The Italian government has introduced a tax rule for 2020 that makes in-kind benefits more attractive to employers.

More and more employers are using in-kind employee welfare benefits as an opportunity both for the business and the employees. These are goods and services provided by the employer to employees on top of their normal salary to support their purchasing power and to improve quality of their private and family life. These benefits are attractive because the value of the goods and services is often not included in employees' income for tax and social contribution purposes. Recently in Italy a new rule has been issued that may further encourage employers to introduce an employee welfare benefits plan or to update their existing one.

In general, employee welfare benefit plans in Italy have to apply to all employees or to broad categories of employees in order to qualify for the tax and social security exemption. Indeed, due to the strict rules governing such plans, it usually is not possible either to provide for individual payments or to give employees significant amounts in goods and services other than those expressly allowed by Italian law, which have social assistance purposes (e.g. childcare contributions). These benefits are not always the right instrument to compensate for a reduction in income, for example in the case of redundancy payments.

However, the Italian income tax code contains an exception allowing employers to award employees, even on an individual basis, goods or services of any kind without taxing their value up to a certain amount. This provision was recently amended by the so called 'Decreto Agosto', a piece of legislation introduced to address the Covid-19 emergency. The amendment temporarily increases the tax and social contribution exemption for goods and services that employers may provide to employees without restriction from EUR 258.23 to EUR 516.46. This means that only for 2020, the annual non-taxable cap on goods and services in kind provided to employees (either individually or collectively) has been doubled.

The new cap frees employers from the restrictions that have sometimes limited employers in supporting their employees during the emergency period, since now employers will be able to offer their employees goods or services that are completely fungible (e.g. shopping vouchers or fuel vouchers), thus optimising the allocation of the company's budget from a tax and social contribution perspective.

The new rule can be an advantage both for employers that have already implemented an employee welfare benefit plan and those that intend to implement one. However, it should be noted that the new cap will be applicable only for 2020, and according to the text of the provision only to goods or services received by employees in 2020.

Toffoletto De Luca Tamajo e Soci

Comments from other countries:


In the UK benefits in kind provided to employees are subject to income tax and employer social security ('NICs') in full unless an exemption applies. If certain conditions are satisfied, the following 'welfare' benefits can be provided free from tax and NICs:

· counselling for personal problems such as stress, debt problems, bereavement, alcohol and drug dependency; and

· trivial benefits (worth up to GBP 50) to cover small gifts on the occasion of events such as birthdays, marriage, childbirth.

The most significant COVID-19 related exemption introduced in the UK is to allow employers to reimburse expenses incurred by their employees in the period 16 March 2020 to 5 April 2021 on home office equipment required by the employees to enable them to work from home due to COVID-19 tax and NICs free. Without this exemption, the reimbursement of such expenses is subject to tax and employee and employer NICs in full, although it is possible for employers to provide home office equipment free from tax and NICs to employees who are working from home under a formal arrangement.

Victoria Goode, George Carey, Lewis Silkin


In Germany, the legislator introduced a new tax provision due to the coronavirus crisis. As a result of this new provision, employers can grant their employees tax-free special payments of up to EUR 1,500 in the form of allowances and benefits in kind. The new regulation covers special benefits that employees receive between 1 March and 31 December 2020. The condition is that the allowances and support are paid in addition to the wages already owed.

Stefan Fischer, KLIEMT.HR

New Zealand

In New Zealand, non-cash benefits provided to employees by employers as a result of their employment relationship may be subject to Fringe Benefit Tax. This extends to the employer providing goods and services as fringe benefits in specific circumstances. Currently the rates, requirements and exemptions of Fringe Benefit Tax are unchanged following the COVID-19 epidemic.

Peter Kiely, KTC


There is no preferential tax policy in China, but the Chinese government has issued tax support policies in terms of individual income tax exemption preventive medical protective equipment provided by employers to employees, employees' subsidies and bonuses obtained for temporary work in epidemic prevention and control, among other measures. In addition, the Chinese government has now extended the period of during which the social insurance burden for employers is reduced due to the impact caused by COVID-19 till December 2020.

