Scope and rates
Value-added tax (VAT) is due on any supply of goods or services made in Italy, where it is a taxable supply made by a taxable person in the course or furtherance of a business carried on by said person. Supply includes all forms of supply.
Supply does not include anything done otherwise than for a consideration. However, certain actions carried out for no consideration are deemed to be supplies, for example (and by no means exhaustive), conditional sales, renting contracts with a binding clause for the transfer of ownership, private use of business assets (or more generally for purposes other than those of the business), disposal free-of-charge, supplies of services (where the value exceeds the threshold of 25.82 Euros (EUR)) for private use or for free.
Furthermore, VAT is due on any importation.
The standard rate of VAT is 21 percent as of 17 September 2011. This rate was previously 20 percent.
VAT rate changes
The VAT rates were due to increase in October 2012. However, because of recently enacted legislation, the VAT rates will not be increased until July 2013, only if certain budgetary measures are not satisfied (to be determined 30 June 2013).
Under the legislation (enacted 7 August 2012), the VAT rates could increase according to the following schedule:
- from 1 July 2013 through 31 December 2013: the “reduced” VAT rate of 10 percent will increase to 12 percent and the “standard” VAT rate of 21 percent will increase to 23 percent
- beginning 1 January 2014: the “reduced” VAT rate of 12 percent will be lowered to 11 percent and the “standard” VAT rate of 23 percent will be lowered to 22 percent.
Yes. There is a reduced rate of 10 percent for certain goods and services, including:
- certain type of food
- domestic fuel and power
- public transport
- certain pharmaceutical products
- hotel accommodation
- services of writers and composers
- some TV and radio broadcasting
- social housing
- power deriving from renewable sources.
In addition, there is a reduced rate of four percent for certain goods and services, including:
- basic foodstuff
- books and newspapers
- main residence
- certain pharmaceutical products
- some television and radio broadcasting
- medical equipment and aids for disabled people.
The list of zero rate supplies includes:
- exports and European Union (EU) supplies
- supply, modification, repair, maintenance, chartering, and hiring of sea-going vessels, and aircrafts used for international traffic
- international transport services
- services directly connected with exports or imports
- works upon goods to be delivered outside of Italy.
The list of exemptions includes:
- transactions relative to the collection of taxes
- lotteries, betting, and other games of chance
- certain transactions relating to civil dwellings and property
- postal services
- cultural services
- certain real estate transactions.
Note: it is not possible to recover VAT incurred in making exempt supplies.
Registration tax, which is alternative to VAT (one excludes the other), customs duties.
If a business makes taxable supplies in Italy it will be required to register and account for Italian VAT. No VAT registration threshold exists in Italy.
The registration rules that apply to Italian entities also apply to non-Italian entities which are making taxable supplies in Italy.
If a business is not registered for VAT in Italy but sells and delivers goods from another EU Member State to customers in Italy who are not VAT registered (distance sales), where the value of those sales exceeds a threshold of EUR35,000, it is required to register and account for VAT in Italy (either via direct identification, where possible, or through the appointment of a VAT representative).
Access the form and the instructions for direct identification on the Italian tax authority’s website.
The penalty for failing to register for VAT on time is between EUR516 to EUR2,066.
Certain simplifications schemes may apply as follows:
If a business is an intermediate supplier to a Italian buyer of goods which purchased from a business in a EU Member State other than its own and are delivered from there to Italy, VAT due can be accounted for by the Italian customer (see section Invoices).
Where a company stores stock at the customer’s premises under its control the customer accounts for VAT on the supply as an acquisition.
Supply and Install
If a business supplies goods and installs or assembles them in Italy, the customer can account for any VAT due, in effect, as an acquisition. The supplier must be registered for VAT in another EU Member State, and not otherwise required to be registered in Italy. In addition, the goods must be shipped from within the EU (see section International Supplies of Goods and Services).
Domestic Reverse Charge
See for more detail the section International Supplies of Goods and Services.
