What does this guide contain?
The guide provides you with practical VAT information for Italy:
- Your VAT registration in Italy
- Your VAT obligations TVA in Italy
- The invoicing rules in Italy
- A VAT credit refund in Italy
VAT REGISTRATION IN ITALY
When do you have to register for VAT?
It is mandatory for your company to apply for VAT registration with the Italian tax authorities before starting your activities. Financial penalties may apply if the application for registration is submitted late.
What documents do I need to provide when I register?
If your company wishes to register for VAT in Italy, it is essential to contact the Italian tax authorities (Agenzia delle Entrate). There is no need to contact the tax authorities in your country of establishment.
In particular, your company will need to submit the following documents:
- The VAT registration form(s) completed in the language of the country
- A copy of the articles of association
- An extract from the trade register
- A certificate of VAT liability
- Power of attorney (if using a fiscal agent)
- Proof of activity on the territory of the country concerned: a contract, an order form, etc.
All documents should be sent at the following address: Agenzia delle Entrate - Centro operativo di Pescara - via Rio Sparto 21 - 65100 Pescara
The Italian tax authorities may require some of these documents to be translated into Italian.
How long does it take to get a VAT number?
If your file is complete, it generally takes one month to obtain the VAT number.
Is a fiscal representative necessary?
In principle, non-European companies cannot register for VAT in Italy themselves. They must do so through a VAT representative. This is a local company that will represent you towards the local VAT authorities. He is responsible for meeting all your VAT obligations, including those of which he has no knowledge. For this reason, the VAT representative may require a deposit (e.g. a bank guarantee) from you before accepting the representation assignment.
European companies are not obliged to appoint a VAT representative. However, to facilitate their relations with the local tax authorities, they may appoint a proxyholder (agent) to carry out the tax formalities on their behalf. In this case, it is not necessary to issue a bank guarantee. The company remains solely responsible for paying its VAT debts. This option is also applicable to companies established in a third country (ex. UK) with which reciprocal agreements are in place.
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VAT OBLIGATIONS IN ITALY
Is it necessary to keep VAT accounting ledgers?
Your company must keep ledgers sufficiently detailed to enable the application of VAT and its control by the Italian tax authorities.
When do you have to file a VAT return?
Your company is required to calculate and pay VAT due (“Comunicazione dei dati delle fatture emesse e ricevute”) on a monthly basis.
Quarterly summaries (“Comunicazione liquidazioni periodiche IVA or LIPE”) must be filed by electronic means before the last day of the second month following the quarter.
The VAT expert's eye
Member States set the duration of the taxable period at one, two or three months. However, they may set different periods provided they do not exceed one year. The VAT return must be submitted within a period to be determined by the Member States. This deadline may not be more than two months after the end of each taxable period (Art. 250 of the VAT Directive).
Do I have to submit an annual return?
Your company is obliged to submit an annual VAT return by February 1st and April 30 of the year following the one of reference.
The annual return determines the taxpayer’s position in terms of the difference between input VAT and output VAT for the entire calendar year, and any VAT refunds due to the taxpayer. Any periodic payments are also taken into account, as well as any tax credit resulting from the previous year’s annual return and not claimed back or used to offset other taxes.
In case of corrections in favor of the company, it will be possible to amend the annual VAT return until December 31 of the fifth year following that in which the return is submitted.
The VAT expert's eye
Member States may require the taxable person to file a return containing all the data referred to in Articles 250 and 251 and concerning all transactions carried out during the previous year. This return shall include all the information necessary for any adjustments. They authorize, and may require, the return to be made by electronic means under conditions which they determine (Art. 261 of the VAT Directive).
What is the deadline for paying Italian VAT?
Companies submitting their annual return must pay, by 16 March at the latest, the tax due on the basis of the return submitted .
Periodic payment ("Comunicazione dei dati delle liquidazioni periodiche IVA")
Your company should calculate and pay VAT periodically on a monthly basis. The data must in principle be filed electronically by the 16th of the month following the month it refers to and the payment should be received on the Italian Authorities’ bank account by the same date.
