Company car mixed use: taxable amounts beyond fringe benefit

Remuneration and benefits
Company car for mixed use: taxation also applies to amounts exceeding the conventional value
Italian Revenue Agency

A company introduced a new corporate policy for cars assigned to managers, known as Car Flexi. Under the scheme, executives could choose an electric or plug-in hybrid vehicle for both business and personal use, contributing to the leasing cost. Specifically, each participating employee paid, via payroll deduction, an amount equal to the conventional fringe benefit value calculated according to ACI tables. In addition, they agreed that the remaining cost of the vehicle would be covered through a reduction in variable remuneration.

The company maintained that this second portion — deducted from variable pay — should also be excluded from taxation, treating it as employee participation in the cost of the vehicle.

The Italian Revenue Agency disagreed. It clarified that only the amount deducted up to the conventional fringe benefit value may reduce taxable income. Any amounts exceeding that threshold must instead be treated as ordinary employment income and are therefore subject to taxation and social security contributions.

In other words, the employee may “neutralise” the taxable value of the company car only up to the limit set by the Italian Income Tax Code (TUIR). Beyond that limit, deducted amounts remain taxable, even if they serve to cover the actual cost of the vehicle.