Tax Observatory › Employment › Italian fringe benefits in 2026: the €1,000 and €2,000 thresholds and the checks to make before year-end

Italian fringe benefits in 2026: the €1,000 and €2,000 thresholds and the checks to make before year-end

In 2026, goods and services provided to employees, reimbursements of household utility bills and of rent and mortgage interest on the employee’s main home are again tax-free up to €1,000, or €2,000 for employees with dependent children. Exceeding the threshold by even one euro, however, makes the whole amount taxable income: the calculation must be done before the year-end payments.

For 2026, goods and services that employers provide to their employees, together with amounts paid or reimbursed for household utility bills and for rent or mortgage interest on the employee’s main home, are free of income tax and social security contributions up to a total of €1,000 for the year. The limit rises to €2,000 for employees with children who qualify as dependants for tax purposes, provided that the employee has notified the employer and given the children’s tax codes. The threshold is not a tax-free amount above which only the excess is taxed: if it is exceeded, even slightly, the entire amount provided during the year becomes employment income. Before the December vouchers and reimbursements, employers should therefore add up what has already been provided since the start of the year.

The rule: a derogation for 2025, 2026 and 2027

The ordinary rule is set out in Article 51(3) of the Consolidated Income Tax Act (TUIR, Presidential Decree No. 917 of 22 December 1986): the value of goods and services provided to employees does not form part of their income if, in the tax year, it does not exceed €258.23 in total; if it does, the full value is taxable. Article 1(390) of Law No. 207 of 30 December 2024 (the 2025 Budget Law) departs from this limit for the 2025, 2026 and 2027 tax years, raising it to €1,000, and to €2,000 for employees with dependent children. Paragraph 391 of the same Law makes the higher threshold conditional on a statement by the employee.

The 2026 Budget Law did not amend these provisions. Legislative Decree No. 148 of 7 August 2026, which changed the rules on company cars used for both business and private purposes, did not alter Article 51(3) or paragraph 390. It did, however, amend, with effect from 2025, the definition of family members in Article 12 of the TUIR, to which Article 51(3) refers (see below). In Circular No. 6 of 30 January 2026, the National Social Security Institute (INPS) confirmed that the rules apply to 2026. The Italian Revenue Agency’s main guidance remains Circular No. 4/E of 16 May 2025, which refers, insofar as they remain applicable, to the clarifications in Circular No. 5/E of 7 March 2024.

With effect from 1 January 2027, the TUIR will be replaced by the new Consolidated Income Tax Act (Legislative Decree No. 117 of 19 June 2026): paragraph 390 will be repealed with effect from that date and, for 2027, the €1,000 and €2,000 thresholds will be found in Article 53(4) of the new Consolidated Income Tax Act. Nothing changes for 2026.

What counts towards the threshold

There is a single limit, which covers all of the following taken together:

• the value of goods and services provided to the employee, including through shopping vouchers and other vouchers (documenti di legittimazione);
• amounts paid or reimbursed for household water, electricity and natural gas bills;
• amounts paid or reimbursed for rent on the employee’s main home;
• amounts paid or reimbursed for interest on the mortgage on the employee’s main home;
• the value of benefits determined on the standard basis laid down in Article 51(4) of the TUIR: company cars used for both business and private purposes, low-interest loans, and buildings made available for the employee’s use.

This last item is often overlooked. According to Ministry of Finance Circular No. 326/E of 23 December 1997, the limit also applies to these benefits and is checked against the taxable amounts, that is, net of anything the employee pays or has deducted from pay. The annual value of a company car used for both business and private purposes often exceeds €1,000 on its own: for an employee who has one, even a voucher of a few hundred euros can make the entire amount taxable. The annual value of the car should therefore be calculated before any vouchers or reimbursements are granted.

Goods and services intended for the employee’s spouse and for the family members listed in Article 12 of the TUIR also count. Cash payments other than those listed above do not qualify: an unrestricted sum of money, not linked to utility bills, rent or interest, is ordinary pay and is taxed from the first euro.

For utility bills, according to Circular No. 35/E of 4 November 2022, the property must be residential and owned or occupied under a valid legal title by the employee, the spouse or family members, and the cost must actually be borne by one of them; the property does not have to be the main home. The bill may be in the name of the spouse or a family member. The employee’s share of utilities for the common parts of a residential building also qualifies, as do utilities in the landlord’s name, if the lease requires the actual cost to be recharged to the tenant on an itemised basis.

For rent and mortgage interest, by contrast, what matters is the employee’s main home, in the sense used for the tax credits (detrazioni) on mortgage interest and rent: the property where the employee or the employee’s family habitually live. The lease or mortgage may be in the name of the spouse or a family member, provided that the property is the employee’s main home (Circular No. 5/E of 2024). For rent, the relevant amounts are those actually paid during the year under a duly registered lease; for a mortgage, only the interest portion of the instalment counts, not the repayment of capital.

