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Fringe Benefit 2024: new features with tax-free amount up to €2,000

For year 2024, it is possible to provide employees with up to €2,000 tax-free fringe benefits.

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The 2024 Budget Law increases the amount of fringe benefits that do not contribute to the formation of taxable income for the employees. The amount for fringe benefits in 2024 has been raised from €258.23 to €2,000 for employees with dependent children, and to €1,000 for employees without dependent children.

Fringe Benefits: what they are and how they work

Before delving into the new distribution for 2024, let us provide a brief definition of fringe benefits with examples.

Article 51, paragraph 3, of the Tuir (Income Tax Code), in its original wording, states:

“The value of goods transferred and services provided does not contribute to the formation of income if the total amount during the tax period does not exceed 500,000 lire; if the aforementioned value exceeds the mentioned limit, it entirely contributes to the formation of income.”

Thus, the aforementioned rule allows employers to provide their employees with “in-kind benefits” which, up to a certain amount, are exempt from taxes and contributions.

By “in-kind compensation,” we mean the provision of goods or services that are not in money. However, they are indicated in the payroll.

Fringe Benefits: examples

As examples, the following goods or services can be included among the fringe benefits:

  • Meal vouchers;
  • Fuel vouchers;
  • Mobile phone;
  • Company car;
  • Accommodations;
  • Gifts during holidays;
  • Shopping vouchers;
  • Insurance policies;
  • etc.

In addition to those listed, there are two important new features regarding fringe benefits:

  • The possibility introduced from 2022 to include the reimbursement of domestic utilities among the fringe benefits recognized by the employer (for more details, refer to paragraph 5 of this article);
  • The possibility introduced from 2024 to include among the benefits also the expenses for renting the primary residence.

The original limit of €258.23 had already been raised to €3,000 by the Decreto Aiuti Quater (Legislative Decree No. 187 of November 18, 2022), but exclusively for year 2022. For year 2023, however, this facilitation concerned exclusively employees with dependent children.

It should be remembered that fringe benefits represent a gratuitous act. There is therefore no obligation on the part of the employer to provide them. Such an expense is borne by the company and does not represent a contribution reimbursed by the State.

Fringe Benefit News 2024: up to €2,000 tax-free for employees

The Budget Law (Law 30/12/2023 No. 213) has introduced important new features regarding fringe benefits.

For year 2024, the rule provides the following limits within which the amount provided as a fringe benefit is deductible for the employer company and tax-free for the employee:

  • Up to €2,000 for employees with financially dependent children;
  • Up to €1,000 for all employees.

Therefore, in the year 2024, as an exception to what is provided by Article 51, paragraph 3, of the Tuir:

The value of goods transferred and services provided, up to the amount of €2,000 to employees with dependent children in 2024 and of €1,000 for all employees, does not contribute to the formation of income.

Fringe Benefit €2,000: who is eligible

The beneficiaries of the allowance are:

  • Holders of employment income;
  • Holders of income similar to that of employment (including continuous coordinated collaborators);

for whom income is determined according to Article 51 of the Tuir and who have dependent children.

Law No. 213 of the 2024 Budget Law of December 30, 2023, indeed adds an important condition for the use of the €2,000 tax-free bonus.

The employee must have dependent children as specified by Article 12.

The fringe benefits that enjoy this allowance are only those received by employees “with children, including recognised children born out of wedlock, adopted or foster children, who are in the conditions provided by Article 12, paragraph 2, of the aforementioned consolidated act on income tax (Tuir).”

Fringe Benefit: when a child is considered financially dependent

For the recognition of the allowance on tax-free fringe benefits up to €2,000, Circular 23/E of August 1, 2023, specifies the following:

  1. Children are considered financially dependent if they have a gross income not exceeding €2,840.51 (this limit is considered before any deductible charges). For children aged 24 years and under, this income limit is raised to €4,000.
  2. The condition of financial dependency must be verified on December 31 of each year. Therefore, for the purposes of this allowance, for its application in 2024, the condition mentioned in point 1 must be verified on December 31, 2024.
  3. The allowance is recognized in full to each parent (thus €2,000 each), holding income from employment and/or similar, even in the presence of a single child, provided that the same is financially dependent on both.
  4. The allowance is also recognized if the child is financially dependent, according to the parameters of point 1, but for whom no deduction is due following the request for the universal single allowance (assegno unico universale – AUU).
  5. The allowance is recognized in full to both parents (€2,000 each) even if the deduction is, by choice of the parents, borne by only one of the two (100% dependent on the parent with the highest income).

