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Update - Italian Budget Law for 2021 Includes VAT Zero-Rating for COVID-19 Vaccines and Testing and Further Social Security Contribution Relief

Further to the measures of Italy's Budget Law for 2021 previously reported, the Budget Law also provides VAT zero-rating for COVID-19 vaccines and testing. In particular, it is provided that the sale of authorized COVID-19 vaccines and the provision of directly related services are exempt from VAT with the right to deduct input tax (i.e., zero-rated). The same is also provided for the sale of diagnostic equipment for COVID-19 and the provision of directly related services. The zero-rating generally applies from 20 December 2020 to 31 December 2022.

In addition to the VAT zero-rating, the Budget Law has also provided extended social security contribution relief for companies located in qualifying disadvantaged areas until 31 December 2029. This includes an extension of the 30% reduction in total social security contributions until 31 December 2025, a 20% reduction for 2026 and 2027, and a 10% reduction for 2028 and 2029.

Additional social security contribution relief is also provided for the hiring of new permanent employees during the two-year period 2021 to 2022, in order to promote stable youth employment. The relief includes a 100% contribution exemption for a maximum period of 36 months in respect of new hires under the age of 36 at the time of hiring, with a maximum cap of EUR 6,000 per year. The period is extended to 48 months for private employers in the regions of Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia, and Sicily. Separately, a 100% contribution exemption is provided for the hiring of female employees, which is available for a maximum period of 12 months, or 18 months if the hire is permanent, subject to a maximum cap of EUR 6,000 per year.

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