Italian VAT
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Italian VAT Guide for Businesses
In Italy, Value Added Tax (VAT) known as Imposta sul valore aggiunto (IVA) was first introduced on the 1st of January, 1973. However, the provisions of IVA have been affected by the European Legislation several times, starting from the year of 1967.
The Italian legislation, the VAT Act, is made up of seven sections, comprising ninety-four articles and three schedules. IVA is a consumption tax which is administered by the Italian Ministry of Finance.
What is the Standard VAT (IVA) Rate
in Italy?22%
Number of returns per year: 13
In Italy, the reduced and super-reduced VAT rates are applied on a number of items allowed by the VAT Directive. The reduced rate of 10% applies on hotel accommodations, restaurant and catering services, admission on cultural services and all phases of waste management, storage and temporary storage, as well as the operations of plant construction.
The super-reduced rate of 4% applies on listed food, drinks and agricultural products, for instance. Specific supplies of goods and services expressly listed in Presidential Decree n. 633/72 are exempt from VAT, such as education and insurance services.
Requirement to Register for VAT
It is necessary to have a VAT number – an 11-digit code – in order to start a business or a professional activity relevant for VAT purpose in Italy. VAT registration is obligatory for anyone involved in business, agricultural activity or an artistic or professional activity on a regular basis.
VAT registration is due prior to the provision of any supplies. There is a distance sales VAT registration threshold of €35,000 per annum in case of the supplies are the sale of goods via internet.
Additionally, for non-resident traders, there is no VAT registration threshold in Italy.
To obtain a VAT ID number in Italy, you need to complete and submit a “Declaration of commencement, change of data or cessation of activity” to the issuing body, the Italian Revenue Agency (Agenzia delle Entrate). In the Declaration, it is required to provide the identification details, the code of the type of activity to be pursued, and the place of business.
VAT liability applies to the following transactions:
- Supply of goods and services carried out in Italy in line with business transactions or professional activity (carried out by a taxable person: entrepreneurs, professionals, or artists)
- Importations effected by anyone
- Intra-Community acquisitions (in certain cases)
The obligation of complying with the Italian legislation means the requirement to register for Italian VAT, complete Italian VAT returns and further declarations.
VAT Filing Return Frequency
and Deadlines
The periodic VAT returns and payments shall be calculated and paid every month or, in some cases, every quarter for those who own VAT numbers.
By the 16th day of each month, taxpayers must calculate the difference between their output VAT and input VAT in the previous months.
The possibility to choose the submission of the quarterly VAT return is open for the taxpayers with an annual turnover of less than €400 000 for supplies of services or €700 000 for other activities or belonging to certain categories. Those entities shall file the VAT return and pay the VAT due for the first three quarters of a calendar year by the 16th day of the second month following each quarter; the VAT return for the fourth and last quarter must be submitted by 16 March of the following year.
Additionally, by December 27th of each year, all taxpayers must pay the advance VAT payment. They shall pay in advance on their VAT bill for the month of December if they file monthly VAT returns or on their VAT bill for the fourth quarter if they file quarterly VAT returns.
As a further requirement, the taxpayers subject to VAT must submit a report on the periodic VAT returns which must be submitted quarterly. This form must be sent online. By the last day of the second month following each quarter.
Additionally, each year the taxpayers who carry out a business, art, or profession must submit an annual VAT return covering all the transactions carried out in the previous year. The annual VAT return must be paid by March 16th at the latest and may be paid in equal instalments (the first one must be paid by 16 March at the latest, subsequent instalments must be paid by the 16th day of each month and the last instalment may not be paid later than 16 November).
Agents and Fiscal Representatives
In Italy, the fiscal representative supports non-EU business in tax-related matters. Foreign companies have an opportunity to register in Italy for VAT purposes without creating a branch, thus they appoint a fiscal representative or tax agent that is responsible for all reporting obligations.
However, the majority of EU companies use a local VAT agent.
Submission
To pay the periodic VAT returns and payments the F24 form must be filled in and submitted online. The advance VAT payments shall be paid online, using Form F24 as well.
To file the annual VAT returns, the online form found on the website of the Revenue Agency must be filed.
Invoicing Requirements
Whenever the business supplies standard-rated or reduced-rated goods or services it must issue a VAT invoice. However, there is no need to issue a VAT invoice if the customer is not VAT registered, for zero-rated supplies, if the customer operates self-billing arrangements or for gift of goods on which VAT is due.
Italian VAT invoices shall be issued on the date of the supply for goods, and up to 15 days following the month end of any supply.
