Imposta sul Valore Aggiunto (IVA) is the principal indirect tax in Italy.
It is a value added tax on consumption of goods and services, that is levied at each stage of the production and distribution. Liability for VAT rests with the person supplying the taxable goods or services or importing goods into Italy.
However, the supplier is allowed to deduct from its VAT liability on sales made the amount of VAT paid and properly invoiced to it in relation to purchases effected by it, or VAT paid by it at importation. The actual burden of the tax is therefore borne by the final consumer. VAT is chargeable on supplies of goods and services for a consideration made in Italy by a taxpayer acting as such.
The constituent elements of the charging provision are as follows:
In Italy the following categories of VAT rates are applicable:
In addition, some goods and services are exempted from the tax. Businesses that make exempt supplies are unable to recover all of the input tax that they incur, so the VAT paid to suppliers will be a ‘real’ cost.
It is also important to note the interaction between VAT and Customs duty. Customs duty is levied across the EU at the place where goods are imported into the community. It is levied in order to bring the cost of goods produced outside the EU up to the same level as those produced within it.
Once duty (and VAT) has been paid by the importer, the goods are in ‘free circulation’ and they can then be released for use in the home market. Unlike other indirect taxes, such as VAT, once duty has been paid it is not usually recoverable by the importer.
It therefore represents a bottom line cost to the importing business if it cannot be passed on in higher prices. It is therefore very important to ensure that the correct rate of duty is applied.
VAT is charged on the value of the importation, including any custom duty.
No, any legal or physical person who carries on a business or undertakes an artistic or professional activity independently from an employer, or who sets up a permanent establishment in Italy, must register for VAT, by filing a specific application form with the Italian tax authority. Further to the new VAT e-commerce package, entered into force from 1 July 2021, under certain conditions, simplifications are foreseen for business with a yearly turnover below €10,000.
The VAT registration procedure must be completed before commencing the activity (ie before performing any supply and/ or purchase of goods and/or services).
A penalty is normally imposed by Italian tax authority if a business fails to register at the correct time.
Yes, with the exception of distance selling rules.
In line with the EU VAT Law, pursuant to article 58 of Directive 2006/112/EC (amended by the Directive 2017/2455/EC), the Italian VAT rules determining the place of supply of telecommunications, broadcasting and electronic services (TBE) supplied to private consumers (B2C) changed from the Member State where the supplier belongs (ie where established) to the Member State of the consumer.
Moreover, the EU Council, through articles 369 bis and following of Directive 2006/112/EC, has adopted and extended the above stated simplification also to distance sales of goods as well as to any type of cross-border service supplied to final customers taking place in the EU.
The result of this is that local VAT is chargeable at the applicable rate in each of the Member States in which electronically supplied services are made (ie where the customer belongs). To ensure compliance with this, suppliers (Extra – EU as well as EU) have the choice to either:
A European Union (EU) taxpayer, without a permanent establishment in Italy, can register for VAT in the two following alternative ways:
A non European Union (EU) taxpayers, without a permanent establishment in Italy, can register for VAT via the appointment of an Italian resident as its VAT representative (as per art. 17, para 3 of the VAT Act) only.
However, taxable persons established in the Norway and United Kingdom could register in Italy through the direct VAT identification procedure (as per article 35-ter of the VAT Act) under the legal instruments governing mutual assistance in the field of indirect taxation (pursuant to the resolutions n. 44/E/2020 and 7/E/2021 of the Italian Tax Authorities).
A foreign business without a permanent establishment in Italy is generally required to register only if its Italian supplies are towards persons who are not themselves VAT-registered in Italy or are VAT registered but not established in Italy.
Foreign businesses making taxable supplies to Italian resident businesses are generally not requested to VAT register in Italy because, in such circumstances, the Italian purchaser of the goods or services is obliged to account for the VAT on the supplies received under the ‘reverse charge’ procedure. This is unless the VAT registration is requested for other transactions (ie intra-EU purchases of goods, intra-EU supplies of goods, exports).
All taxpayers are required to file:
Please note that in case the relevant deadline falls on a weekend or public holiday, the date for submitting the relative VAT fulfillment is the following working day.
