Company cars assigned in July, tax rules on fringe benefits change

ROME – Do you have a company car that was assigned to you in July , just in time for your vacation, but was originally ordered in 2024 ? Be careful, because the fringe benefit calculation method is changing, which could impact the employee's net pay and impact social security contributions and company charges .

It all began on July 1, 2025, with the conclusion of the transition period established by the Revenue Agency to ensure a smooth transition between the new tax regime for company cars used for mixed-use, in force from January 1 , 2025, based on the vehicle's fuel type, and the previous regime, which calculated the benefit based on carbon dioxide emissions. Essentially, the transitional regime established the possibility of choosing, for vehicles ordered by December 31, 2024, and assigned to the employee between January 1 and June 30, 2025, between the previous tax regime , more favorable to internal combustion engines, and the tax regime in force from 2025, which favors plug-in hybrids and electric vehicles , with rates of 20% and 10%, respectively. Internal combustion engines, on the other hand, are taxed at 50%.

But what happens to vehicles assigned from July 1st onwards? As specified in Circular 10/E of the Revenue Agency of July 3rd, the analytical criterion of the vehicle's "normal value" applies to company vehicles used as fringe benefits "ordered by December 31, 2024, granted for mixed use to employees, with contracts signed in 2024, registered in 2025, and delivered to the employee in July 2025," which takes into account both private and business use.

This means that the fringe benefit must be taxed only for the portion attributable to the vehicle's private use, excluding the use for the employer's benefit from its normal value. For example, considering the rental or leasing fee paid by the employer net of an allowance for the employee's business-related kilometers. In fact, cars ordered in 2024 but assigned from July 1st onward would not be subject to either the tax rules in force until 2024 or the new rules introduced by the 2025 budget law.

The Revenue Agency's circular specifies that the old rules apply , until the natural expiration of the contracts , to cars registered and assigned to the worker from July 1, 2020, to December 31, 2024. And even in the event of an extension of assignment of a vehicle without other changes (same car, same user), the tax rules originally in force at the time of the initial stipulation will continue to apply until the end of the extension.

However, if the vehicle is revoked from the previous user and assigned to another employee with a new contract in 2025, this effectively constitutes a new assignment. Three possibilities arise : if the reassignment concerns a vehicle registered after January 1, 2025, the new rules introduced by the 2025 Budget Law apply; if it concerns vehicles registered between July 1, 2020 and December 31, 2024, and reassigned by June 30, 2025, the previous tax regime will continue to apply; if, however, the same vehicles are reassigned after July 1, 2025, the fringe benefit will be applied at "normal value," net of company use. In short, a real dilemma for companies and employees to contend with.