The 2025 Budget Law introduces changes to the calculation of fringe benefits for company cars used for both business and personal purposes. Notably, it reduces the taxable and contributory value for electric and plug-in hybrid vehicles while penalizing internal combustion vehicles, particularly those with higher emissions.
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Options for Providing a Company Car to Employees
Before delving into the new fringe benefit rules, it is essential to outline the options available to companies regarding company cars usage:
- Company Car for Business Use Only:
The employer provides a vehicle solely for business purposes without any personal use by the employee. - Employee-Owned Car for Business Purposes:
In this scenario, the employee uses their personal vehicle for business trips outside the local area. Employers must reimburse fuel, wear and tear, and other expenses based on the ACI (Automobile Club d’Italia) tables for the specific car type. The employee must provide documentation, including: Vehicle mode, Date and destination of the trip, Kilometers traveled, Applicable ACI tariff amount. - Company Car for Mixed Use:
A car provided for both business and personal use is one of the most common fringe benefits for employees. This category is regulated by Article 51, paragraph 4, letter a) of the Presidential Decree No. 917/1986, which stipulates that a percentage of the value based on a standard annual mileage of 15,000 km (as calculated by ACI) is assigned to the employee as taxable income. The percentage varies according to the vehicle type and mileage cost.
2025 Updates for Company Cars Provided for Mixed Use
Specifically, the percentage of the car fringe benefit, with reference to a conventional mileage of 15,000 kilometers calculated on the basis of the ACI mileage cost, is determined in increasing proportion to the degree of carbon emission:
- 25% for vehicles emitting less than 60 g/km of CO2
- 30% for emissions between 60 and 160 g/km
- 50% for emissions between 160 and 190 g/km
- 60% for emissions above 190 g/km
This framework already encouraged the adoption of lower-emission vehicles.
New Provisions company cars from the 2025 Budget Law
Today, Paragraph 48 of the ”Legge di Stabilità”, in the name of the “ecological and energy transition objectives and climate change mitigation and adaptation,” Article 51, paragraph 4, letter a) of the TUIR has been fully amended. As of January 1, 2025, for vehicles registered and assigned to employees from this date onward, the fringe benefit percentage is set at 50% of the value corresponding to a conventional mileage of 15,000 km based on the ACI tariff tables.
The percentage is further reduced for more environmentally friendly vehicles:
- 10% for fully electric vehicles
- 20% for plug-in hybrid electric vehicles
Impact on Employee Payroll and Contribution Deductions
This regulation significantly benefits employees assigned electric or plug-in hybrid vehicles by substantially lowering the taxable and contributory value in their payroll. The taxable amount will be calculated at 10% or 20% of the value corresponding to 15,000 km based on ACI rates. However, amounts exceeding the fringe benefit exemption thresholds for 2025—set at €1,000 for employees without dependent children and €2,000 for those with dependent children—will be subject to payroll deductions and taxation.
Strategic Implications for Companies
These new provisions will profoundly influence corporate vehicle policies. To avoid increased fleet management costs, companies will need to prioritize fully electric or at least plug-in hybrid vehicles when assigning cars to employees. This strategic shift aligns with the legislative goals of promoting ecological transition and addressing climate change.
For payroll professionals and HR departments, careful planning will be essential to optimize fringe benefit tax implications and ensure compliance with the new regulations. LDP Payroll specialists are available to assist companies in navigating these changes and optimizing their vehicle fleet strategies.
