EU VAT guide – Italy

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How much is VAT in Italy? 

The Standard VAT Rate (Imposta sul Valore Aggiunto(„IVA”)) in Italy is 22%. 

Some supplies are exempt from VAT. This applies to business activities like education, health care, insurance, and financial services. 

Some supplies are exempt from VAT. This applies to business activities like education, health care, insurance, and financial services. 

VAT thresholds in Italy

Valuable information about the VAT threshold in Italy and applicable provisions can be found in the Italian VAT legislation. Also, a helpful source of information is an interpretation of the relevant information shared by Tax Authority officials. 

VAT registration threshold for resident businesses: There is no registration threshold

However, there is a simplified scheme for small business operators(resident natural persons) who can make supplies exempt from Italy VAT, even if those types of supplies are taxable activities. 

An economic operator must fulfill the requirements to take advantage of the simplified regime. Still, the primary ones are that the threshold cannot be higher than EUR 85,000 during the calendar year and that the professional is resident in Italy.

VAT registration threshold for non-resident businesses: there is no VAT threshold 

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold

VAT Taxable Activities in Italy

Following the interpretation of the Italian VAT Law, the activity should be treated as taxable when it covers the supply of goods or provision of services conducted as part of the business, art, or professional operations handled within the Italian territory. 

Types of taxable activities that trigger the imposition of VAT: 

• The supply of goods and rendering of services in Italy for consideration;
• Receipt of reverse-charge services from the non-resident taxpayer;
• Import of goods;
• Intra-community acquisition of goods.

Other case scenarios exist where domestic or foreign businesses should impose Italy VAT on their transactions. 

Tax Representative in Italy 

For non-EU established businesses, having a tax representative for all VAT compliance-related activities is mandatory. 

For EU-established businesses, having a tax intermediary isn’t mandatory. Still, the economic operator could acquire the professional to ease up and streamline compliance challenges for its operations in the country. 

VAT on Electronically Supplied Services in Italy 

Electronically Supplied Services 

The EU VAT Directive 2006/112/EC characterizes Electronically Supplied Services as provided via the Internet or other digital channels. These services are typically automated, with minimum or no human intervention. The cornerstone of their delivery is the advancement and application of information technology; without it, their provision isn’t possible. 

Italy has integrated this EU-wide definition of Electronically Supplied Services into its legal framework.

Across different regions, you might come across phrases like digital services, digital products, and electronic services. Generally speaking, in the context of the EU VAT Directive and its implications, these terms are embraced under the umbrella of electronically supplied services, shedding light on digital transactions under these VAT rules.

Taxability Rules for ESS

B2B supply of electronically supplied services – The general place of supply rules should be applied

B2C supply of electronically supplied services – Non-resident companies should apply EU-harmonized VAT rules specifically designed for this purpose, i.e., by this, we mean that in the cases where a buyer is a natural person, the VAT rules of Member State where resides should be applied 

Place of supply rules for distance sales of goods and B2C electronically supplied services the annual turnover of the seller is under the EUR 10,000 threshold, the merchant can apply VAT rules of his country of residence or follow the OSS rules

Place of supply rules for distance sales of goods and B2C ESS electronically supplied services– When the annual turnover of the merchant rises above the threshold of EUR 10,000, the seller should impose the VAT rate of the country where the goods are dispatched or where the customer receiving the services is based

How much is VAT in Italy for Electronically Supplied Services? 

VAT rate Italy: A standard VAT rate of 22% is applied in most cases on sales of Electronically Supplied Services in Italy

E-Commerce VAT Rules in Italy

On July 1, 2021, a new E-Commerce package was launched and has since been incorporated into national VAT laws.

This update from the European Union has brought about significant shifts in how online commerce operates across Europe. The main goal behind these changes was to simplify the administrative tasks and bring uniformity to the e-commerce rules across member states.

The relevance of these changes is seen in the legislative move to include new types of transactions that could be reported using the simplified scheme. 

