With Reply No. 302/2025, the Italian Revenue Agency (Agenzia delle Entrate) once again addresses an issue of continuing relevance for both public and private employers, namely the correct tax treatment of expense reimbursements paid to employees in connection with business trips and assignments. The clarification focuses in particular on transport expenses incurred for taxi services within Italy that are paid in cash, and on the tax consequences arising from the lack of traceability of such payments.
The request
A Ministry (the applicant) sought clarification on the correct tax regime applicable to the reimbursement of expenses incurred by an employee during three business trips carried out in Italy and abroad, relating to the use of taxi services in Italy, where payment had been made in cash. The applicant administration took the view that, pursuant to Article 51(5) of the Italian Income Tax Code (TUIR), such reimbursements should be included in the employee’s taxable employment income.
Accordingly, “at the time of settlement, the reimbursement is subject to IRPEF withholding at the highest marginal tax rate applicable to the employee, as provided for by the legislation in force (23%, 35%, 43%).”
The legal framework
1. The all-inclusive principle of employment income
The Italian Revenue Agency begins its analysis by referring to Article 51(1) TUIR, pursuant to which “employment income consists of all sums and values in general, of whatever kind, received during the tax period, even in the form of voluntary payments, in connection with the employment relationship.”
This provision defines employment income according to the principle of all-inclusiveness: all amounts and benefits received in connection with the employment relationship constitute taxable income, unless expressly excluded. Among the exceptions are the favourable tax regimes applicable to travel allowances and expense reimbursements, but only under the conditions specifically laid down by the legislature.
2. Article 51(5) TUIR and the business-travel regime
Article 51(5) TUIR regulates in detail:
- the quantitative thresholds within which travel allowances are not included in taxable employment income, distinguishing between business trips within Italy and those abroad;
- the regime under which itemised reimbursements of expenses for meals, accommodation, travel and transport do not constitute taxable employment income, provided that such expenses are incurred in connection with business trips or assignments outside the municipality of employment, are duly documented, and the related payments are made using traceable payment instruments (bank or postal transfers or other systems referred to in Article 23 of Legislative Decree No. 241/1997), with specific reference also to non-scheduled public transport services governed by Law No. 21/1992;
- the conditions required for reimbursements to be excluded from employment income.
As is clear, with specific reference to taxi services and other non-scheduled public transport services, the legislature has introduced an additional and specific requirement: the related reimbursements are excluded from taxable employment income only if the payment is made by bank or postal transfer or through traceable payment instruments.
This rule, introduced to promote transparency and combat tax evasion, requires the use of:
- bank or postal transfers;
- debit or credit cards;
- the payment instruments referred to in Article 23 of Legislative Decree No. 241/1997 (now Article 14 of Legislative Decree No. 33 of 24 March 2025).
3. IRPEF withholding in the event of taxability
Where reimbursed amounts are included in taxable employment income, Article 29(1)(b) of Presidential Decree No. 600/1973 applies. Under this provision, the withholding agent (sostituto d’imposta) is required, at the time of payment, to apply a direct withholding as an advance payment of personal income tax (IRPEF) on the taxable portion of the allowances referred to in Article 51(5), (6), (7) and (8) TUIR, applying the tax rate corresponding to the highest income bracket of the recipient at the time of payment or, failing that, the rate applicable to the first income bracket.
The Revenue Agency’s position
Since in the case examined the taxi fare was paid in cash, the Revenue Agency confirms that the requirement of traceability—essential in order to benefit from the exclusion provided for by Article 51(5) TUIR—is not met.
Accordingly, the reimbursement paid by the employer:
- is fully included in the employee’s taxable employment income;
- is subject to IRPEF withholding at the marginal tax rate, pursuant to Article 29(1)(b) of Presidential Decree No. 600/1973.
Conclusions
Reply No. 302/2025 confirms that, for taxi reimbursements incurred in Italy, traceability of payment is an essential condition for tax exemption.
In the absence of electronic or otherwise traceable payment:
- the reimbursement constitutes taxable income;
- it must be subject to IRPEF withholding at the marginal tax rate;
- the employer must comply accordingly in order to avoid irregularities in the event of a tax audit.
The clarification reinforces the need for both private companies and public administrations to adopt internal procedures consistent with the applicable legislation and to train staff on the correct methods of payment during business trips and assignments.