Paying VAT on a quarterly basis is also possible under conditions. VAT must be settled and paid by the 16th of the second month following each of the first three calendar quarters (16 May, 20 August and 16 November). The payment for the last quarter is to be made at the time of the annual adjustment by the 16 March of the following year, except when the taxpayer takes up the option of benefiting from the longer deadline for the payment of taxes due on the basis of the tax return. In the case of quarterly payment, any tax debt must be increased by 1% by way of interest.
All VAT taxpayers are obliged to make the advance payment except those who are not required to pay VAT monthly or quarterly. 27 December is the deadline for making the advance payment of VAT due for the periodic settlements for the last month or quarter of the year.
The VAT expert's eye
Every taxable person who is liable for the tax must pay the net amount of VAT when filing the VAT return. Every taxable person who is liable for the tax must pay the net amount of VAT when submitting the VAT return. However, Member States may set a different deadline for the payment of this amount or collect instalments (Art. 206 of the VAT Directive).
When should the intra-EU statement be filed?
The recapitulative statement [ESL] must be drawn up for each calendar month. Taxpayers can however opt for filing the Statement on a quarterly basis provided the intra-EU transactions do not exceed € 50.000 within the past four quarters. The statement has to be filed before the 25th day of the month following the reporting period [month/quarter] to which it relates.
The eye of the VAT expert
The recapitulative statement shall be drawn up for each calendar month. However, Member States, in accordance with the conditions and limits which they may lay down, may allow taxable persons to submit the recapitulative statement on each calendar quarter where the total quarterly amount of intra-EU supplies of goods does not exceed either in respect of the quarter concerned or of any of the previous four quarters the sum of € 50.000 or its equivalent in national currency. The recapitulative statement shall be submitted within a period not exceeding one month.
INVOICING RULES IN ITALY
Does the invoice have to include VAT?
As a supplier of goods or services, your company is normally obliged to issue an invoice with VAT to its customer. This is the general rule. However, there are many derogatory situations which transfer this obligation to pay tax to the customer himself. These situations are known as "reverse charge" situations.
The special reverse charge rules have been introduced in Italy for foreign companies:
For supplies of goods:
The reverse charge is applicable to all domestic supplies of goods made by a business not established in Italy, provided that the customer is VAT established in Italy.
For supplies of services:
The reverse charge is applicable to all domestic supplies of services made by a business not established in Italy, provided that the customer is VAT established in Italy.
What are the mandatory mentions on an invoice?
The VAT Directive lays down the minimum information that you must include on your invoice. In some cases, countries may add additional compulsory information. Particular attention should be paid to the conversion rates when the currency used on the invoice is not that of the country in which the transaction takes place, and to the specific statements justifying the legal reason why VAT is not charged.
What VAT rate should be mentioned on an invoice?
Italy has four different VAT rates :
- Standard rate : 22%
- Intermediary rate : 10%
- Reduced rate: 5 %
- Super reduced rate: 4 %
VAT REFUNDS IN ITALY
How can I recover VAT in Italy?
There are several methods to obtain refunds of Italian VAT. The practical formalities for reclaiming foreign VAT will differ depending on whether or not your company is established in Europe and/or is identified for VAT in Italy:
- If your company has a VAT number in Italy, it will have to submit a refund application in the form and within the timeframe required by local regulations. In principle, the VAT credit is automatically transferred to the following month. However, an actual refund can be requested under certain conditions. Up to day, input VAT could be recovered at the latest within the annual VAT return at the end of the second year following the year in which the VAT became payable. Under the new regulation, input VAT has to be reported no later than in the annual VAT return of the same year where VAT is charged, i.e. VAT on purchases made in 2017 will need to be included in the 2017 annual return to be submitted by April 30th 2018.This new regulation is already being challenged and amendments might arise. Updated information will follow if needed.
- If your company is established in a European country and does not have a VAT number in Italy, it will have to apply for a VAT refund electronically from its country of residence, in the form and within the time limits required by Directive 2008/9.
- If your company is established outside Europe and does not have a VAT number in Italy, it will have to appoint a tax representative to submit its refund application in the form and within the time limits required by the 13th Directive.
Is Italian VAT recoverable on all expenses?
VAT incurred on purchases, imports or intra-Community acquisitions of goods and services can be reclaimed by a foreign company provided that these expenses are for taxable activities and provided that the appropriate documentation is available.
No input VAT can be recovered on any of the following expenses:
- Transport expenses;
- Catering and restaurant costs;
- Representation costs.
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