The Italian Tax Authority Provides Guidance for Employee Child Benefit Payments up to €3,000 Tax-Free

Circular No. 23/E/2023 provides instructions for employers looking to provide sums or reimbursements to their employees with dependent children as part of their benefits. The practice of the Tax Authority offers expected clarifications regarding the new corporate welfare regulations following the changes introduced by the “Employment Decree,” which has raised the limit for 2023 to €3,000 (instead of the usual €258.23) within which employees can receive goods and services exempt from taxes. The same decree (D.L. 48/2023) also includes among the “bonuses” that do not contribute to forming dependent income the sums paid or reimbursed to workers for the payment of household utilities such as electricity, water, and gas bills. It should be noted that if the total value of goods (including company vehicles made available for mixed use by employees) or services provided, as well as sums paid or reimbursed for bill payments, exceeds the aforementioned limit, the entire value falls within the taxable income and contributions.


Subject Scope

For employees with dependent children for tax purposes, benefits of up to €3,000 received from the employer are exempt from personal income tax (IRPEF), as well as the substitute tax on productivity bonuses. This exemption also applies in full to each parent, who is the holder of dependent employment income and/or equivalent income, even if they have only one child, provided that the child is fiscally dependent on both parents. It should be noted that, for tax purposes, children with income not exceeding €2,840.51 (net of deductible expenses) are considered dependent. Since the benefit applies to the year 2023, this income threshold, which rises to €4,000 for children up to 24 years old, must be verified as of December 31 of this year. The document also clarifies that the new benefit applies to both parents, even in cases where they agree to assign the entire tax deduction for dependent children to the parent with the higher income.

The Tax Authority specifies that this provision applies to recipients of employment income and income treated as such (e.g., self-employed collaborators, Furthermore, fringe benefits as per Article 51, paragraph 3, of the TUIR (those up to €258.23 or, in certain cases, up to €3,000) can also be provided by the employer on a per-person basis.

Rules for the Benefit

To access the benefit, the employee must declare to their employer that they are entitled to it, providing the tax code of the dependent child or children. In the absence of this declaration, the mentioned benefit is not applicable. Naturally, if the conditions for the benefit change during the year, for example, if a child is no longer fiscally dependent, the employee is required to promptly inform the employer. The employer will then recover the undue benefit in subsequent pay periods, within the time limits for reconciliation operations.

Finally, it is worth noting that employers are responsible for implementing this benefit, providing information to unified union representatives where applicable.


Support For Training And Employment

The decree of the Ministry of Labor and Social Policies dated August 8, 2023, titled “Support for Training and Employment,” has been published in Official Gazette No. 198/2023. This decree, adopted pursuant to the so-called “Employment Decree,” establishes the implementation methods for initiating and operating the new employment activation measure starting from September 1, 2023. The measure aims to facilitate the integration of individuals at risk of social and occupational exclusion into the workforce through participation in active labor market policy measures, including, for example, training and qualification programs, professional retraining, career guidance, job placement support, universal civil service projects, and community-oriented projects. Following the signing of a personalized service agreement, participants in labor activation activities will be entitled to a financial benefit, namely a monthly allowance of €350, disbursed by INPS via monthly bank transfers, for a maximum of 12 months.

Additionally, an interministerial decree dated August 8, 2023, also in accordance with D.L. 48/2023, has been published in the same Official Gazette. This decree establishes the “Social and Occupational Inclusion Information System” (SIISL), which will serve as the access channel for the new measures. It regulates the activation, access, and data entry procedures for the SIISL platform. The ministerial portal developed by INPS will enable participants to access personalized job search and skills enhancement pathways. This includes information and opportunities related to job offers, training courses, orientation internships, community-oriented projects, and other active labor market policy tools tailored to each individual’s characteristics and competencies. Additionally, participants can track the status of benefit disbursement and activities outlined in their personalized service agreements.