The reference to the family members in Article 12 of the TUIR must be read in its current wording. Paragraph 4-ter was rewritten by Legislative Decree No. 192 of 18 December 2025 and then amended by Article 1 of Legislative Decree No. 148 of 7 August 2026, in both cases with effect from the 2025 tax year. In its current wording, it includes among family members, in addition to the spouse, children and ascendants, the other persons listed in Article 433 of the Italian Civil Code, such as brothers and sisters, parents-in-law, and sons- and daughters-in-law, even if they do not live with the employee. Living together or receiving support payments (assegni alimentari) matters only where the rule refers to family members who are dependants for tax purposes. Circular No. 4/E of 2025, which described a narrower definition, related to the previous wording. The Revenue Agency has not yet commented on the new wording: for family members other than the spouse, children and ascendants, it is advisable to keep evidence of the family relationship by blood or by marriage.

Dependent children and the employee’s statement to the employer

The €2,000 threshold applies in respect of children who meet the conditions in Article 12(2) of the TUIR, including children born outside marriage who have been legally recognised, adopted children, children placed in affiliazione and children in foster care. The conditions are total income not exceeding €2,840.51, raised to €4,000 for children aged up to 24. What matters is the income condition, not entitlement to the tax credit for dependants: the higher threshold also applies for children for whom the parent receives the single universal allowance for dependent children (assegno unico e universale) instead of the tax credit. The condition is checked as at 31 December 2026 (Circular No. 23/E of 1 August 2023).

If both parents are employees and the child is a dependant of both for tax purposes, each parent is entitled to the full €2,000 threshold, even with only one child and even if the tax credit for the child is allocated entirely to the other parent.

The higher threshold applies only if the employee informs the employer of the entitlement, giving the children’s tax codes. The law does not prescribe a form: any agreed method is sufficient, provided that the statement is kept. Without the statement, the €1,000 limit applies. If the conditions cease to be met, the employee must inform the employer immediately, and the employer recovers from subsequent pay the benefit to which the employee was not entitled, at the latest at the year-end tax adjustment (conguaglio) or the final adjustment when employment ends.

Exceeding the threshold: everything becomes taxable

The derogation concerns only the amount of the limit. The rule in Article 51(3) of the TUIR still applies: if the total value exceeds the threshold, the entire amount is taxable, not only the excess. This is confirmed by Circular No. 4/E of 2025 and by the instructions for the 2026 730 tax return, and INPS applies the same rule to social security contributions (Circular No. 156 of 30 December 2025). An employee who receives vouchers and reimbursements of €1,050, with a €1,000 threshold, is taxed on €1,050, not on €50.

There is one limit per employee per year. An employee who changes employer during 2026 has only one threshold: the new employer must take into account the benefits provided by the previous one, as shown in the Single Certification (Certificazione Unica) that the employee hands over for the year-end adjustment; if no adjustment is made, the check is carried out in the employee’s income tax return. A separate matter is the employee’s statement that the same expenses have not already been reimbursed, by the same employer or by others: its purpose is to prevent the same bill or the same rent from being reimbursed twice.

Once the threshold is exceeded, the employer withholds tax from the pay period in which this happens or, if it is clear from the outset that it will be exceeded, from the first pay period; in any case, the employer regularises the position in the year-end adjustment.

The 12 January rule and year-end reimbursements

For tax purposes, the extended cash-basis rule in Article 51(1) of the TUIR applies: goods and amounts provided by 12 January 2027 are treated as received in 2026 if they relate to 2026. A reimbursement of 2026 utility bills paid on 10 January 2027, or a voucher relating to 2026 and handed over on that date, is therefore added to the other 2026 benefits and counts towards that year’s threshold. A voucher is treated as received when it becomes available to the employee, even if it is used later.

Tax credits in the income tax return

For expenses reimbursed tax-free by the employer, the employee cannot claim the tax reliefs available for the same expenses, because the employee has not actually borne them: this applies to the tax credit for mortgage interest on the main home (Article 15(1)(b) of the TUIR) and to the tax credits for rent (Article 16 of the TUIR). Employees who file the 730 or the Redditi income tax return will find the amount of fringe benefits in the Single Certification and must take it into account when reporting expenses that qualify for tax credits (oneri).

The employer’s obligations

The law provides that the relief is applied after the unitary trade union representatives (rappresentanze sindacali unitarie, RSU), where there are any, have been informed. For 2023, the Revenue Agency accepted that the RSU could be informed after the benefits had been provided, as long as this was done by the end of the tax year, because the relief concerns the whole year (Circular No. 23/E of 2023); later circulars refer to this clarification insofar as it remains applicable. The most prudent approach is nonetheless to inform them before the benefits are provided. Fringe benefits may also be granted to individual employees, not necessarily to all employees or to categories of employees, because the rule refers to paragraph 3, not paragraph 2, of Article 51; the law does not require a company policy.