Tracy Zhu, Fangda Partners


In Belgium, in-kinds benefits aiming at supporting employees' purchasing power and improving the quality of their private and family live are in principle considered as remuneration as soon as a causal link exists between the grant of these benefits and the employment relationship. They are therefore subject to Belgian personal income and social security. The taxable amount is either based on the actual value of the benefit or a lump-sum method. Under certain circumstances (e.g. New Year, jubilees, pension, etc.) and provided fixed amounts are not exceeded, benefits or vouchers can be granted in an exempted way. Further to the lockdown measures caused by the COVID-19 pandemic, the Belgian government has recently introduced a consumption voucher as a way to boost the local economy and increase employees' purchasing power. Since 17 July 2020, an employer can, until the end of this year, grant its employees a voucher worth up to EUR 300, which can be spent in qualifying outlets in the food, cultural and sport sectors. The cheque is exempt from social security contributions and taxes and should be valid until 7 June 2021.

Sylvie Dumortier, Claeys & Engels


Polish regulations oblige employers (who meet some criteria) to set up a special employee benefit fund. The fund is aimed at financing or co-financing so-called 'social activity', including in particular: recreation for employees and their families in the form of holidays, summer or winter camps for children and young people, entrance tickets to artistic, cultural, entertainment or sports events, in-kind and financial aid in special cases, etc.

The award of benefits from the fund depends on the eligible person's living, family, financial and housing situation. In the first place, benefits are granted to the individuals on low incomes, single parents, and individuals providing care to children and family members requiring special care or treatment.

Benefits from the fund are tax and social security free up to an annual limit. In March 2020 the limit was temporarily doubled as part of the anti-COVID-19 regulation package and is PLN 2,000 per annum for 2020 and 2021.

Katarzyna Sarek-Sadurska, Raczkowski


In Estonia, in-kind benefits provided to employees are considered fringe benefits and subject to income tax and social contributions at the level of the employer. An exemption of the kind described in Italy (i.e. one that allows employers to award employees goods or services of any kind, even on an individual basis, without taxing their value up to a certain amount) is not available in Estonia. However, there are some specific in-kind benefits to which tax exemption may apply (e.g. share options), if specific conditions are met. These are not related to supporting employees during the emergency period by offering employees goods or services that are completely fungible (e.g. shopping vouchers or fuel vouchers) and thus, optimising the allocation of the company's budget from a tax and social contribution perspective.

Karina Paatsi Cobalt


The value of in-kind benefits received from an employer are included in the employee's taxable income in Finland. The valuation of benefits in kind varies year to year because of differences in costs to employer, market value, etc.

The Finnish government has not introduced any major amendments to in-kind benefits to address the COVID-19 situation. Any additional benefits employee receives from employer in addition to employee's pay are taxed as wage income. Only so-called minor other gifts that are given collectively to the entire staff may be regarded as tax-free. The value of a minor other gift can be up to 100 euros per employee per year.

There has been only slight amendments regarding to the valuation of taxable in-kind benefits applied in 2020. In response to guidelines for people to stay home, the tax authority has eased the restrictions on usage of the lunch benefit. Until 31.12.2020, lunch benefit can be used to pay for meal delivery.

Seppo Havia, Theo Pynttari, Dittmar & Indrenius


In Austria tax advantages for food vouchers have been extended to a higher amount from 1 June 2020. Vouchers for meals remain tax-free up to a value of EUR 8 per working day if the vouchers are only redeemed at the workplace or in a restaurant (near the workplace) for consumption there. If the vouchers can also be used as means of payment for food that does not have to be consumed immediately, they are tax-free up to a value of EUR 2 per working day. This means that the maximum limit for tax-free meal vouchers was raised from EUR 4.40 to EUR 8.00 and from EUR 1.10 to EUR 2.00.

Birgit Vogt-Majarek, Karolina Saal, Schema Mayer Starlinger


Kazakhstan legislation does not provide an express possibility for an employer to provide its employees with goods and services above their normal salaries (especially under preferential tax conditions) to support employees' purchasing power and improve the quality of their personal and family life. According to the Kazakhstan Tax Code, all received benefits, including additional material incentives (that is, other than salary) for employees in any form whatsoever (monetary or goods), are considered as income subject to taxation and social deductions.

