Company Cars: The New Rules in Force – What to Know About 2025 Taxation (Roberta De Felice – HR Link, 16 September 2025)

In 2025, the taxation of company cars for mixed private and business use has changed: the calculation based on emissions has been replaced by fixed percentages linked to the vehicle’s fuel type. With Circular 10/E issued in July, the Italian Revenue Agency clarifies how the new rules apply. Here’s what you need to know.

Circular 10/E of July 2025, issued by the Italian Revenue Agency, has provided clarification on the aspects of the 2025 Budget Law concerning company cars for mixed private and business use, i.e. vehicles made available to employees for both professional and personal purposes.

The main change is the shift from the deductibility calculation based on CO₂ emissions to a new system linked to the vehicle’s fuel type. The new rules apply to vehicles registered and delivered starting from January 2025, with contracts signed from the same date. The Circular also specifies the treatment of vehicles with contracts signed by December 31, 2024, but assigned only from July 2025 onwards. Here’s what you need to know.

The New Taxation Rules

The reform aims to encourage the ecological transition. Until 2024, the calculation of the fringe benefit (the taxable value of the benefit forming part of the employee’s income) was linked to the amount of CO₂ emitted by the vehicle. Now, the parameter is determined on a flat-rate basis, depending on the fuel type.

A fixed percentage is applied to the annual per-kilometre cost, calculated on a conventional mileage of 15,000 km according to the ACI tables. For internal combustion vehicles (diesel, petrol, LPG, methane, as well as non plug-in hybrids), the coefficient applied to per-kilometre costs in order to calculate the car benefit rises from 30% to 50% — which, according to Assolombardia, translates into a roughly 67% increase in taxation. Significantly lower percentages (10% and 20%, respectively) apply instead to electric and plug-in hybrid vehicles.

The system simplifies calculations compared to the past, but since it no longer considers emissions, it treats older, more polluting combustion vehicles the same as newer, more eco-friendly ones.

Transitional Phase and Special Cases

Roberta De Felice, Labour Consultant and associate at HR Capital, a payroll and labour consultancy firm, stresses that “the correct identification of the criterion for valuing the company car fringe benefit is crucial, as it affects both the determination of employment income and the possibility of falling within the exemption thresholds for fringe benefits.” The 2025 Budget Law has in fact raised these thresholds for the 2025-2027 period to €2,000 per year for employees with dependent children and to €1,000 for all others.

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