For reimbursements of utility bills, rent and interest, the employer obtains and keeps the supporting documents or, alternatively, a statement in lieu of an affidavit by the employee (dichiarazione sostitutiva di atto di notorietà, Article 47 of Presidential Decree No. 445 of 28 December 2000), which does not require the signature to be authenticated: a signature accompanied by a copy of an identity document is sufficient (Revenue Agency reply No. 17 of 2025 to a ruling request). The statement contains the details that identify the expense: the bill number and the name of the person billed and, if this is not the employee, that person’s relationship to the employee; type of utility; amount, date and method of payment. The employee keeps the bills and receipts for any audit. In all cases, the employer also needs the statement that the expenses have not been reimbursed by others. The amounts must be shown separately in the Single Certification.

Within the threshold, the exclusion also applies for social security purposes, because the contribution base is the same as the taxable base; above the threshold, both tax and contributions are calculated on the entire amount. The relief also applies to income treated as employment income and determined under the rules of Article 51, such as the fees of company directors whose directorship does not form part of their professional practice.

A separate measure applies to employees who were hired on a permanent contract in 2025, had employment income of no more than €35,000 in 2024 and moved their residence to the municipality where they work, more than 100 kilometres from their previous residence (Article 1(386) to (389) of Law No. 207 of 2024). Amounts paid or reimbursed for rent and for maintenance of the rented property are tax-free up to €5,000 a year for the first two years of employment; the exclusion applies for tax purposes only and, above €5,000, only the excess is taxed. It does not apply to employees hired in 2026.

An example

An employee has one dependent child and has given the child’s tax code to the employer: the employee’s threshold for 2026 is therefore €2,000. During the year the employee has received shopping vouchers worth €1,800, and in December the employer reimburses utility bills of €300.

• Total 2026 fringe benefits: €1,800 + €300 = €2,100.
• Threshold: €2,000, exceeded.
• Amount that becomes taxable income: €2,100, not €100.

If the reimbursement of the bills were limited to €200, the total would be €2,000, within the limit, and nothing would be taxed. If the employee had not given the child’s tax code, the threshold would be €1,000 and the €1,800 of vouchers alone would exceed it: in that case too, the full €2,100 would be taxable.

In practice

• For each employee, the employer adds up everything already provided in 2026 as goods, services and reimbursements, including vouchers not yet used, reimbursements to be paid by 12 January 2027 and the annual value of any company car, loan or building made available for the employee’s use.
• The employer checks which employees have reported their dependent children and given their tax codes: for the others, the threshold is €1,000.
• Before the December payments, the employer sets the amount of vouchers and reimbursements so as to stay within the threshold, also taking into account any benefits from a previous employer shown in the Single Certification handed over by the employee.
• For utility bills, rent and interest, the employer collects the supporting documents or the statement in lieu of an affidavit, together with the statement that the expenses have not been reimbursed by others.
• Where there are unitary trade union representatives, the employer gives them the information required by law, preferably before the benefits are provided and in any case no later than 31 December 2026.
• The employee informs the employer immediately if a child is no longer a dependant for tax purposes and, in the income tax return, does not claim tax credits for interest and rent already reimbursed.

Frequently asked questions

If I exceed the threshold by a few euros, do I pay tax only on the excess?

No. Once the threshold is exceeded, the entire value of the year’s fringe benefits becomes taxable income, for both tax and social security purposes. This is why the total should be checked before the last payments of the year.

Can bills in my husband’s or wife’s name be reimbursed?

Yes. Utility bills may be in the name of the spouse or of a family member covered by Article 12 of the TUIR, which, with effect from 2025, also includes the other persons listed in Article 433 of the Italian Civil Code, such as brothers, sisters and parents-in-law. However, the bills must relate to a residential property owned or occupied by one of them, and the cost must actually be borne by the employee or the family member. The employer must obtain the supporting documents or a statement in lieu of an affidavit.

We are both employees and have one dependent child: is the €2,000 threshold split between us?

No. If the child is a dependant of both parents for tax purposes, each parent is entitled to the full €2,000 threshold, even if the tax credit for the child is allocated entirely to the other parent. Each parent must make their own statement to their employer.

Sources

Article 51(1), (3), (3-bis) and (4) of Presidential Decree No. 917 of 22 December 1986 (TUIR); Articles 12, 15 and 16 of the TUIR.

Article 12(4-ter) of the TUIR, as amended by Legislative Decree No. 192 of 18 December 2025 and by Article 1(1) and (3) of Legislative Decree No. 148 of 7 August 2026.

Article 1(386) to (391) of Law No. 207 of 30 December 2024.

Article 53(4) and Articles 376 and 377 of Legislative Decree No. 117 of 19 June 2026.

Article 47 of Presidential Decree No. 445 of 28 December 2000.

Ministry of Finance, Circular No. 326/E of 23 December 1997, section 2.3.1.

Italian Revenue Agency, Circulars No. 35/E of 4 November 2022, No. 23/E of 1 August 2023, No. 5/E of 7 March 2024 and No. 4/E of 16 May 2025; reply No. 17 of 2025 to a ruling request; instructions for the 2026 730 tax return.

INPS, Circulars No. 156 of 30 December 2025 and No. 6 of 30 January 2026.