TAX AUTHORITY: NO TAX BENEFITS FOR MBO CONVERTED INTO WELFARE
With Answer No. 77 of 20 March 2025, following a question posed by a company in the energy sector, the National Tax Authority commented on the correct tax treatment of performance bonuses (so-called MBOs) converted by employees into company welfare benefits (goods or services).
In this reply, the Authority stated that such incentives converted into welfare do not entitle employees to the tax benefits under Article 51 paragraphs 3 and 4 TUIR, but are subject to ordinary taxation, contributing to the formation of employee income which is taxable income, if:
- the bonus is granted ad personam (i.e. to well-identified or individually chosen employees, not to the generality or well-defined categories of employees);
- the bonus originates from an individual choice or in any case other than collective bargaining including second-level collective bargaining (which may actually regulate the option of converting the bonus into welfare);
- the bonus is not a performance bonuses pursuant to the 2016 Stability Law (L. 208/2015) art. 1 paras. 182 et seq.
Basically, the Authority clarifies that the exceptions to ordinary taxation have an exceptional character and cannot be extended to any goods or services offered by the employer as an alternative to monetary remuneration.
