Italian TFR (Severance Fund) Explained: Formula, Rivalutazione, and Tax (2026)

The TFR (Trattamento di Fine Rapporto) is a mandatory deferred-pay fund that Italian employers set aside for every employee each year. It is not a bonus: it is part of your pay, held in escrow by your employer (or a pension fund) and released when employment ends. Understanding how the annual quota is calculated, how it grows through yearly rivalutazione, and how it is taxed at liquidation can make a significant difference to your financial planning.

The annual quota: RAL divided by 13.5

Under art. 2120 of the Italian Civil Code, the TFR quota accrued each year equals the total annual remuneration (RAL) divided by 13.5. For a RAL of 30,000 EUR, the quota lorda is 30,000 / 13.5 = 2,222.22 EUR. The divisor 13.5 is fixed by law, regardless of whether you are paid over 12, 13, or 14 mensilite. It represents roughly 7.4 % of RAL per year.

The 0.50 % contributo INPS

Before the quota enters the TFR pot, 0.50 % of the RAL is deducted and paid to INPS as a mandatory contribution. For a RAL of 30,000 EUR, this is 30,000 x 0.005 = 150 EUR. The net quota that compounds each year is therefore 2,222.22 - 150 = 2,072.22 EUR. This deduction applies regardless of whether your TFR stays with your employer or is transferred to a fondo pensione.

The rivalutazione: why the TFR grows faster than a simple sum

Each year the existing TFR stock is revalued (rivalutazione) at a statutory rate equal to 1.5 % fixed plus 75 % of the annual ISTAT consumer-price index change. This is compounded: the entire balance from prior years is revalued before the new quota is added. Over a long career, the compounding effect is substantial. Many online calculators skip the rivalutazione and simply multiply the quota by the number of years, producing a misleading lower figure.

Worked example: 30,000 EUR RAL, 10 years, 2.5 % revaluation

After 10 years the TFR accumulated with rivalutazione is approximately 23,215 EUR, while the flat no-revaluation figure (quota x anni) is only 20,722 EUR. The rivalutazione alone accounts for roughly 2,493 EUR, about 12 % of the flat total. The longer the service period, the larger this gap becomes.

No-revaluation vs with-revaluation: side-by-side

TFR in azienda vs fondo pensione

Since 2007, employees joining a new employer have 6 months to decide whether to keep future TFR accruals with the employer (TFR in azienda) or to transfer them to a complementary pension fund (fondo pensione). Leaving the TFR in azienda means it is subject to the statutory rivalutazione and tassazione separata at liquidation. Transferring to a fondo pensione means the money is invested in a fund (potentially generating higher returns) but under different tax rules. The decision is not easily reversible, and the right choice depends on personal circumstances and your employer's size.

How TFR is taxed at liquidation

The TFR is not taxed as ordinary income (IRPEF) at the time of payment. Instead it is subject to tassazione separata: the tax authority applies an average rate derived from the IRPEF paid in the five years preceding the liquidation year, applied to the capital quota of the TFR. The rivalutazione component accrued from 1 January 2001 is taxed separately at a flat 17 % imposta sostitutiva withheld by the employer at the time of payment. This dual taxation regime means the effective tax burden on TFR is generally lower than on equivalent ordinary income.