Drafted by Marzio Scaglioni, Leila Rguibi and Antonio Giardina
On August 1st, 2023, the Italian Tax Authority (hereinafter “ITA”) with Circular No. 23/E provided the awaited clarifications regarding article 40 of Law Decree 48/2023 (the so-called “Decreto Lavoro”), which provides for the raising of the exemption threshold – up to €3,000 – for fringe benefits granted by the employer to employees with children who are tax dependents pursuant to Art. 12, para. 2 of the Presidential Decree no. 917/1986 (hereinafter “TUIR”).
Firstly, the circular points out that only those who have children who are fiscally dependent are extended the possibility of including in the fringe benefit basket also reimbursements and sums paid for the payment of electricity, water and gas bills with the consequence that the ordinary regime for those who do not fall under the above condition remains in place. For the sake of completeness, it should be noted that the ordinary regime provides for an exemption threshold of €258.23 for the value of any benefit in kind granted in favor of the employee, and that reimbursements for expenses arising from the payment of utilities mentioned above are not included.
Subsequently, the ITA highlights that, in case the limit of €3,000 is exceeded, the entire value of the fringe benefits granted will be taxed and subject to social contributions, and not only the portion exceeding the aforementioned threshold, as is already the practice under the ordinary regime. In addition, this exemption regime also applies in case the employee – by means of a performance bonus paid to him or her – decides to convert the latter into welfare, and therefore, to benefit from goods and services made available by his or her employer.
The ITA also focused on addressing the issue of the beneficiaries of this exemption scheme and the related conditions of eligibility. More in detail, it was clarified that the benefit under analysis is granted in its entirety to each parent, holder of subordinated employment income and/or equivalent one, even in the circumstance in which the family has only one child, provided that the latter is fiscally dependent. This relief is also granted in the event that the taxpayer cannot benefit from the deduction for children who are fiscally dependent pursuant Article 12 of the TUIR due to the fact the parent receives the relevant monthly family allowance. The aforementioned favorable regime is also extended to both partners in the event that they agree to allocate the entire dependent children’s deduction to the one of the two parents who has the higher total income, pursuant to Article 12, paragraph 1, letter c).
The ITA also reminds that the condition of being a dependent child for tax purposes must be verified with reference to the FY 2023, ascertaining, in particular, whether or not the income limit was exceeded as of December 31st, 2023. In the event that the conditions for being considered a dependent child for tax purposes are no longer met, the worker must notify his or her employer, who will recover the benefit not due from the following salary monthly payments and, in any case, within the time limits for carrying out the end-of-year adjustment calculation or at time of the employment relationship’s termination during FY 2023.
From an administrative perspective, the ITA confirmed that the worker – for the purpose of benefiting from the above exemption regime – will have to provide a self-declaration to his or her employer in which he or she (i) certifies the entitlement to benefit of the concerned exemption regime and (ii) indicates the tax code of dependent children. In the event that the employee’s declaration is missing, no favorable regime can be applied.
In this regard, since there is no specific law requirement, it is believed that the mere self-declaration, indicating the children who are tax dependent, can be made in a way agreed upon between employer and employee. On this point, finally, the ITA clarifies that it is also possible to digitally sign this declaration and reminds, also, that it is necessary to keep safely stored this documentation for the purpose of possible inspection by the competent authorities.
For the purposes of granting of this benefit, it will also be necessary, to proceed in advance with a notification by the Company to the Trade Unions representatives, where present. However, the ITA considers that it is possible to proceed with the issuance of the benefit even in the absence of the above notice provided that the latter is made by the end of FY 2023.
Finally, the circular addresses the issue of the compatibility of this exemption regime with the discipline of the so-called “fuel voucher bonus” provided for in art. 1, par. 1 of Law Decree no. 5/2023; on this point, the concurrent nature of the two schemes is confirmed, indeed, the threshold of €200 for fuel vouchers granted to employees is to be considered additional to the threshold of €3,000 (which may include additional fuel vouchers) and therefore, in the presence of fuel vouchers, there will be an overall threshold of €3,200.
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