Under certain conditions, the exemption limit is raised from 258.23 euros for each tax period to 3,000 euros.
Fringe benefits represent a non-monetary remunerative allowance
Fringe Benefit Regulations Simplified
In order to promote sustainable mobility, the implementation of complementary pension schemes, increased energy efficiency, healthcare assistance, social solidarity, and contributions to bilateral entities, Article 5, letter e, of Law No. 111 of 2023, provides for the revision and simplification of provisions concerning sums and values excluded from income calculation (fringe benefits), with particular regard to the non-competition limits on income for the allocation of non-monetary compensation.
In essence, with this provision, the legislature in the government’s enabling act for tax reform intended to deal with the issue of fringe benefits in order to simplify its regulation with the upcoming implementing decrees.
Special attention has been paid to non-competition limits, which will be raised. These are the values paid by the employer to the employee to incentivize their work within the company and foster a lasting relationship.
Fringe Benefits: What Are They
When referring to fringe benefits, we are talking about goods or services that the company provides to the employee in a form other than monetary sums, in relation to the employment relationship. That said, fringe benefits, representing a non-monetary remunerative allowance, under certain conditions, or more precisely, once a certain threshold is exceeded, contribute to income calculation.
Currently, the threshold for non-taxability of benefits received by the employee in connection with the employment relationship but different from monetary sums does not contribute to income calculation if they are less than 3,000 euros. However, for 2023, this threshold, under Decree Law 48/2023 Article 40, is recognized only for employees with dependent children. More specifically, the provision states that:
They do not contribute to income calculation, up to the overall limit of 3,000 euros, the value of goods provided and services rendered to dependent workers with children, including children born out of wedlock, adopted or entrusted, as well as sums paid or reimbursed to these workers by employers for payment of integrated water service, electricity, and natural gas utility bills.
Utilizing the Exemption on Fringe Benefits
It is important to note that Decree Law No. 48/2023 stipulates that the exemption regime up to 3,000 euros applies only if the worker declares their entitlement to their employer, indicating the tax code of their children. It will then be the responsibility of the employer to implement this after informing the unified trade union representatives in advance.
