Italy set to implement guarantee system for non-EU businesses

On 15 April 2025, Italy announced new regulations for non-EU/EEA businesses holding a VAT registration number. 

Under the current EU VAT registration process, Member States will issue both a local tax identification number for national use, and an intra-EU VAT registration number for intra-EU trading purposes.   The intra-EU VAT registration number is validated on the EU VAT Information Exchange System (VIES).

Under Article 35, Paragraph 7-quater of Presidential Decree No. 633/1972, non-EU businesses that already hold a valid VAT registration number must provide a financial guarantee of EUR 50,000 or risk being delisted from EU VIES.  Businesses that are delisted from EU VIES will no longer be able to use their Italian VAT registration number for intra-EU trading purposes. 

The financial guarantee is in addition to existing fiscal representation requirements which required non-EU businesses to appoint a fiscal representative before applying for VAT.

The deadline for providing the financial guarantee is 13 June 2025.

The changes will mean that affected businesses seeking to apply for a new VAT registration will now also need to comply with the guarantee requirements.

Businesses already established within the EU (i.e. in any other Member State) remain unaffected.

Estonia VAT rate changes

Estonia has proposed an amendment to permanently increase its standard rate of VAT.

A rate increase from 22% to 24% was previously announced under the Security Tax Act as a temporary increase that would be effective from July 2025 and remain in place until 31 December 2028, with the intention of reverting back to the rate of 22% on 1 January 2029. 

The Security Tax Act is designed to fund increases in national security spending in response to the ongoing military conflict between Russia and Ukraine.

However, the new amendment would make this increase permanent, pending approval by the Estonian parliament.

Netherlands added to Amazon’s Pan-EU programme

The Netherlands has been added as a mandatory marketplace for enrolment on Amazon’s Pan-European (Pan-EU) programme.

Under the Pan-EU programme, Amazon sellers can target multiple European markets whilst only sending their inventory to one Amazon warehouse.  Amazon will automatically distribute stock across its network of fulfilment centres across the EU, based on customer demand.  Sellers benefit from much lower local delivery rates, rather than the European Fulfilment Network rates. 

In order to take advantage of the programme, sellers were previously required to list their products in Germany, France, Italy and Spain (regardless of where they stored inventory).

On 25 June 2025, the Netherlands was added as a fifth mandatory marketplace, which means that sellers using the Pan-EU programme must now list their products across all five marketplaces.

EU court clarifies VAT penalty measures

The European Court of Justice (ECJ) has issued a judgment on the proportionality of penalty measures imposed by Member States in relation to violations of VAT regulations.

The case (C‑164/24) involves Cityland EOOD, a Bulgarian company which had its VAT registration revoked by the national tax authority following allegations of non-payment of its VAT liabilities for multiple periods between 2013 and 2018. 

Cityland EOOD had claimed that the unpaid VAT liability was due to payment issues with one of its clients for which it was already engaged in a separate legal dispute.  The company also asserted that it had already paid the outstanding VAT, with only the remaining interest still due.

Nonetheless, the tax authority proceeded with deregistration, after which Cityland EOOD took its case to a national court.  The national court (Bulgarian Administrative Court) referred the case to the ECJ for further clarification regarding whether the existing Bulgarian tax regulations which permitted automatic revocation (and under which Cityland EOOD had its VAT registration revoked) was compatible with the EU VAT Directive.

The ECJ held that automatic revocation of a VAT registration was a disproportionate penalty and had no basis under the EU VAT Directive. 

As the impact of automatic revocation is severe (e.g. significantly hampering the business from trading), tax authorities must conduct a proper analysis and investigation into the individual circumstances of each case, instead of applying a blanket approach.  The analysis must also take into account the risk of fraud and any other extenuating circumstances.

The case will be passed back to the national court for further adjudication.