In general, the obligation to account for the VAT due can be shifted to the customer (if the supplier is a non-established entity) provided that the later is resident in Italy and is registered for Italian VAT, and that the supplier does not have an Italian fixed establishment intervening in the supply. Bear in mind that these provisions are subject to particular requirements.
An overseas business can choose between the appointment of a fiscal representative or direct identification.
Direct identification is always available for entities established in other EU countries; for non-EU persons, direct identification is possible only on a mutual basis (if there are agreements that allow Italian subjects to directly identify) and if the tax payer is a VAT person in its country.
The appointment of a fiscal representative (or the choice of directly register) is mandatory when the overseas entity carries on sales of goods or supplies of services (whose place of supply is Italy) directly to private consumers (non-VAT persons) – exceeding the threshold for the distance sales regime, and to business customers not established in Italy.
Yes. However, Italian VAT grouping differs from what is ordinarily intended as a VAT group in other EU Countries. In Italy, companies belonging to a group may opt for a VAT grouping in that they are able to offset the VAT credits and debts of each group company. Thus, repayment and payment positions of the companies being part of the group may be pooled together even if each group member retains its own VAT number and intra-group transactions are not disregarded.
As from 1 January 2008, VAT repayment positions of new VAT group members accrued before the person enters the group cannot be used to shelter VAT net payment positions of other members.
Yes, the opportunity is also given to companies either resident in a EU Member State, other than from Italy, registered for VAT in Italy or with a permanent establishment in Italy, to pool their Italian VAT position with the one of the other companies.
All registered businesses are required to submit VAT returns on an annual basis. The VAT due is paid on a periodical basis (monthly or quarterly) and repayments are made on an annual basis (quarterly repayment claims are admitted in certain cases). An additional annual declaration is required for certain tax payers.
Failure to file VAT returns and settle any outstanding payments on time may result in penalties. Penalties are up to 240 percent of the outstanding amount of VAT.
According to Italian VAT legislation (art. 13, par. 4, DPR n. 633/72) the taxable base is determined using the official exchange rate (published by the Bank of Italy on the day when the transaction is effected or, if not available, on the preceding day closest to the transaction date.
For intra-Community acquisitions the invoice received must be integrated and converted using the exchange rate on the day on which the transaction is effected (if indicated on the invoice) or, alternatively, the invoice date.
The Italian legislation does not allow the possibility to apply a different exchange rate.
Yes, if the amount of VAT is not lower than EUR50.
A business established in another EU Member State should make a claim under the VAT “Refund” Directive 2008/9. A non-EU business should recover the VAT under the 13th Directive (the refund is conditioned upon the granting by non-EU States of comparable advantages regarding turnover taxes).
Under both of these provisions there are strict conditions and time limits for making claims. The claim period covers the calendar year and claims must be submitted by the 30 September of the following year. The claim period can be shorter than a calendar year (quarter) if the VAT amount recoverable in this period is not lower than EUR400.
Access the claim forms on the Italian tax authority’s website.
Italy applies reciprocity rules for reclaims submitted by companies established in non-EU countries, in compliance with art 38-ter of the Italian VAT Act (which enacted in Italy the 13th Directive refund procedure).
Currently, the only non-EU countries which have entered reciprocity agreements with Italy (and whose companies can file 13th Directive refund claims to the Italian tax authorities) are Switzerland, Norway and Israel.
Yes. There are certain items that businesses cannot recover VAT on. For example:
- exempt supplies: where VAT relates to both taxable and exempt supplies, an apportionment is needed
- non-business (including private) activities: where VAT relates to both business and non-business activities, an apportionment is required
- motor cars (excluding commercial vehicles): the VAT recovery rate is limited to 40 percent for VAT incurred on expenditures on cars not wholly used for business purposes. The limitation covers all the expenditures incurred on cars: the purchase of the vehicle (including contracts of assembly and the like), intra-community acquisition, importation, leasing or hire, modification, repair or maintenance, lubricants, fuel, and similar.