The annual return permits the final settlement of the taxpayer’s VAT payable or receivable. It consists in disclosing the algebraic sum of all the transactions (both sales and purchases) carried out all through a solar year. It permits to establish the turnover and, therefore, whether to benefit from some simplifications for the following year. Finally it usually serves as the basis for the tax authorities’ assessments.
Moreover, all taxpayers (with some exceptions) are required to determine their VAT position before the tax authorities on either a monthly or a quarterly basis. This is done through preparing on their ledgers a VAT calculation as the difference between VAT on sales and deductible VAT on purchases, and to complying with the regular settlement obligation. Should the taxpayer be in a debt position, they are required to remit to the Treasury the payable VAT.
However, should a VAT credit result from the VAT calculation, the VAT receivable is carried forward and offset with VAT debts in the next periodical VAT calculations or, under certain conditions, asked for refund.
Taxpayers with a limited turnover (below €400,000 if they provide services or €700,000 if they supply goods) can opt for quarterly calculations provided that they increase the VAT amount to be remitted to the Treasury by 1% as interest.
The other taxpayers must determine their VAT obligations through regular computations to be effected on a monthly basis by the 16th day of the following month.
The main administrative penalties can be summarised as follows:
In cases where payments occur within 90 days after the deadline, the penalty is 15% of the amount paid with delay.
EC-lists (ECL) reporting
Forms INTRA-2bis and INTRA-2quater, concerning respectively intra-EU purchases of goods and purchases of generic services from entities resident in other EU member States, are now mandatory only for taxable persons required to submit Intrastat forms/EC lists on a monthly basis, whereas the obligation is no longer in place for taxable persons following a quarterly submission (without prejudice to the possibility of a quarterly submission on a voluntary basis).
The obligation to submit purchases Intrastat forms/EC lists must be complied with for statistic purposes, by taxable persons required to submit forms on a monthly basis:
Moreover, it is mandatory to submit the forms INTRA-1bis and INTRA-1quater, concerning respectively intra-EU sales of goods and sales of generic services to entities resident in other EU member States.
Yes. A range of penalties can be imposed where businesses do not comply with the VAT rules:
Criminal penalties are provided in a limited number of cases if the Italian tax authority proves that the behaviour of the taxpayer is fraudulent; there may be evasion of VAT liabilities or overstatement of VAT credits by, for example, the violation of accountancy rules, use of counterfeit documents and invoices, the hiding and the destruction of accountancy records.
Yes, it may be possible to reclaim the VAT incurred in certain circumstances.
Two schemes exist, one for businesses established in the EU and another for businesses established elsewhere.
The EU cross border refund scheme is available in all EU Member States and enables a business established in an EU country to recover VAT incurred in another Member State.
To be eligible to make a claim, the claimant must be a taxable person established in an EU Member State other than the one from which the claim is to be sought. In addition, the claimant:
The amount that is refundable is determined by the deduction rules that apply in the country making the refund. The claim is submitted electronically to the tax authority from whom the repayment is being sought.
The refund period must not cover more than one calendar year or less than three calendar months – unless it is covering the remainder of a calendar year. The claim has to be made by 30 September of the year following that in which the VAT was incurred.
Businesses established outside of the EU can, subject to certain conditions, also reclaim the VAT incurred on imports in Italy or purchases of goods and services pertaining to their activity.
The scheme is available to any person carrying on a business established in a third country ie outside the EU, provided that in the period of the claim:
The claim has to be made by 30 September of the year following that in which the VAT was incurred.
A VAT invoice, pursuant to Article 21, paragraph 2, Presidential Decree 633/1972, contains the following information:
The invoice should be issued also for the other types of transactions and it contains, in place of the amount of the tax, the following notes with the indication of the relevant community or national regulation:
A simplified VAT invoice can be issued where a business makes retail sales and makes a sale of goods or services for an overall amount not exceeding €100.
As a general note, starting from 1 January 2019, the issuance of electronic invoices is mandatory for transactions between Italian residents (both B2B, B2C and B2G) via the Intercharge Systems (so called SdI). In particular, electronic invoices are issued transmitting the same in XML format to the so called “Sistema di Interscambio” (“Interchange System”, hereinafter “SdI”) managed by the Italian Tax Authorities, who, on its turn, delivers the same to the customer.
For further information on indirect tax in Italy please contact:
Simonetta La Grutta
T+39 02 783351
E simonetta.lagrutta@bgt.it.gt.com
