Operating in Italy? Here's What the 2025 Budget Law Means for Your Expense Reimbursements

New Italian regulations: traceable payments required for expense deductions

Effective January 1, 2025, Italy's Budget Law introduces stringent rules on employee expense reimbursements.

All reimbursable expenses must be paid using traceable methods such as corporate cards, bank transfers, and checks to ensure tax deductibility and avoid additional tax burdens. 

Cash payments or untraceable methods will render these expenses non-deductible and potentially taxable as employee income.​

Untraceable reimbursements could cost you more

Consider this scenario: An employee incurs €100 in travel expenses and pays in cash. They submit a paper receipt, and the company reimburses via bank transfer. Under the new law, this reimbursement is non-deductible.​

What it all means

Assuming a corporate tax rate of 27.9% (IRES + IRAP), the company cannot deduct the €100 expense, resulting in an additional €27.90 in taxes. The total cost is €127.90.

For the employee, the €100 reimbursement may be considered taxable income, leading to potential personal tax liabilities.​

In contrast, if the expense had been paid directly using a corporate card:​

• The company pays €100.
• The expense is fully deductible.
• The employee avoids out-of-pocket expenses and potential tax implications.

WithLess: ensuring compliance and efficiency in Italy

Yes, Italy's complex tax regulations can be challenging. That’s why WithLess offers solutions to simplify compliance:​

• Smart corporate cards: Instantly issue physical and virtual cards to employees, ensuring all expenses are traceable and within predefined limits.
• Automated expense management: Digitize receipts, automate reconciliations, and integrate seamlessly with your accounting systems.
• Real-time monitoring: Gain visibility into spending patterns, ensuring adherence to Italian tax laws.​

Key takeaways for international companies in Italy

• Mandatory traceability: All employee expenses must be paid using traceable methods to qualify for tax deductions.
• Documentation requirements: Maintain detailed records of all transactions, including receipts and payment proofs.
• Exceptions: Certain expenses, like public transportation tickets, may still be reimbursed if adequately documented.​

What to do now: align with Italy's 2025 Budget Law

Failure to comply with these new regulations can result in significant financial penalties and administrative burdens. By partnering with WithLess, you can ensure your Italian operations remain compliant, efficient, and cost-effective.​

Contact us today to learn more about how WithLess can support your business in adapting to Italy's evolving financial landscape.