The restriction does not apply where the vehicle falls into any of the following categories:
- the vehicle forms part of the taxable person’s stock in trade in the exercise of his/her activity
- the vehicle is used as a taxi
- the vehicle is used for instruction by a driving school
- the vehicle is used for hire or leasing and
- the vehicle is used by sales representatives.
- Business entertainment: VAT is generally not recoverable on business entertainment costs, as defined for Corporate Income Tax purposes. A recently enacted provision (Ministerial Decree 19 November 2008) has stated that certain kind of expenses cannot be considered entertainment costs; it follows that the input VAT relating to said expenses has become fully recoverable (for instance, according to said provision, the travel, meals, and accommodation expenses incurred to host even potential clients during exhibitions where the goods and services produced by the enterprise are displayed should not be considered entertainment expenses).
- Tour Operators’ Margin Scheme. The VAT on goods and services which fall under this scheme cannot be reclaimed.
- Goods sold under one of the margin schemes for second hand goods. There are a number of schemes which provide for VAT to be accounted for on the goods’ sales margin, but do not allow VAT recovery on the purchase of those goods. For entertainment activities such as cinemas, theatres and sports, the operators with a turnover that does not exceed EUR25,822 and those which set up traveling shows (their turnover is of no importance), the VAT is applied on a taxable amount equivalent to 50 percent of the total of receipts collected, but such operators cannot deduct the VAT on their purchases.
International supplies of goods and services
If a company sells goods to a customer who is registered for VAT in another EU Member State and the sale involves the removal of those goods from Italy (either by the supplier or the customer) to that Member State, then the company does not need to charge VAT and may zero rate the supply as an intra-EU dispatch. It must obtain the customer's VAT number and quote it on the invoice. It should also obtain evidence of the goods' removal from Italy.
If a company sells goods to a customer who is not registered for VAT in another EU Member State, it will have to charge Italian VAT. If the sales exceed a certain threshold for that Member State it may have to register in the Member State under what is known as the Distance Selling Scheme.
If a company exports goods to a customer (business or private) outside of the EU, then it does not need to charge VAT; but, as for intra-Community sales, it should make sure that in all cases it keeps proof of dispatch/delivery to support the zero rating.
If a company supplies services to a business customer established in another EU Member State or outside of the EU, then the service is out of the scope of Italian VAT provided that the service does not fall within one of the following categories:
- services connected with immovable property, taxed in Italy if the property is located in Italy
- passenger transport, taxed in Italy proportionally to the distance covered in Italy
- restaurant and catering services, taxed in Italy if physically carried out in Italy
- restaurant and catering services supplied on ship, airplanes or trains during an intra-Community passenger transport, taxed in Italy if the point of departure is in Italy
- short-term hire of means of transport, taxed in Italy if the means of transport are put at disposal of customers in Italy, provided they are used in the EC territory, or, if the means of transport are put at disposal of customers outside the EU territory, if they are used within the Italian territory
- admission and services ancillary to admission to cultural, artistic, sporting, educational, entertainment events, including fairs and exhibitions, are taxed in Italy if the event takes place in Italy.
Services to non-business customers are taxed in Italy if the supplier is established in Italy, Please note, however, that this general rule is subject to many exceptions that must be analyzed on a case-by-case basis.
A resident company, which makes zero rate supplies (exports, EU supplies, international services, etc.) for more than 10 percent of its total turnover, acquires the status of habitual exporter.
A habitual exporter is entitled to purchase VAT-free services and goods (exceptions apply for immovable property and for goods and services on which it cannot recover VAT) up to the amount of the zero rate supplies made in the prior calendar year or during the preceding 12 months. Documental obligations and procedures apply (in order to benefit from VAT-free treatment, the habitual exporter is required to submit its supplier a so-called declaration of intent, filling in a specific form).
