Car taxation, 'reform needed' to speed up the transition in Italy

Reforming car taxation in Italy with the aim of encouraging the spread of low (or zero) CO2 emission vehicles. In the new edition of the Good Tax Guide, which analyses car taxation in 31 European countries, the European environmental organisation Transport & Environment (T&E) argues that the Italian system is the only one in Europe, along with Bulgaria and Slovakia, to be "completely de-coupled from CO2 emissions". The study shows that while France (which ranks among the best, along with Denmark, the Netherlands and Austria) is promoting effective policies, in Italy the sector's main taxes - such as stamp duty and registration tax, but also VAT deductibility and vehicle cost deductibility - are disconnected from environmental parameters, resulting in ineffectiveness in promoting electric vehicles and, more broadly, cleaner technologies.

"A step forward," comments Esther Marchetti, Clean Transport Advocacy Manager at T&E Italy, "has been taken with the recent reform on company cars in use by employees. The reform, introduced by the Budget Law 2025, significantly changed the taxation of fringe benefits related to vehicles granted in mixed use. Objective: to incentivise the adoption of low- or zero-emission vehicles, reducing the so-called 'environmentally harmful subsidies' and aligning the taxation of fringe benefits with environmental sustainability goals

Company-registered cars, after all, account for 41 per cent of new registrations and 58 per cent of CO2 emissions. Company cars drive on average twice as many kilometres per year as privately driven cars. And registrations of large endothermic SUVs and hybrids are three times more frequent among companies than in the private market (according to Dataforce ). Precisely to exploit their potential in the transition, the European Commission is preparing a legislative proposal to decarbonise company fleets, which it will present by 2025.

Meanwhile, the Good Tax Guide highlights how Italy's new tax structure has contributed to increasing the penetration rate of electric vehicles in the country. Indeed, in the first quarter of 2025, the market share of battery-powered vehicles (Bevs) stood at 5.2%, up from 2.9% in the same period of 2024. In the corporate sector, pure electric vehicle registrations reached 6.4%, surpassing for the first time the private channel, which remained at 4.1%. Against a European average of 15.2%. These increases are significant compared to 2024, when the shares were 4.7% for the corporate channel and 3.8% for the private channel. Not only that: in the first three months of 2025, for the first time since 2021, Bev registrations in the corporate channel rose again, exceeding those in the private market by more than 50%.

The new rules, which came into force in January, reduced tax exemptions for most endothermic company vehicles, while increasing them for plug-in hybrids and, above all, Bevs. The result was a rise in line with the average, to 11th place out of 31 countries. The average tax gap was reduced to EUR 14,700, between electric and conventional cars, over a four-year period of vehicle ownership and operation. These values are still too low compared to more virtuous countries such as Denmark (43 thousand, first place), Portugal (30,300 euro) or France (24 thousand euro). As far as private individuals are concerned, the situation is even worse: Bev-fuel tax difference for compact suvs, only 2,900 euro, well below the European average (8,500) and a long way from Malta (15,700 euro). Among the big countries, Germany is also worse: 1530 euros.