New limits of benefit in the kind exemption. Increase of threshold and new rules for the valorization of the company car

Prepared by Marzio Scaglioni, Leila Rguibi and Alice Martinis

The Decree no. 104 of 14 August 2020 (so called “August Decree”), containing “Urgent measures for the support and revival of the economy” and in force since August 15, 2020, provided for the amendment of the threshold exemption of fringe benefits granted to employees.

In particular, the article 112 of the aforementioned Decree, established that, limited to the tax period 2020, the threshold for exemption of the value of goods and services granted by the companies to employees and/or persons treated as such is raised from EUR 258, 23 to EUR 516,46.

Benefit in kind subjected to the threshold, are by way of example, the car granted to the employee for both personal and business use, the rented or furnished accommodation, the corporate loans, the extra professional insurance policies, and all the measures that are included in the so called “contractual welfare”, such as food stamps, good fuel, etc.

In case the sum of all the goods and services granted in the fiscal year 2020, doesn’t exceed the ceiling of EUR 516, 46, the related amount will not compete to form the employee’s income and, consequently, neither contributions nor taxes will be due on the same amount.

If, on the other hand, the abovementioned sum exceeds the threshold of EUR 516,46, the whole amount will be included in the taxable basis.

The companies, as withholding tax agent, has to apply withholding taxes to the whole benefit in kind in case the threshold has been exceeded, in the payroll run in which the ceiling is exceeded or, from the first payroll run, in case is foreseeable that the threshold will be passed.

In any event, employers can make any deductions due on the value of fringe benefits recognized to employees by the date for carrying out the adjustment operations, that is 28 February of the year following the tax period under consideration.

With regard to the possibility of assigning to the employee of the company car or motorcycle or, again, of the moped, the Budget Law 2020 provided, with particular reference to the newly registered vehicles, that the valorization of fringe benefit varies in reward measure depending on the degree of pollution of the vehicle.

In particular, the previous percentage of 30%, to be applied to the conventional values indicated in the Aci Tables, is replaced by the following percentages: for vehicles with CO2 emission values not exceeding 60g/km, the percentage shall be equal to 25%; for vehicles with CO2 emission values between 60g/km and 160g/km, the percentage shall remain equal to 30%; for vehicles with CO2 emission values between 160g/km and 190g/km, the percentage shall be equal to 40% for the year 2020 and 50% from 2021; for vehicles with CO2 emission values above 190g/km, the percentage shall be 50% for the year 2020 and 60% from 2021.

The new framework outlines above applies to newly registered vehicles granted for both personal and business use with contract signed from 1st July 2020.

With reference to this point, the Revenue Agency recently clarified, with Resolution no. 46 E of 14 August 2020, that the date of 1st July 2020 shall be considered both by reference to the date of registration of the vehicle and by reference to the contract concluded between the employer and the employee for the grant of the vehicle, provided that, in compliance with the «cash principle», the same must enter into the availability of the employee after 30 June 2020.

The Revenue Agency has also taken the opportunity to recall that the assignment of the company car cannot be considered as a unilateral act of the employer, since it is necessary the explicit agreement with the employee, to be formalized with a specific contract.

Finally, the resolution states that in the event that the assignment of the vehicle for both personal and business use takes place after 1st July 2020, but the same was registered before that date, no reference can be made either to the previous discipline (as the assignment was not ongoing on 30 June 2020) or to the new discipline (given that the date of registration of the vehicle is before 1 July 2020). In this case, the fringe benefit will not be determined on a flat-rate basis, but will be based on the normal value of the asset, as defined by the “Italian Tax Consolidated Text” (art. 51, par. 3), and separate from it the share related to the use of the vehicle carried out in the interest of the employer.

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Marzio Scaglioni

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