The 2005 Finance Bill introduced the obligation for the supplier of a habitual exporter to electronically submit to the Italian authorities a return, according to an official form, reporting the information contained in the aforesaid declaration of intent received. The deadline for submission is the 16th day of the month following the one in which the zero rated transaction was carried out thanks to the declaration of intent.
When goods are imported into Italy from outside the EU, import VAT and customs duty may be due. This has to be paid or secured before the goods will be released from customs' control.
If a company buys in certain services from supplier not established in Italy, it will be required to apply the reverse charge. This is intended to take away any VAT advantage of buying those services from outside Italy.
Under the reverse charge the recipient is required to account for a notional amount of VAT as output tax on its VAT return covering the period in which the payment was made and he recovers this VAT as input tax on the same return. If the company is able to recover all of its VAT, the reverse charge has no cost effect and is a VAT compliance matter only. However, if the company is partly exempt there is likely to be a VAT cost depending on the level of recovery allowed under the partial exemption method.
For services rendered by EU supplier to a B2B Italian customer, the customer – as from 17 March 2012 – should integrate the invoice issued by the EU supplier with an “integration section” as for the intra-Community acquisition of goods; whilst in case of services rendered by a non-EU supplier to a B2B Italian customer, the customer should issue a self-invoice.
The reverse charge applies to all services supplied to Italian business customers by non-established suppliers, with the exceptions previously listed.
Yes, unless the transaction is subject to the reverse charge mechanism in the hands of the customer.
A tax invoice should contain the following data:
- date of issue
- a sequential invoice number (with reference to the calendar year). If the invoice adjusts an earlier invoice (such as, a credit note), unambiguous reference should be made to the original invoice
- supplier VAT number
- customer VAT number (always on intra EU supplies when the customer is a taxable person). If the VAT on a transaction will be accounted for by the customer and not the supplier such as the reverse charge mechanism applies, then an invoice is required and the invoice requires a written explanation for the basis of the transaction or a reference to the respective paragraph in the 6th EC VAT Directive or local country VAT Act
- supplier name and address
- customer name and address
- address of the permanent establishment (if any)
- the quantity and nature of the goods/services supplied
- the taxable amount per rate
- unit price (exclusive of any VAT)
- the market value of the goods sold as a cash discount or allowance when this is provided for by the contract as well as the market value of other goods given as discount or allowance when this is not provided for by the contract
- the VAT rate applicable
- the amount of VAT payable in Euros
- legal basis for exemption (if applicable)
- new means of transport/margin schemes (if applicable)
- VAT number, name and address of fiscal representative (if any)
- the Italian tax authorities could require the translation in Italian if the invoice is issued in a foreign language
- with reference to certain exempt supplies of services (such as, bank or insurance services) or with reference to certain services supplied by specific persons (retailers), the Italian VAT law provides to release the supplier from the obligation to issue an invoice, if the supplier is not requested by the purchaser to issue the invoice (purchasers that acquire good for purposes of their business must request to the retailers to issue the invoice). In addition, please note that the taxable person who performs exempt supplies falling under article 10 can request the Italian tax authorities to be released from the issuing of the invoice with the exclusion of the supply of gold, medical services, and hospital services
- the date and the number of the DDT (bill of delivery), if according to the law a delayed invoice procedure is in place
- the indication of the issuer of the invoice in case of self-billing
- the indication that the issuer of the invoice has opted for the VAT cash accounting in accordance with article 32-bis, par. 3 DL 83/2012 (enacting par. 16 of Directive 2010/45)
- for intra-EU supplies of new means of transport, which are already enrolled with public relevant transportation registers, the date of the first registration on the public register and the amount of kilometers covered, or the amount of hours of navigation or flight.
The aforementioned indications are only valid up to 31 December 2012, as some of them will be changed following the implementation of the Invoicing Directive as from 1 January 2013.
