By Resolution No. 46 of 14 August 2020, the Revenue Agency gave its opinion on the use of fringe benefits for tax and contributions purposes in relation to vehicles granted to employees for company and personal (i.e. “heterogenous”) use.
Regulatory references
The Revenue Agency’s intervention follows the amendment of Article 51.4 a) of Presidential Decree 917/1986 (Income Tax Consolidation Act (TUIR)) by Law 160/2019 (the “Budget Law” 2020) in force since 1 January of this year. This amendment revised, with effect from 1 July 2020, the quantification of the fringe benefit taxable based on CO2 emissions per kilometre, to the benefit of less pollutant vehicles in contrast to vehicles that produce more carbon dioxide.
More specifically, the new wording of the regulatory provision provides that for newly-registered vehicles, motorbikes and mopeds with carbon dioxide emission values not exceeding 60 g/km of CO2, which are allocated to employees for heterogenous use in contracts signed since 1 July 2020, 25% of the amount corresponding to a conventional distance of 15,000 kilometres – calculated based on the kilometre cost for the year deducible from ACI tables and net of any amounts withheld by the employer for this employee benefit – should constitute the assessable base (for taxation and contributions purposes).
The aforementioned percentage is increased to 30% for vehicles with carbon dioxide emission values higher than 60 g/km but below 160 g/km; if the values are higher than 160 g/km but below 190 g/km, the percentage is increased to 40% for 2020 and to 50% with effect from 2021; for vehicles with carbon dioxide emission values in excess of 190 g/km, the percentage is 50% for 2020 and 60% with effect from 2021.
Contracts already in force at that date are excluded and are subject to the old rules, which set the fringe benefit at a fixed rate of 30%.
The Revenue Agency’s clarifications
In relation to the new provisions, the Revenue Agency – in response to a petition for a clarificatory tax ruling filed by an employer – provided important clarifications regarding the correct identification of the number of vehicles, motorbikes and mopeds subject to the new rules.
More specifically, the petitioner asked:
The Revenue Agency replied, on this point, that the term “new registration” is attributable to vehicles, motorbikes and mopeds registered since 1 July 2020, and the date of entry into force of the 2020 Budget Law (1 January 2020) is of no relevance to this. The tax authorities did not consider it feasible, for logical-systematic reasons and also for reasons of temporal consistency of the new regime, to hypothesise two different moments in time for the purposes of the regulation’s operation, i.e. 1 January 2020 for purposes of compliance with the registration deadline and 1 July 2020 for purposes of compliance with the deadline for the signing of the contract by which the benefit is allocated for heterogeneous use.
Moreover, in order for the new wording of Article 51.4 a) of the Income Tax Consolidation Act (TUIR) to be applied – motor vehicles, motorbikes and mopeds must be “allocated for heterogeneous use by contracts entered into with effect from 1 July 2020“. This is because – according to the Agency – the allocation of a car to the employee for heterogeneous use is not a unilateral act but rather an actual contract between employer and employee.
Finally, the tax administration gave its opinion on the tax rules applicable in the event that the contract allocating the vehicle for heterogeneous use is signed after 1 July 2020, but the vehicle is registered before that date. In this case, the taxable base is quantified by reference to the general principles governing the determination of income from employment.
Here, the Revenue Agency made reference to Resolution 74/2017 where it indicated that, if the legislation gave no default criterion for the valuation of a benefit, costs incurred by the employee exclusively for the employer’s benefit should be identified based on objective elements ascertainable by documentary evidence. This is in order to ensure that the full “ordinary value” of the asset allocated does not go towards determining income from employment. Consequently, the benefit should be assessed for tax purposes solely for the part attributable to the vehicle’s private use, separating the vehicle’s use for the employer’s benefit from its normal value.