How the TFR is revalued, the monthly coefficients and what taxes are paid

It's time to retire and you don't know how much the sum is TFR? There are some simple software on the net that calculate it, but to know exactly how much the severance pay set aside and re-evaluated over the years by the employer, it is sufficient to check the pay slip where it is indicated in a special box.

However, the figure may not be 100% true. Not everyone knows, in fact, that iTFR is revalued over time, as well as the contribution contribution that every worker takes with their INPS pension management. So it is good to get information and find out what is the coefficient of revaluation of the TFR that must be applied in order to have the right liquidation when leaving the job, either for retirement, resignation or dismissal.

The revaluation coefficient of the TFR

The revaluation coefficient of the TFR is a percentage, calculated month by month, used for increase (and therefore revalue) the TFR fund set aside until the previous year. This calculation system was introduced for the first time with the law number 297 of 1982 in reform to the article 2120 of the Civil Code. Since then, the individual TFR shares of every single worker grow as if the sums were deposited in the bank. But what is the revaluation coefficient of the TFR? To determine the parameter in a given month it is calculated 75% of the change in the Istat FOI index compared to the month of December of the previous year and the result is added to a fixed rate established by law to the extent of1.5%, thus obtaining the "annual revaluation rate of the TFR". Since the rate of 1.5% is annual it must be related to the number of months that have passed since the beginning of the year. The revaluation is always calculated on the TFR fund set aside untillast year, so that no revaluation must be applied to the TFR accrued over the last year.

The tax revaluation of the TFR

Also the revaluation of the TFR, or better, of the TFR fund, is subject to taxation which has changed over time. From 2001 on the revaluation a fixed rate of the11%, which since 2015 was then raised to 17% for revaluations of treatments starting from 1 January 2015.

In this case the revaluation always increases the TFR fund but, being taxed separately, it is not included in the tax base.

Separate taxation of severance pay, how it works

There separate taxation of the TFR regards a tax regime that is applied to one-off income and follows calculation mechanisms other than ordinary taxation. These incomes, such as the severance pay (TFR), do not contribute to forming the total income of the tax payer and are often taxed separately to avoid a tax burden that is too onerous. Separate taxation does not therefore follow the principles set by ordinary taxation linked to the IRPEF brackets, but goes on its own. The rate of separate taxation for the TFR is calculated by averaging the income produced in the two years preceding the payment of the sums due. Therefore, if a worker has received income subject to an average rate of 27%, the same percentage will also be applied to the TFR. If no income has been received in the two-year period in question, the tax authorities will apply the corresponding rate to the lowest tax bracket, ie 23%.