Fringe benefits in Italy: what they are and how they can be used

Companies utilize fringe benefits as a strategy to minimize contributions and tax liabilities in Italy, in contrast to what would occur if employees were compensated solely in monetary terms. These benefits are viewed as non-monetary forms of compensation, involving the provision of goods or services designed to foster employee loyalty and motivation. Such benefits may be granted individually by the employer and are exempt from contributing to the employee's income if their total value in the tax period does not exceed 258.23 euros.

What are fringe benefits?

Fringe benefits refer to non-monetary rewards provided to employees, involving the provision of goods and/or services, without legal obligations.
The term "fringe benefits" originates from the English words "fringe" (meaning margin or edge) and "benefit" (signifying advantage or profit), implying marginal compensation or indirect perks.
These benefits fall within the broader category of incentive-based compensation methods, serving as crucial tools for boosting the performance of employees and collaborators.

Who can benefit from it?

In contrast to corporate welfare, where legal regulations mandate exemptions from contributions and taxes only if provided to all or specific employee categories, fringe benefits can be individually granted to workers in agreement with their employer.

This type of non-monetary compensation is especially pertinent for executives, middle managers, and managerial personnel, but it could potentially be extended without restrictions to employees at lower levels as well.

What is the purpose of fringe benefits?

Typically, businesses utilize these methods to lessen their contribution and tax obligations, compared to what would occur if employees were given monetary compensation alone. Nevertheless, these approaches also provide a significant incentive and enhance employee loyalty.

Does the value of the fringe benefit have an impact on the calculation of severance pay (TFR)?

In accordance with Article 2120, Paragraph 2, of the Italian Civil Code, the annual remuneration considered for calculating severance pay includes the value of in-kind benefits.
As per the guidelines from the Court of Cassation, such benefits, when regularly provided, are included in severance pay calculations unless specified otherwise in collective bargaining agreements.

How is the fringe benefit quantified?

The fundamental principle is the comprehensive inclusion of all income earned from employment. This principle dictates that any sums or values received during the tax period, including charitable donations related to the employment relationship, are considered part of employment income.

When assessing fringe benefits, the standard practice is to quantify them at their normal value, which must also be displayed on the payslip. The term "normal value," as defined in Article 9, Paragraph 3 of the TUIR, refers to the average price or consideration charged for similar goods and services under conditions of free competition and at the same stage of marketing. This determination takes into account the time and place of acquisition or provision, and if specific data is unavailable, the nearest relevant time and place are considered. To establish the normal value, available resources such as price lists from suppliers, chamber of commerce rates, and professional tariffs are consulted, incorporating any customary discounts.

But are all fringe benefits taxable?

The fundamental principle of including all income within employment earnings is overridden by the stipulations of Article 51, paragraph 3. According to this provision, all benefits paid are exempt from contributing to the formation of the worker's income if, during the tax period, they amount to less than €258.23 in total.

The concluding section of Article 51, Paragraph 3 of the TUIR sets a general cap on fringe benefits, fixed at €258.23 annually. However, the Labour Decree (Legislative Decree no. 48/2023, later converted into Law no. 85/2023) introduced a temporary amendment for the year 2023. As per this amendment, the general exemption limit stated in Paragraph 3 of Article 51 of the TUIR is raised to €3,000 annually. This adjustment applies to goods and services provided to employees with dependent children, including recognized illegitimate children, adopted, or foster children. Additionally, this limit encompasses sums paid or reimbursed by employers to workers for domestic utilities like integrated water service, electricity, and natural gas. Notably, this benefit is applicable exclusively to employees with dependent children, subject to the condition that the employee informs their employer of their entitlement by providing the tax code of the children.

What happens if the limit of €258.23 per year is exceeded?

If the specified threshold is surpassed, the entire value of the asset becomes fully taxable.

Circular No. 326/E dated 23 December 1997, issued by tax authorities, provided crucial details regarding the amount and limitations, outlining the following:

  • If the limit is exceeded within the tax period, the surplus contributes entirely to the formation of income. Therefore, the €258.23 value doesn't function as a tax-exempt "deductible," but as an absolute limit. Beyond this point, the entire benefit is subject to taxation.
  • This limit is of a general nature and applies to the goods outlined in Paragraph 4 of Article 51, for which specific flat-rate criteria are envisaged.
  • The exemption limit always applies. In cases where multiple benefits are determined using different criteria, their values must be summed up to verify if the threshold is exceeded.
  • To confirm that the total value in the tax period exceeds €258.23, the assessment should consider the taxable amounts received by the income recipient. This calculation is made net of any amounts paid by the employee using payment or deduction methods and includes any VAT payable for all goods and services used in the same tax period.
  • The assessment of the exemption threshold must consider all income received, even if originating from other employment relationships during the same tax period.
  • During the application of withholding taxes, the employer, acting as the withholding agent, must consider all received values within the employment relationship. If the employee has requested the equalization of other employment or similar income, values received from other relationships must also be taken into account.
  • The withholding agent must apply the withholding tax in the pay period where the €258.23 threshold is exceeded. Additionally, if it's evident that the value of the good or service exceeds €258.23 for the entire tax period, withholding tax will be applied from the first pay period.

How do you calculate the company car fringe benefit?

The valuation of the company car fringe benefit is contingent upon the vehicle's usage. In the case of a company car used for both personal and business purposes, as per Article 51, paragraph 4, letter a) of the TUIR, a varying percentage, determined based on the vehicle's emissions value calculated over a standard mileage of 15,000 km annually, is considered taxable income. This percentage is calculated using the operational cost per kilometer, derived from the deductible ACI national tables.

How do you calculate the fringe benefit of the accommodation?

In accordance with Article 51, paragraph 4, letter c) of the TUIR, any surplus between the cadastral income of a property, escalated by all associated building expenses, including utilities not covered by the user, and the payment made for utilizing the property is classified as income. The law specifies that if a building is provided with the requirement to reside in it, 30 percent of this surplus is considered income.

For properties exempt from land registry registration, the difference between the rent's value established under the regulated regime or, in its absence, the value determined under the open market conditions, and the actual payment for the property usage, is deemed income.


In conclusion, understanding fringe benefits in Italy is essential for both employers and employees. These non-monetary perks, ranging from company cars to housing allowances, play a significant role in the overall compensation package. While they offer employees added incentives and improve job satisfaction, they also come with tax implications that need careful consideration.
Moreover, the recent changes, such as the temporary increase in exemption limits, reflect the government's efforts to balance taxation while providing support to employees with dependent children. As the landscape of fringe benefits continues to evolve, staying updated with the latest legal provisions is crucial for businesses and their workforce.

Employers should not only be mindful of the tax implications but also consider the strategic use of fringe benefits to attract and retain top talent, fostering a positive work environment and ensuring compliance with Italian tax laws. Employees, on the other hand, should be aware of their entitlements, enabling them to make informed decisions and fully appreciate the value of their compensation beyond their salaries.

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