In conclusion, the allowance applies to each parent in full measure (€2,000 each) if the child is considered financially dependent on both, regardless of whether the parent takes advantage of the deduction for dependent children or not.

It is important to communicate to the employer that the child is financially dependent, even if the tax deduction is not requested.

Fringe Benefits: €2,000 bonus under the same conditions also for company administrators

It is therefore possible to recognize the fringe benefit in question also to administrators of companies with dependent children. In this case, the provision of such goods and services or the payment/reimbursement of domestic utilities must be subject to a board resolution.

Fringe Benefit €1,000: who is eligible

A new feature of the 2024 Budget Law is the increase of the limit from €258.23 to €1,000 also for employees without dependent children.

The maximum amount of fringe benefits for 2024 is €1,000 for all employees whose income is determined according to Article 51 of the Tuir (without the condition of having dependent children).

Fringe Benefits: €2,000 bonus under the same conditions also for company administrators

It is therefore possible to recognize the fringe benefit in question also to administrators of companies with dependent children. In this case, the provision of such goods and services or the payment/reimbursement of domestic utilities must be subject to a board resolution.

Domestic Utilities: bills also included in the €2,000 Bonus

For year 2024, the payment/reimbursement of domestic utilities also falls within the tax-free benefits.

Therefore, the employer can directly pay or reimburse the employee for bills related to electricity, natural gas, and integrated water service.

What utilities are included

The following types are included in the allowance:

  • Utilities related to residential properties owned or held by the employee;
  • Utilities related to residential properties owned or held by the spouse or family members of the employee, provided they actually bear the costs. Family members are those specified by Article 12 of the Tuir;
  • Utilities for domestic use, including those billed to the condominium and divided among the condominium owners for their share. This also includes condominium expenses incurred for heating or domestic water use;
  • Utilities for domestic use that, although billed to the landlord, are recharged to the tenant. To be included in the benefit, the expense must have been analytically recharged to the tenant, not recharged on a flat-rate basis. In this case, the benefit is also recognized if the expense is paid by the spouse or family members as per Article 12 Tuir;
  • Utilities resulting from multiple bills;
  • Utilities resulting from bills dated 2024, provided they concern consumption made in 2024 and paid/reimbursed by the employer by January 12, 2025.

New Fringe Benefits 2024: rent and mortgage interest on the residence

Article 1 of Law 213, paragraph 17 introduces two new types of expenses that fall within the fringe benefits that employers can recognize to employees:

  • Expenses for the rent of their own residence;
  • Interest on the mortgage related to the primary residence.

For year 2024, the employer may disburse tax-free reimbursement sums for:

  • Domestic utilities;
  • Rent for the primary residence;
  • Interest paid for the mortgage taken out for the purchase of their own primary residence,

always staying within the limit of €2,000 for employees with dependent children and €1,000 for those without dependent children.

It is recalled that until the year 2022, the employer could disburse only the value of the goods transferred and the services provided within the limit of €258.23.

Fringe Benefit €2,000: how it works

Law 213 of December 30, 2023, reiterated some aspects of the methods and conditions related to the provision of corporate fringe benefits:

  1. They can be provided by the employer also ad personam. This means that there is no obligation to provide such goods and services to all employees. The employer may choose to provide them only to certain employees.
  2. The maximum amount of €2,000 (€1,000 in the case of employees without dependent children) that does not contribute to employment income is to be considered a limit and not a franchise. Therefore, providing an amount greater than this involves the entire amount being subject to taxation for social security purposes (including the part below the limit). It is therefore necessary to carefully verify which goods and services were provided to the employee during the year.
  3. The allowance produces a detaxation effect not only for ordinary IRPEF taxation but also in relation to the substitute tax, in the event of the provision of performance bonuses in goods and services. Therefore, up to the amount of €2,000, fringe benefits are tax-free even if they are enjoyed, at the choice of the employee, in substitution, in whole or in part, of the performance bonuses. The same applies in the case of the substitution of sums disbursed in the form of participation in the profits of the company. The principle also applies to employees without dependent children up to the amount of €1,000.