VAT Invoices are required to contain the following details:
- Issue date
- A unique invoice number
- VAT number of the supplier
- Fiscal representative details of the supplier if appropriate
- Full address of the supplier and customer
- Full description of the goods or services provided
- Details of quantities of goods, if applicable
- A date of the supply if different from the invoice date
- The net, taxable value of the supply
- The VAT rate(s) applied, and the amount of VAT broken out by rate
- A reference to the applicable law where VAT is not charged
- The gross, total amount of the invoice
In Italy, the use of the simplified invoices is allowed in accordance with certain circumstances. From the 1st of January 2019, the real-time electronic sales invoice issuance and reporting is mandatory in Italy. The invoices must be issued and submitted to the e-invoicing platform of the Revenue Agency, SDI. Additionally, there is an extension of the e-invoicing obligation to taxable persons established in Italy.
E-invoices shall be issued for:
- All supplies of goods and services
- VAT adjustments to taxable persons subject to VAT
Exclusions apply to transactions not subject to VAT (certified by means of receipts and/or tax receipts).
From the 1st of January 2019, e-invoicing is mandatory for B2B and B2C among Italian operators with an annual turnover greater than €65,000.
From the 1st of January 2022, the scope of e-invoicing is extended to cross-border transactions carried out with foreign business partners.
From 1 July 2022, e-invoicing is required for a new group of taxpayers. These are Amateur sports associations and third sector entities with revenue up to EUR 65,000 and Flat-rate tax regime taxpayers (regime forfettario).
From 2024, enterprises with annual fees or annual revenues up to EUR 25,000 will need to clear and issue e-invoices with the SDI.
E-invoicing in Italy
Italy can be considered as an innovator in electronic invoicing in Europe. In Italy for the ministries, tax agencies, and national security agencies, the use of e-invoices in public procurement, and regarding to the B2G has been mandatory since the month of June 2014. Then, one year later it became obligatory for all public entities.
The Italian VAT compliance rules and requirements have continuously been exacting and the system of them is a quite complete one. As of January 1st, 2017, “Spesometro” was the first report of the transactions which was a listing of all sales and purchases invoices that shall be filed as an XML file by the taxpayers to the Italian Tax Authorities.
The use of e-invoicing has been mandatory for the B2B invoicing since the January 1st, 2019. Additionally, in 2019, the system called in Italian as “Sistema di Interscambio” (referred to as SdI) was introduced, as kind of real-time reporting obligation (for B2B and B2C invoices). Italy was the first country in Europe which has adopted an electronic invoice clearance model (SdI).
Clearance model means that the issued invoices are needed to be pre-approved by the competent Tax Authorities and after this action the invoices can be sent to the customers. The SdI is managed by the Revenue Agency with technology and operational support provided by Sogei which is an IT provider of the Italian Ministry of Economy and Finance. The system is absolutely compatible with the European standard.
By the adoption of the SdI, the “Spesometro” obligation has been eliminated. Since the SdI at first didn’t cover the foreign invoices, the “Esterometro” report was launched. It was like Spesometro with the difference that Esterometro exclusively dealt with foreign invoices. Thus, Esterometro takes the invoices which are not assigned to SdI live reporting.
The VAT-registered businesses with Italian residence or established in Italy shall complete a quarterly listing Esterometro – there is a monthly obligation for the ones prior to 2020 – of all cross-border invoices (both sales and purchases). The non-resident Italian VAT-registered businesses are not obliged to comply with the SdI.
At the end in Italy it is intended to eliminate the Esterometro and increase transmission via SdI for all invoices. The obligation of Esterometro is going to be eliminated in the month of January 2022, thus the foreign transactions are going to be reported in SdI. In this way it is possible to unify the transmissions with the Italian Agenzia delle Entrate. Consequently, from the 1st of January 2022, the taxpayers shall submit all their invoices to the Agenzia delle Entrate through SdI.
In addition, Fattura 1.6.1. was introduced in the year of 2021, which defines the XML structure and the content of the invoices transmitted through SdI.
Those companies that wish to use the Esterometro shall wait for the official governmental technical specifications to be published before the adaptation. However, companies using a technology partner to send their invoices will not have a problem with this adaptation.
Additionally, the deadlines for transmitting foreign transactions via SdI is as follows:
- The taxpayers will need to submit the (sales) e-invoices issued to foreign business customers within 12 days from the date of the transaction to the Tax Agency.
- Input e-invoices regarding to purchases from foreign business suppliers shall be submitted via SdI by the 15th day of the month following the month after the receipt of a particular purchase invoice.
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