Tax Treatment of Payments Made by the Employer

With response to query no. 421/E/2023, the Tax Authority has provided clarification regarding the taxation of reimbursements made by employees for electric vehicle charging expenses incurred through vehicles assigned for mixed use, as well as costs incurred by recipients for infrastructure (e.g., wallboxes, charging stations, defalco meters).

The requesting company maintains a corporate fleet of vehicles assigned for mixed use by employees, with the associated “fringe benefit” reflected in their paychecks. The company intends to renew its vehicle fleet with fully electric or hybrid vehicles to promote electric mobility among employees. The company plans to reimburse employees for the electricity expenses incurred for charging at their homes as part of this initiative. There will be no maximum reimbursement limit for employees, and the reimbursable expense will be determined based on the average price communicated by Arera and actual consumption. Each employee will be provided with two cards (one for work-related use and one for personal use) to monitor and differentiate kilometers traveled for work purposes and personal use, as well as the corresponding energy consumption. Therefore, reimbursements will be based on kilometers traveled for work purposes. For certain categories of employees (e.g., executives), reimbursement will cover the entire charging cost, irrespective of personal or work-related use.

Furthermore, with regard to the electricity supply contract, employees will enter into contracts with their chosen utility providers. The company will cover the costs related to any necessary upgrades to the domestic electricity supply for vehicle charging.

Employees assigned vehicles for mixed use must either install a dedicated “wallbox” (devices for domestic charging of electric and plug-in hybrid vehicles that can meter energy consumption for the vehicle) or provide monthly readings from a defalco meter installed prior to the domestic electricity connection point for unique energy consumption measurement. The installation costs of charging stations are not included in the vehicle rental fee; the company will cover installation and routine maintenance expenses (including wallbox rental fees). However, if installation requires extraordinary measures (e.g., structural modifications to the building), these additional costs will be borne by the employee.

The Tax Authority reaffirms the principle that employee income is comprehensive and that the general valuation criterion for goods and services provided to employees is their “normal value.” Nevertheless, the Tax Authority notes that specific exceptions to the comprehensive income principle are outlined in the TUIR, listing income components that do not contribute to the taxable base or only partially contribute. These exceptions include motor vehicles, motorcycles, and mopeds provided for mixed use by employees, for which, in derogation from the general taxation criterion based on their “normal value,” a flat-rate determination criterion of the amount subject to taxation is provided, which, after the 2020 budget law, has been confirmed as flat-rate, albeit with gradations based on the carbon dioxide emissions of the vehicles themselves.

Regarding vehicles for mixed use, Circular No. 326/1997 clarified the following:

  • The determination of the taxable amount based on the total travel cost shown in ACI tables is entirely flat-rate, regardless of the employee’s actual usage costs or mileage. Therefore, it is irrelevant whether the employee covers some or all of the elements included in the travel cost calculation defined by ACI.
  • In addition to allowing employees to use vehicles for mixed use, employers may provide other goods or services, either for free or at a cost, such as facilities for storing the vehicle. These goods and services must be evaluated separately to determine the amount subject to taxation for the employee.

Consistent with this practice document, the Tax Authority believes that the installation of infrastructure (wallboxes, charging stations, and defalco meters) at the employee’s residence should be separately evaluated to determine the amount subject to taxation for the employee. Therefore, these expenses should be treated as part of the employee’s taxable employment income.

Regarding electricity consumption, it does not fall within the category of goods and services provided by the employer (i.e., fringe benefits) but constitutes a reimbursement of expenses incurred by the employee. As such, it is considered employment income for the employee, with exceptions being made for reimbursements solely in the interest of the employer or expenses incurred by the employee for operational efficiency (e.g., purchasing minor-value assets such as copier paper, printer ink, calculator batteries, etc.). Specific exemptions for detailed reimbursement of travel expenses also apply. Therefore, the Tax Authority considers reimbursements made by the employer to the employee for electricity expenses related to the charging of company-assigned vehicles for mixed use as employment income subject to taxation.

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