italian enrolment.

We are not one of those professionals. For payroll services in Italy we coordinate an enrolled professional who runs the formalities, and we never run payroll or TFR ourselves or use a protected title for our staff. The professional's name is given per engagement.

A company may also use its own staff for the formalities. Which route fits a given company is a decision for our contact page, not for this guide.

What changes on 1 January 2027?

Normattiva marks Art. 19 TUIR and Art. 11 D.Lgs. 47/2000 in force to 31 December 2026. D.Lgs. 117/2026, in force since 4 July 2026, is the consolidated income-tax act that takes over the TFR tax articles from 1 January 2027, and it carries a chapter on the separate taxation of the TFR (Normattiva).

Whether it takes over each article, and with what wording, was not read. We print no successor article number and we do not say the rules are unchanged. This page needs a re-read before the new year. The Treasury Fund thresholds are not affected, as they run to 2032 under L. 199/2025.

From our practice

From our practice

The first TFR date a founder meets is the 60-day window after the first hire, not the incorporation. Before the offer, we settle which enrolled consultant runs the formalities and whether the size test applies. The 48 hours we quote for incorporation cover none of this. Federica Conti, tax and compliance coordination lead.

Sources

Frequently asked questions

What is TFR in Italy, and how does it work?

TFR is the trattamento di fine rapporto, a severance allowance that every employee accrues during employment and receives on any ending of it, whatever the cause. Each year the employer sets aside a quota of the pay, revalues the balance and pays it out when employment ends.

How is TFR calculated in Italy?

Each year's quota is the TFR pay for the year divided by 13.5, which INPS expresses as 7.41% a month. The balance accrued at 31 December is then revalued yearly at 1.5% fixed plus 75% of the rise in the consumer-price index. No official calculator was found among our sources.

Is severance pay in Italy the same as TFR, and what is it for?

TFR is deferred pay. It is owed on every ending of employment, including resignation, so it is not a dismissal payment. Compensation for an unlawful dismissal is a separate regime that this page does not cover and for which it gives no figure.

Does a foreign founder or a non-employee director accrue TFR?

No. TFR follows subordinate employment, not office, so a director with no employment contract accrues none. Whether a director can also hold an employment contract that accrues TFR is a separate question that this page does not answer. Raise it before any appointment is drafted.

Where does the TFR money sit?

It sits in one of three places: with the company as a liability; with the INPS Treasury Fund, paid monthly, once the company reaches the size threshold of 60 staff for 2026 and 2027, 50 from 2028 and 40 from 2032; or with a pension fund if the worker is enrolled.

Does a new Italian company pay TFR to INPS from day one?

Only if its average headcount reaches 50 in the year it starts. In that case it pays from the month it started, arrears included. Otherwise the size test runs on the previous calendar year's average, and the 60, 50, 40 schedule applies to the years after the start.

What changed on 1 July 2026?

From 1 July 2026 first hires in the private sector are enrolled automatically in a supplementary pension fund that takes their whole TFR. The worker may opt out within 60 days of the hire, either naming another fund or keeping the TFR with the employer, household workers being excluded.

What does the employer have to do at hiring?

The employer informs the worker of the applicable agreements, the automatic mechanism, the destination fund and the timing of the choices. It keeps the worker's signed declaration, hands over a copy and, if the worker stays silent, starts paying the fund from the month after the 60 days expire.

What tax does the company pay on TFR?

The company pays a 17% substitute tax on each year's revaluation of the TFR fund. An advance of 90% of the previous year's revaluations is due by 16 December and the balance by 16 February, both through the F24. The 17% does not apply to TFR sent to a pension fund.

How is the employee taxed?

The payout is taxed separately from the year's other income, at the rate of the year the right arose applied to the amount divided by the years of service and multiplied by twelve. The tax offices then re-settle the tax at the average rate of the previous five years under Art. 19 TUIR.

Can an employee get TFR early?

After eight years with the same employer an employee may ask once for an advance of up to 70% of the TFR due at that date. It is allowed only for specified needs, such as extraordinary medical expenses or a first home bought by notarial deed, and it is deducted from the final TFR.

What if the company goes insolvent?

The INPS Guarantee Fund takes the employer's place in paying the TFR under L. 297/1982 Art. 2. The fund is financed by an employer contribution of 0.20% of pay, or 0.40% for industrial executives. This page does not describe how or when the fund pays the employee.

Who can handle TFR for a company run from abroad?

Only an enrolled consulente del lavoro, a lawyer or a dottore commercialista may take on the employee formalities when the employer does not handle them itself or through its own staff. A provider qualified in another EU state works under the free provision of services. Our related page is on payroll services in Italy.

Is there an official TFR calculator?

None was found among the sources we read. The arithmetic is the formula given above: the year's TFR pay divided by 13.5, or 7.41% a month less 0.50% where it applies, plus the yearly revaluation of 1.5% and 75% of the consumer-price rise. The page offers no tool.

Does anything change in 2027?

The two tax articles are marked in force to 31 December 2026 and pass into the consolidated income-tax act of D.Lgs. 117/2026, in force since 4 July 2026. The successor article was not read, so we do not state what the 2027 wording says.