Tax Aspects of the Severance Pay Share in Divorce

When facing the final phase of a marriage, the distribution of Severance Pay (Trattamento di Fine Rapporto - TFR) often represents one of the most delicate and debated economic aspects. Many clients turn to the firm asking not only if they are entitled to such a sum but, above all, what the net amount actually received will be. Understanding the applicable tax regime is essential to avoid surprises at the time of settlement. As a lawyer specializing in family law in Milan, I often note that while attention focuses on the percentage due, equal to 40% of the period when the employment relationship coincided with the marriage, the impact of taxes that the State requires on these sums tends to be overlooked.

Italian legislation and rulings from the Italian Revenue Agency (Agenzia delle Entrate) have clarified that the share of severance pay allocated to the ex-spouse is not tax-exempt. It constitutes income for the recipient and is therefore subject to taxation. The core principle is that the ability to pay follows the receipt of the sum: whoever receives the economic benefit is required to bear the related tax burden. This means that the share paid to the ex-spouse must be considered gross of taxes, and taxation will be applied according to specific criteria that differ from the ordinary taxation of employment income.

Separate Taxation Regime and the Role of the Withholding Agent

The share of severance pay received by the ex-spouse is, in most cases, subject to the separate taxation regime. This mechanism is favorable to the taxpayer as it prevents the receipt of a sum accumulated over many years from being aggregated with current year income, pushing the IRPEF (personal income tax) rate into excessively high brackets. The rate applied is usually the same that would have been applied to the employee entitled to the severance pay, calculated based on the average tax rate of the previous five years or according to specific criteria provided for end-of-employment indemnities.

From a procedural standpoint, it is crucial to understand who carries out the withholding. If the payment is made directly by the other spouse's employer, the latter acts as a withholding agent. The employer will calculate the share due to the ex-spouse (usually 40% as established by divorce law) and apply the withholding tax at source before disbursing the net amount. It is essential that the judge's order clearly specifies the calculation and payment methods to allow the employer to correctly perform tax withholdings and pay them to the Treasury, relieving the beneficiary from subsequent immediate tax return obligations, except for any adjustments.

The Approach of Studio Legale Bianucci

Avv. Marco Bianucci, a lawyer specializing in family law in Milan, addresses financial matters related to divorce with an analytical and forward-thinking approach. We do not limit ourselves to requesting the allocation of the severance pay share but work to pre-calculate the net amount the client will receive. The firm's strategy involves a careful analysis of the counterparty's employment and tax situation, often in collaboration with labor consultants, to ensure that the judicial order or the assisted negotiation agreement is impeccable from a tax perspective as well.

The objective of Avv. Marco Bianucci is to protect the client's concrete economic interest. In negotiations, it is vital to specify whether the agreed sums are intended gross or net of taxes to avoid future interpretative disputes. Our experience teaches us that a well-written clause today avoids a tax assessment or a civil lawsuit tomorrow. We also assist the client in the enforcement phase, liaising with employers or social security institutions to release the sums owed as quickly as possible, ensuring that tax withholdings have been applied correctly.

Frequently Asked Questions

Does the share of severance pay received by the ex-spouse need to be declared in the 730 form?

Generally, if the employer has made the withholding as a tax or advance payment under separate taxation, the amount is not aggregated with other IRPEF income in the ordinary section. However, the Italian Revenue Agency may proceed with a recalculation of the tax due, subsequently sending a communication if the tax withheld is less than the final tax due. It is always advisable to consult a tax advisor for the correct completion of the tax return.

Who pays the taxes on the share of severance pay due to the ex-wife or husband?

The taxes are borne by the person receiving the sum, i.e., the ex-spouse who is the beneficiary of the share. Even if the withholding is physically made by the employer (withholding agent) before disbursement, the tax burden economically falls on the recipient of the money, reducing the gross amount awarded by the judge.

How is the net share of severance pay calculated in a divorce?

The calculation begins by identifying the severance pay accrued during the years when the employment relationship coincided with the marriage. 40% of this amount is calculated. From this gross value, the separate taxation rate applicable to the employee is subtracted. The final result is the net sum that will be transferred to the ex-spouse.

Can I claim severance pay if I am separated but not divorced?

No, the right to a share of severance pay arises exclusively with the final divorce decree. Simple legal separation does not grant the right to receive a share of the other spouse's severance pay, even if the employment relationship ceases during the separation period.

Request a Legal Assessment in Milan

The tax implications in divorces require technical expertise and constant updating. If you have doubts about the taxation of your severance pay share or need assistance in asserting your financial rights, contact Studio Legale Bianucci. We receive by appointment at our office in Milan at Via Alberto da Giussano, 26, to offer you personalized and concrete advice.