Yes, provided that there is an agreement with the customer before doing so and Electronic Data Interchange (EDI) or an advanced digital signature is used to guarantee the authenticity of the origin of the invoice and the integrity of the content. Certain retailers ordinarily required to issue cash till receipts to private customers who do not require an invoice, can replace such obligation by a daily electronic transmission of relevant data to authorities. The detailed transmission procedure is described in the Ministerial Guidelines of 8 July 2005.
The aforementioned indications are only valid up to 31 December 2012, as they will be changed following the implementation of the Invoicing Directive as from 1 January 2013.
Yes. However, the supplier remains responsible for the issue of the invoice. Furthermore, if the issuer is resident in a black listed State, the supplier (who must have been in business for at least 5 years and has not been assessed for VAT by tax authorities in the preceding 5 years) must communicate beforehand the arrangement to the tax authority.
The relevant amounts shown in the invoice can be shown in a foreign currency but the output VAT has to be shown in Euros.
Transfers of business
Yes. If a company sells a business as a going concern then VAT is not due. The transaction is subject to the registry tax. There are certain conditions to satisfy, for example the purchaser should intend to use the assets to carry on the same kind of business carried out by the seller.
Options to tax
The Italian VAT law provides for a general regime of exemption for the real estate transactions, However, under certain conditions, there is the possibility to opt – in the transfer deed – for the to apply VAT on the transaction. In the same way, there is a possibility to opt for the VAT taxation of the lease of the immovable property, on a unit by unit basis, at the time of the conclusion of the leasing agreement. The reverse charge procedure applies to the transfer of the immovable property where the supplier has opted for VAT taxation. The reverse charge applies for supplies between business persons, whose tax point occurs after 1 October 2007.
Head office and branch transactions
From a VAT perspective, in case of sale of goods, the local branch and the foreign head office are treated as separate entities, therefore transactions are not disregarded. As regards services, instead, in the light of the decision on the FCE case (C-210/04), the Italian tax authorities clarified that services rendered between a head office and its branch, are disregarded for VAT purposes (under the condition – pointed out by the ECJ judges – that the branch lacks of decisional autonomy).
Businesses may only claim VAT relief for bad debts if it is due to customers’ bankruptcy or insolvency.
There is not a general anti-avoidance rule for VAT purposes; there are, however, some specific anti-avoidance provisions.
Based on the positions of the Italian Supreme Court (cases No 14428/2005 and 12353/2005), should the tax payer perform obvious uneconomical transactions in a way that VAT is not due, the tax authorities would be allowed to reclassify the transactions and claim for application of VAT. The taxpayer should always be in the position to prove the economic value of his/her acts, which otherwise appear to be carried out with the only purpose of obtaining an undue tax advantage.
With this respect, the Italian tax authorities have clarified (in Circular Letter n 67 of 13 December 2007) that the principles set forth in the Halifax ECJ decision should also apply for Italian VAT purposes.
An anti-carousel fraud rule (in force as of 1 January 2006) has been introduced in Italy (Art. 60 bis of the Italian VAT law) providing a joint liability of the purchaser for the VAT not paid by the seller. This rule only applies when the price is lower than the relevant market value. This anti-fraud rule only applies to a limited series of goods: cars, motorcycles, mobile phones, computers, live stocks, and fresh meat.
The 2008 Financial Bill introduced a specific anti-avoidance provision according to which the fair market value becomes the taxable basis in certain transactions between related parties which are partially exempt (implementing article 80 of Directive 2006/112).
Law Decree n. 40/2010 (converted into final Law n. 73/2010), and completed with Ministerial Decree 30 March 2010, introduced a new reporting requirement: Italian VAT persons (including non-established persons, registered in Italy for VAT purposes either with a fiscal representative or through a direct VAT identification) must report electronically (on a monthly or quarterly basis, depending on the volumes of transactions carried out)goods and services supplied to, and goods and services acquired from, B2B customers whose legal seat, residence or domicile is located in one of the countries included in the following “black list”. Imports and exports should also be reported. The reporting deadline is the end of the month following the relevant period. Transactions lower than EURO500 should not be reported.
