Italy – Automatic Settlement in the Event of Failed VAT Payment

The Italian Ministry of Finance, in cooperation with the Revenue Authorities, is moving forward with its agenda to modernize its tax compliance systems as a necessary stepping stone to combat new paths of tax avoidance. The respective Ministry of Finance, as a measure to strengthen its fight against tax evasion, proposes in the draft of the 2026 Finance Law a very innovative approach. 

The proposed measure is the introduction of an innovative VAT management system, a specific procedure that requires a negligent taxpayer to remit the funds (calculated automatically) if the taxpayer has previously forgotten to submit an annual return on time. 

The Revenue Agency’s automatic settlement procedure determines and notifies taxpayers of the tax due in situations where the annual VAT return hasn’t been filed. The VAT calculation logic of the Revenue Agency is supported by the transactional data gathered through the e-invoicing, periodic VAT returns, and other digital reporting files previously submitted by the taxpayer. 

Only after the calculation procedure is completed shall the taxpayer receive a notice of irregularity that contains the precise calculation of the settlement amount and the rationale for it. From that moment, the taxpayer has two options: to proceed with the payment or to appeal the issued notice with supporting documentation. 

This payment due will be based on the owed amount, interest, and an administrative penalty equal to 120% of the amount owing. The taxpayer can obtain a discount for an early payment of the settlement amount.