OE2022, IRS reform for youth

The proposedState for 2022 introduces several reforms to the IRS for young people (IRS Jovem), making it automatic, covering income from self-employment and applying it for five years instead of the three initially planned when the measure was launched.

OE2022, IRS reform for youth

All young people will be eligible, whatever their salary, since there is no longer an annual income ceiling. They will be granted an exemption of 30 % for the first two years of employment, 20 % for the following two years and 10 % for the final year, with limits corresponding to 7.5 times the value of the social support index (IAS), 5 times the value of the IAS and 2.5 times the value of the IAS.

According to simulations by consulting firm EY, a young person with a gross salary of 950 euros would pay 1,510 euros in IRS per year. With the IRS Jeune, he or she would pay 969.74 euros in the first two years of the exemption, 1,149.90 euros in the 3rd and 4th years, and 1,330.06 euros in the 5th and final year. In all, the difference translates into a saving of 1,981.76 euros.

The saving rises to 2,521.46 euros if the young person's gross salary is around 1,500 euros. In this case, instead of an annual tax bill of 3,530.42 euros, they will pay 2,842.75 euros in IRS for the first two years (a saving of 687.67 euros), 3,071.97 euros for the following two years (458.45 euros less) and 3,301.20 euros for the 5th year (229.22 euros less).

L'IRS Jovem is aimed at people aged between 18 and 26 with category A and B incomes (dependent and self-employed respectively), covering the first five years of earned income after the year in which they complete a course of study equal to or higher than level 4 of the national qualifications framework.

The age limit can be extended up to and including the age of 28 in the case of a course of study at level 8 of the National Qualifications Framework (doctorate), which is another difference from the current system.

The measure applies in the first year of income after completion of the course of study, and for the following four years, provided that the option is exercised up to the maximum age stipulated, in consecutive or interpolated years, and that the taxpayer's maximum age does not exceed 35, inclusive.