Black Listed Countries
- Alderney (Channel Island)
- Costa Rica
- New Caledonia
- United Arab Emirates
- French Polynesia
- Porto Rico
- Saint Kitts and Nevis
- Solomon Islands
- Saint Lucia
- Saint Vincent and Grenadine
- Guernsey (Channel Island))
- San Marino
- Herm (Channel Island))
- Saint Helena
- Hong Kong
- Sark (Channel Island)
- Isle of Man
- Cayman Island
- Cook Island
- Marshall Island
- British Virgin Islands
- The Turks and Caicos Islands
Communication of sale/purchase of goods/services – Spesometro
Italian “VAT registered” persons are required to report, to the Italian tax authorities, all the transactions (both supplies and acquisitions of goods and services) within the scope of Italian VAT, except those transactions with respect to which issuing a VAT invoice is not mandatory that are lower than EUR3,600 inclusive of VAT.
The communication must be filed (only by electronic means) on an annual basis; the deadline is 30 April of the year after the relevant period.
The main information that should be included in the communication, for each transaction, is the following:
- relevant year
- VAT number or, lacking this, the fiscal code of the supplier and the buyer
- for non-resident persons (without a fiscal code), the identification data (e.g. full name and address, date and place of birth for individual persons and address of the legal seat for entities)
- the consideration, the VAT amount or the reference to the legal provision supporting the applicable exemptions or zero rated regimes or, for transactions with respect to which issuing a VAT invoice is not mandatory, the price amount, VAT included.
The relevant transactions should be reported on the basis of the registration date in the VAT ledgers or, lacking this, according to the tax point as specified by article 6 of DPR 633/73.
The following transactions are excluded from the communication:
- transactions with black listed economic operators
- transactions reported to the Tax Register (i.e. insurance contract, supplies of electrical energy, supplies of mobile services).
The VAT penalty regime can be categorized on the basis of the type of the violation committed by the taxpayer.
In cases in which the law provides penalties ranging from a minimum to a maximum amount, the effective amount of the penalty is settled by tax authorities at the time of an assessment.
When determining the amount, tax authorities consider the severity of the violation, taking into account the behavior and the social and economic situation of the taxpayer.
Penalties may be increased by 50 percent if the taxpayer committed similar violations, already assessed, in the preceding 3 years.
In case of an assessment, each violation committed by the taxpayer triggers in principle the relevant penalty. However, the Italian legislation provides some favorable mechanisms to compute the penalties in case of violations of the same kind (that is, in breach of the same provisions of law) that are committed more than once in a tax year or in different years.
In addition to pecuniary penalties, there are also ancillary penalties such as the suspension of the trading license.
In general, tax audits occur every 4 years if turnover is between EUR5 to 100 million, or every 2 years if turnover is higher than EUR100 million. In practice, however, tax audits could take place more frequently, i.e. at shorter time intervals, depending on the local offices internal policies and budgetary targets.
There is no e-audit but automatic checks between the tax declarations filed by the taxpayers and the VAT payments resulting from the Italian Tax Authorities’ database. If there is a discrepancy between the declaration and the payment amounts (i.e. an underpayment of VAT), a claim will be raised.
Advance rulings and decisions from the tax authority
A formal ruling must be filed in advance (i.e. before the claimant carries out the operations to which the ruling refers) and the ruling process takes around 6 months (tax authorities must respond within 120 days from the filing of the application and the preparation of the ruling could take – on average – from 1 to 2 months).
Only those rulings that, in the tax authorities’ opinion, address matters of general and relevant interest as publicly available.
No, although Italy has taken some of the options granted by the Directive (e.g. compulsory reverse-charge for domestic supplies of goods and services by non-established suppliers to Italian VAT customers; VAT cash accounting; compulsory reverse-charge for domestic supplies of particular items such as mobile phones, etc).
Yes, a reduced VAT rate (currently 10 percent) and super-reduced VAT rate (currently 4 percent).