The Internal Revenue Service offers its interpretation on the provision of free electric car refills within a corporate welfare project. Corporate benefits are a range of services that a company provides to its employees, along with cash compensation, and in most cases are taxed, but there are specific cases where taxation is excluded.
Interpretation No. 329 of June 10, 2022 from the Internal Revenue Service provides guidance on the tax treatment of a corporate welfare initiative included within an education and sustainability project aimed at employees.
The interpellation was proposed by a company (part of a group) that has been committed to environmental sustainability for a decade. With this in mind, it has renewed its company car fleet with electric cars, introduced energy from renewable sources into the company, but in addition to making investments, it is also committed to raising the awareness of its employees so that they assume environmentally sustainable behaviors outside the company as well.
The interpellant company has exposed to the IRS its willingness to recognize six months of free recharging for employees who purchase electric cars within a certain period of time, using where possible the electricity produced by its own photovoltaic or hydroelectric plants or, alternatively, entering into agreements with third-party providers of recharging, and in any case establishing limitations (e.g., a maximum number of recharges that can be made) in order to avoid abuse.
In the interpellation, the question is asked what is the correct taxation to be applied, and the Internal Revenue Service recalls the relevant regulatory framework and the rules that entitle the exclusion from employee income.
Generally speaking, it is Article 51 paragraph 1 of the TUIR that determines which amounts are included in employee income.
The Internal Revenue Service has confirmed that the provision of free charging for employees with electric cars does not fall under the taxation of employee income provided certain conditions are met:
- the works and services must be made available to the generality of employees or categories of employees;
- the works and services must relate exclusively to disbursements in kind and not to substitute cash disbursements;
- the works and services must pursue specific purposes of education, instruction, recreation, social and health care.
In the opinion of the Internal Revenue Service, subject to the conditions indicated, the envisaged favorable measure also applies in cases where a conscious use of resources and responsible attitudes of employees toward the environment are promoted through the use of electric mobility.
In the case under consideration, in fact, an environmental education purpose pursued by the company can be identified.
If, therefore, the company agreement meets the indicated conditions, the benefit can benefit from the employee income exclusion scheme.