€2,000 Employee Bonus: how to obtain it

Article 1 of Law 213, paragraph 17, inserts a necessary condition for the employee to obtain the allowance.

The allowance is indeed granted upon declaration of entitlement by the employee to the employer.

In the absence of the employee’s declaration, therefore, the allowance is not applicable.

Always in Article 1, paragraph 16 of the 2024 Budget Law, it is specified that a similar declaration is not required for the employee without financially dependent children.

How the mandatory declaration for the Fringe Benefit €2,000 should be drafted

Form of the Declaration

The Budget Law does not specify a particular form for the declaration required for the allowance. Therefore, it is believed that the declaration can be made in a manner agreed between the employer and the employee.

Content of the Declaration

Regarding the content, it must include the declaration by the employee of their entitlement to the allowance. In particular, the employee must indicate the tax code of the financially dependent child or children. They must also declare that they possess the documents that prove the payment of the expenses, in case of reimbursement of domestic utilities or expenses for rent, or interest on the mortgage for the main residence.

Documentation to be kept

It is necessary to keep the documentation (even if digitally signed) proving the declaration made, for possible checks by competent authorities.

Mandatory Documentation

The employer must request and keep, for possible checks:

Documentation to justify the amount spent. For example:

  • The invoice attesting to the domestic utility;
  • Documents attesting to the expenses incurred for the lease of the primary residence;
  • Documents attesting to the expenses incurred for the interest on the mortgage relating to the primary residence;
  • Documents attesting to their actual payment.

In this case, attention must be paid to compliance with data protection and privacy regulations.

Alternatively to the documentation indicated in point a), it is possible to produce:

A self-certified declaration of notoriety made pursuant to Presidential Decree No. 445 of 2000, in which the employee declares that they are in possession of the documentation proving the payment of the above expenses. In this case, the documentation must be kept by the employee in case of a check.

The self-certified declaration of notoriety for the expenses incurred for domestic utilities must include the necessary elements to identify the aforementioned documentation. It must contain:

  • Invoice number and date;
  • Type of utility;
  • Amount paid;
  • Date and method of payment;
  • Indication of the account holder. In case the account holder is different from the employee, it is also necessary to indicate the relationship between them and the employee.

In addition to the documentation mentioned in points a) and b), the employer must request in any case:

A self-certified declaration of notoriety, made by the employee pursuant to DPR No. 445 of 2000. With this declaration, the employee attests that the same invoices have not been the subject of a reimbursement request from other employers. This is to avoid that the same expense is reimbursed twice.

Finally, the employee who intends to take advantage of the higher limit of €2,000 tax-free, by virtue of having one or more dependent children, must certify this condition through a self-certification to be made to the employer.

Deadline: when the bonus of €2,000-€1,000 is to be paid out

The timing for the disbursement of fringe benefits is very important in order for such disbursements in kind to be considered exempt from taxes and contributions and deductible from corporate income.

Even in the case of fringe benefits, the “broadened cash principle” (principio di cassa allargato) is applied.

This means that the goods, services, payment, or reimbursement of bills must be provided no later than January 12, 2025.

What is paid beyond that date will be considered fringe benefit related to the tax year 2025, in which the tax-free limit will return to the original amount of €258.23, unless the current system is extended.

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Regulatory Framework

Presidential Decree No. 917 of Dec. 22, 1986, Art. 51 (Consolidated Income Tax Act)

Reference (Italian only)

Legislative Decree no.115 of August 09, 2022 (Aid Decree bis)

Reference (Italian only)

Legislative Decree No. 187 of November 18, 2022 (Aid Quater Decree)

Reference (Italian only)

Legislative Decree No. 21 of March 21, 2022

Reference (Italian only)

Circular 35E dated November 4, 2022

Reference (Italian only)

Budget Law 2024 (Law No. 213 of 12/30/2023)

Reference (Italian only)

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