a) Assignment of a car for mixed use

The assignment of company cars to employees for mixed use is one of the most common forms of fringe benefits in Italy. It is a formula that allows the employee to use the company vehicle—typically a car, but sometimes also a motorcycle or scooter—both for work-related needs (travel, visiting customers or suppliers) and for personal purposes, such as weekends or leisure time. Hence the term “mixed use.”

Company policies and formal agreements

Vehicle assignment is governed by company policies that establish the terms of use, limitations, and any employee responsibilities. It is standard practice to prepare a formal communication informing the employee of the type of vehicle assigned, the conditions of use, and, where applicable, any amounts to be withheld from their payslips to cover costs exceeding company limits (e.g., choosing a higher-end vehicle, requesting additional accessories, etc.).

Tax and Social Security Implications

Given that the vehicle is used for both work and personal purposes, it effectively constitutes a marginal benefit for the employee, as they have the opportunity to enjoy an asset whose cost is borne by the employer, but which can also be freely used for personal and family needs. This benefit therefore has a tax and social security impact that must be quantified and managed.

The quantification must first begin with an analysis that breaks down two distinct categories:

1. The tax exemption limits for fringe benefits;
2. The criteria for determining the economic value of the car benefit granted to the employee.
   
   

Exemption Limits:
According to the 2025 Budget Law (Law No. 207/2024), until 2027, the tax and social security exemption threshold for fringe benefits is equal to:

• Euro 000 for all workers;
• Euro 000 for workers with dependent children.

If the total value of the car benefit (plus any other fringe benefits) is less than the established limit, there is no tax or social security impact. If it exceeds the limit, the entire amount becomes taxable.

Consequences for the employer:
In addition to the impact on the employee’s net pay, exceeding the limits also entails increased costs for the company, in terms of social security contributions and indirect costs.

How is the value of the car benefit determined?

The applicable legislation is Article 51, paragraph 4 of the TUIR (Consolidated Income Tax Act), which has been updated several times by the legislator to include environmental parameters in determining the benefit value. Below is a summary of the applicable criteria, broken down by period:

• Allocations until June 30, 2020
  Taxation of 30% on a conventional mileage of 15,000 km based on the ACI (Italian Automobile Club) mileage rate, net of any amounts withheld from the employee.
• Registration by 30th June 2020, allocation from 1st July 2020 to 31st December 2024
  Calculation of the normal value pursuant to Article 9 of the TUIR (leasing/rental rates), net of the portion related to business use.
• Registration and allocation from 1st July 2020 to 31st December 2024
  Variable percentage tax based on the vehicle’s pollution level, calculated on a standard mileage of 15,000 km based on the ACI (Italian Automobile Club) mileage rate, net of amounts withheld from the employee.
• Vehicle order by 31st December 2024, allocation from 1st January 2025 to 30th June 2025

Variable percentage tax based on the vehicle’s pollution level, calculated on a standard mileage of 15,000 km based on the ACI mileage rate tables, net of any amounts withheld from the employee.

• Order by 31st December 2024, allocation from 1st July 2025
  Variable tax from 10% to 50% depending on the vehicle’s drive system (electric, hybrid, gasoline, etc.) calculated on a standard mileage of 15,000 km based on the ACI mileage rate tables, net of any amounts withheld from the employee;
• Order, registration, and allocation from 1st January 2025
  Variable tax rate from 10% to 50% depending on the vehicle’s drivetrain (electric, hybrid, gasoline, etc.) calculated on a conventional mileage of 15,000 km based on the ACI mileage rate tables, net of amounts withheld from the employee.
  
  
  

Interpretative doubts still open

Some aspects remain unclear, including:

• What happens if the car was already in the company fleet but is allocated to a new employee in 2025?
• When should the normal value pursuant to Article 9 of the TUIR be adopted?

On this last point, the Italian Inland Revenue Agency has previously clarified that in cases of leasing after 1st July 2020, with a vehicle registered before, the normal value of the asset must be applied, excluding the portion related to business use. This approach, however, presents several operational and management difficulties.

An official clarification from the Italian Inland Revenue Agency remains desirable.

b) Vehicle assignment without mixed use.

What if the car is granted solely for business purposes?

Finally, it is possible for the car to be allocated exclusively for business use. In this case, the employee accesses the vehicle only during working hours and leaves it at the company at the end of the day, returning home in another personal vehicle. Any personal use is prohibited and can result in disciplinary action. For the protection of the company, it is recommended that the employee sign a document clearly specifying all the rules of use.