During the COVID-19 pandemic, Kazakhstan offered the possibility for certain categories of employers and, accordingly, their employees (with respect to certain types of activities on a statutorily established list, e.g. activities in the spheres of law, tourism, private education, private medicine, etc.) to apply a '0' adjustment coefficient to the rates of individual income tax and social payments from 1 April until 1 October 2020. The employees affected by the implementation of anti-epidemic measures were give the possibility not to apply income tax and social deductions to increments payable to them starting from 1 March 2020.

Yuliya Chumachenko, Aequitas


Slovak legislation specifies employer´s benefits exempted from tax duty. For example, there are exemptions for the benefits on the educational purposes for employees, catering for the employees, non-alcoholic drinks at the workplace, employers' own products and services and others. Employers are also supported to provide employees with tax and social free vouchers for holiday in Slovakia up to EUR 275 or vouchers for children sport activities (after meeting 50 headcount threshold, holiday voucher is obligatory). There is also a possibility for employers to provide summer and Christmas holiday financial benefits free of tax and social duties up to EUR 500, however this tax and social exceptions are not very attractive for the employees due to the complicated and changing conditions. There have been no changes to employee benefit regulation in Slovakia as a result of the COVID-19 pandemic.

Danica Valentová, Nitschneider & Partners


Throughout the current state of alert, the Romanian Government introduced a series of benefits, including:

  • state support for reduction of employees' working schedule (kurzarbeit);
  • a one-time benefit for purchase of specific goods and services for teleworkers;
  • support for the activity of day workers and seasonal workers;
  • state support for part of the technical unemployment allowance for activities that are still officially suspended;
  • other forms of support stimulating employment for different categories of personnel affected by the COVID-19 crisis.

Employers are increasingly accessing these benefits for their employees.

Teodora Gogu, NNDKP


The Croatian Income Tax Act provides for numerous benefits an employer can provide to the employees tax-free, as long as the criteria are not based on any of the discriminatory bases in the Croatian Anti-Discrimination Act. Some tax-free benefits are non-taxable up to an amount determined on a monthly or annual basis and any amount above the limit is taxed regularly. For benefits in kind, depending on the type of benefit, the Croatian Income Tax Act imposes different annual caps. For example, employers can provide employees with a daily meal up to the annual non-taxable cap of HRK 12.000 (approximately EUR 1.600). The annual non-taxable cap on 'gifts in kind' provided to employees (e.g. vouchers) is HRK 600 (approximately EUR 79.55). Other benefits in kind (such as the use of a company vehicle by employees, beneficial loans, or share disbursements) are taxed regularly as income.

Currently, there have been no significant changes to benefit regulation in Croatia as a result of Covid, apart from the costs of COVID-19 laboratory testing. Costs of testing covered by employers is not be considered income for employee, and is not taxable.

The Croatian Employers' Association (HUP) has requested the Croatian Government make additional changes to the Income Tax Act, which would define more benefits which the employers can provide to their employees as tax-free, such as raising the cap on meal benefits and employee rewards (Christmas bonus, holiday pay, etc.)

Andrej }mikic, Divjak Topic Bahtijarevic & Krka


According to a Chilean Labour Authority resolution, while a temporary suspension of the employment contract between employee and employer under the Employment Protection Law (Law N° 21,227 aimed at protecting families' income and jobs due to COVID-19) is in effect, it is legally appropriate for an employer to grant employees grants benefits in money or in kind to supplement the amount not covered by the benefit they are entitled to receive under Unemployment Insurance (Resolution No. 1959/15 of 22 June 2020).

Paola Casorzo, Munita & Olavarria


In Peru, employers can pay their employees remuneration in money or in kind, regardless of form or denomination, as long as the employee is free to use it how s/he wishes. Employers can also give employees extraordinary bonuses or other payments occasionally. These are not considered remuneration, are given freely by the employer and are not subject to the fulfillment of objectives. Employers can also grant employees food cards, transport and education bonuses, among others, subject to legal limits. These are also not non-salary.

This gives employers an option to provide the employees extraordinary benefits to support them in the context of the COVID-19 pandemic. It must be taken in consideration that although some extra benefits that the employer can grant, such as food cards, will be considered non-salary for employment purposes (i.e. for calculation of social benefits), they may be taken into consideration as income for tax purposes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.