Pensions: and flat rate scheme, redemptions are not deductible

The redemption periods for pension purposes are not deductible for those who joined the flat rate scheme. Voluntary contributions, degree and reunions are not admitted to the deductibility of income.

This was stated by the Ministry of Economy and Finance in response to a question held in the Finance Commission at the Chamber of Deputies. Therefore, all those who have adhered to the flat-rate regime will not be able to deduct the normally deductible contributions from income as foreseen for other workers.

The redemption of periods not covered by insurance

With the decree law number 4 of 28 January 2019, the government introduced the possibility of redeeming the periods not covered by contributions prior to the date of entry into force of the decree itself, extending this option also to the periods included between the year of the first and that of the last contribution, equating them to periods of work not subject to a contribution obligation and which are not already covered by contribution. With reference to university study courses, the burden of the redemption periods consists of the payment of a contribution for each year to be redeemed, equal to the minimum annual taxable level multiplied by the calculation rate of the pension benefits of the compulsory general insurance for employees, in force on the date of the application. For tax purposes, on an ordinary basis, the contribution costs incurred for the redemption of the legal degree course are entirely deductible from the total income up to the amount of the same. They are also included among the contributions paid optionally, starting from 1/1/2001, those paid for the redemption of the degree years, for the voluntary continuation and those for the reunification of different insurance periods, whatever the cause from which the payment originates.

If the contributions are paid to the “tax-dependent unemployed” by family members, they are entitled to a deduction of 19% of the contributions.

Taxpayers in the flat-rate scheme

The deductibility of social security contributions, that is, the possibility of reducing taxable income by subtracting the contributions paid, is independent of the tax regime. Some tax breaks, such as the flat rate, do not allow the deduction of professional expenses. Therefore, the taxpayer on a flat rate basis will not be able to benefit from any deduction or deduction of the contribution burden incurred. In fact, article 1, paragraph 64, of the same law n.190 of 2014 provides that they are deductible from the flat rate income only «social security contributions paid in compliance with legal provisions»Excluding, therefore, the contributions paid optionally. For example, a worker who pays € 6,000 a year in mandatory contributions for his retirement can bring the cost in deduction, if instead it is a charge incurred for a ransom, a reunification or for the payment of voluntary contributions this does not can be inferred from a person who is in a flat rate scheme.

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