VAT in Italy guide
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Taxable supplies are supplies of goods and services that are liable to VAT at the following rates:
- Standard rate: 22%
- Reduced rates: 4%, 5% and 10%
The standard rate of VAT applies to all supplies of goods or services unless a specific provision allows a reduced rate or exemption.
Italian VAT for digital service providers
In case of digital services, telecom services or broadcasting services supplied in a B2B context, the place of supply is the place where the recipient is established. No Italian VAT should be charged, and reverse charge applies unless supplier and customer are established in Italy. In case of digital services, telecom services or broadcasting services supplied in a B2C context we refer to the section on the One-Stop Shop below for more information.
On 1 July 2021 EU has introduced a so-called “One-Stop-Shop” (OSS) system which has replaced a previously applied “MiniOneStopShop” (MOSS) system. OSS has extended the scope of MOSS from digital goods and services to all goods and services sold B2C in the EU. OSS is an electronic portal that simplifies VAT compliance for online sellers, i.e., online businesses that sell goods and/or services in the EU are now only required to register for VAT in one EU country for all their B2C sales in the EU. If such sellers’ B2C sales in EU are above the applicable threshold, which is 10.000,00 EUR throughout the EU, businesses are liable to charge, collect and remit VAT in the Member State where their B2C buyers are located, instead of the Member State or country of their incorporation, i.e. online sellers have to apply the VAT rate of the Member State where the goods are dispatched or where the services are supplied. AS each EU Member State has an online portal where businesses can register for OSS and submit their VAT returns in one Member State for their B2C sales throughout the EU, it is estimated that VAT compliance costs will be significantly reduced. Registration in the OSS system is available for both – taxable persons established in the EU and outside the EU.
The 2019 Budget Law foresees the following increases of VAT rates, precisely:
- 10% reduced VAT rate:
- +3.0% (13%) as from 1 January 2020
- 22% standard VAT rate:
- +3.2% (25.2%) as from 1 January 2020
- +1.3% (26.5%) as from 1 January 2021
VAT Registration Italy
The obligation for VAT registration in Italy might be triggered in different ways. Here is the the list of most common scenarios:
- Importing goods into Italy from non-EU countries;
- Buying and selling goods in Italy (excluding domestic reverse charge);
- Selling the goods from Italy to customers in other countries (B2B or B2C);
- Acquiring goods in Italy from another EU country (Intra-community acquisitions);
- Holdinging and storing inventory in Italy for selling, distribution or consignment;
- E-commerce sales of goods to Italian consumers, subject to Distance Selling VAT registration thresholds;
- Organizing events in Italy where attendees or delegates are paying admission.
Late – registration penalties
Late registration for VAT may result in the imposition of various penalties, depending on the errors committed. Penalties include the following:
- Failure to inform the Italian VAT authorities regarding the beginning of activities: a penalty ranging from EUR500 to EUR2,000.
- Failure to issue and record invoices for taxable transactions: a penalty ranging from 90% to 180% of the VAT not invoiced or posted.
- Failure to issue and record invoices for exempt and exempt-with-credit transactions or certain transactions not subject to VAT: a penalty ranging from 5% to 10% of the amount not invoiced or posted. However, if the violation is not relevant for the assessment of the income, a penalty ranging from EUR250 to EUR2,000 applies.
- Failure to make payments of VAT: a penalty of 30% of the payment not made, plus interest on the late payment.
- Failure to maintain VAT records: a penalty ranging from EUR1,000 to EUR8,000.
- Failure to file the annual VAT return: a penalty ranging from 120% to 240% of the VAT due, a minimum amount of EUR250, applies. However, if the VAT return is filed within the legal term foreseen for the submission of the VAT return relevant for the following year and, in any case, before any audit is started, the penalty is reduced to half (i.e., ranging from 60% to 120% of VAT due), with a minimum amount of EUR200.
Fiscal representative Italy
Non-EU business which are selling in Italy will have to appoint a fiscal representative for the VAT registration and compliance in Italy.
Fiscal representative is jointly liable for the VAT compliance duties for non-EU companies.
Need a Fiscal Representative Service in Italy? 1stopVAT can provide it together with other Global VAT/GST/Sales tax compliance services.
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