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Mileage Reimbursement in Italy: A Guide for Overseas Employers

Employees that need to travel by vehicle for work purposes will expect some type of reimbursement for those expenses, and each country treats that differently, either as a fringe benefit or a tax-free business expense.  Because it is an easy expense policy to misuse, tax authorities will impose certain restrictions on reimbursement.

If you have employees in Italy, you will be encountering some fairly intricate rules on reimbursement, and limits on tax free travel costs.  This guide will give you a basic idea of how it is handled, which may be much more restrictive than in your own country.

What are the mileage reimbursement rates in Italy?

Mileage reimbursement rates will vary depending on whether the vehicle is owned by the employee or is an employer-provided car, and also the type of car being used.  If it’s an employer-provided car, there is an assumption that at least some use is going to be personal, so that limits the tax-free use.

Personal Car: If it’s the employee’s car, they can be reimbursed 44 cents per kilometer for business trips, tax-free up to a certain annual maximum.

Company Car (mixed use):  Previously 30% of the maximum annual 15,000km mileage cost was a taxable benefit, to account for estimated personal use. For contracts entered into after 2020, the taxable amount depends on the emission rate of the car, ranging from 25-50%.  The remainder is a non-taxable amount as it’s allocated to business use.

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Is mileage reimbursement taxable in Italy?

Amounts reimbursed to the employee that exceeds the statutory minimum will be taxable to the employee, and may have to be grossed up in payroll.

Client Case: Reimbursing mileage for an employee’s personal car

We had a client with an employee in Italy that wanted to know the maximum amount that an employee could be reimbursed for use of their personal car. 

We informed them that the maximum amount would be determined by the type of car, which could be found on the government website dealing with fringe benefits.  For a valid and compliant expense claim, the employee would have to provide screenshots of their odometer and kilometers traveled.

The client was free to reimburse more than that amount, but it would have to be included in payroll as a taxable fringe benefit.

Do you need more information about Italy?

If you are new to Italy, then you may have other questions such as:

For cars provided by the company, are the cost of repairs subject to the annual maximum tax-free reimbursement?

Are tolls on expressways included in the mileage amount, or expensed separately?

How is the mileage allocated if a journey is for a mixed personal and business purpose?

Questions like these are why our clients turn to us for guidance on international employment, including benefits, taxation, and running a compliant payroll.  We make international employment simple.

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The information in this article is subject to changes in local legislation.

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