The updated rules now encompass the following:

• Cross-border sales of low-value goods priced under EUR 150, coming from outside the EU, managed by suppliers or intermediaries, except those items that are taxed differently, like tobacco or alcohol;
• Sales of goods between EU countries (intra-community sales) conducted by suppliers or intermediaries;
• Local online sales within an EU country by intermediaries;
• Online services are sold to consumers by businesses based outside the EU or in a different Member State than the one where the buyer resides.

These updates also brought changes to how VAT schemes for e-commerce are structured. Notably, the existing frameworks have been refined, and a new system, the Import One-Stop Shop (IOSS), has been rolled out.

The introduction of the IOSS and updates to existing schemes aim to streamline VAT handling for online sales, both for goods and services, simplifying the business processes and making the e-commerce life-cycle less burdensome.

The E-Commerce VAT package made the following special schemes available:

• Union One-Stop-Shop Scheme;

• Non-Union One-Stop-Scheme;

• Import One-Stop-Shop Scheme;

Overview of EU VAT Special Schemes 

The Non-Union Scheme can be used by:

Non-EU established businesses and those without fixed establishments in the EU. 

The Non-Union Scheme covers the supply of services within B2C business arrangements and only where the place of taxability is within one of the Member States. When the merchant adheres to this scheme, it must be used for all supplies and services. The ones that can be declared in this scheme. 

The Union Scheme can be used by:

Taxable persons established in the EU, which covers cross-border B2C supplies of services and for intra-community distance sales of goods. 

Taxable person not established in the EU for intra-community distance sales of goods. 

Digital Marketplace established or not established in the EU for intra-community distance sales of goods and certain domestic supplies of goods.

Import Scheme can be used by : 

Any taxable person who carries out distance sales of goods imported from third countries or third territories in consignments not exceeding the threshold of EUR 150 sold to customers residing in the Member State

Taxable persons established in the EU, taxable persons non-established in the EU, and electronic marketplaces are eligible to use this type of simplified scheme. 

OSS Return and Payment 

Italy doesn’t have a simplified registration system for non-resident businesses providing digital services or goods to their residents. 

However, these international companies can use one or more OSS schemes when choosing Italy as their Member State of Identification(MSI). This can help them manage their VAT duties more effectively.

But there’s a catch: these benefits are only available if the goods or services sold fall within a specific list set by Italy’s e-commerce rules. 

If a non-resident business sells something not part of the OSS scope, they’ll need to register following the domestic requirements. This means following the standard process for VAT Italy registration and sticking to the country’s VAT rules.

Electronic Platform and Deemed Supplier Rules 

Italy synchronized its domestic regulations to match European Union e-commerce rules, specifically about what’s known as a deemed supplier mandate. This term applies to economic operators providing intermediary services to merchants operating through digital platforms.

Here’s the breakdown:

• If an online marketplace intermediates in the supply of goods through its online channels, it might be considered as the deemed supplier for VAT purposes, but only under certain conditions.
• This applies when goods come from outside the EU, costing less than EUR 150, and are sold to customers within the EU.
• It also applies to goods already in the EU, sold by sellers from outside the EU, with no price limit on these goods.

What changed with the deemed supplier rule?

1. The process treats the sale as if it happens in two steps: First, from the original seller to the online marketplace (considered a business-to-business, or B2B, sale), and then from the marketplace to the final buyer (a business-to-consumer, or B2C, sale).
2. Like any other business, online marketplaces must keep detailed VAT records to show they follow the rules.

Also, if an online platform uses the OSS or IOSS schemes for VAT, it must follow the same rules about keeping records as anyone else using those schemes. 

This approach is designed to make VAT handling clearer and more straightforward for businesses operating in the digital space, ensuring they comply with VAT regulations effectively.

Invoice Requirements in Italy 

General invoice information:

• Date of Invoice issuance;
• A unique sequential number issued in a progressive manner.

Seller information:

• Business Information;
• Full address;
•  VAT number.

Buyer Information:

• Corporate and business name if the supplier is a legal person; name and surname if it is a natural person and tax ID;
• Full address;
•  VAT number.

Fiscal Information:

• Description and breakdown of the goods or services – quantity, discounts, unit price excl. VAT;
• Taxable amount;
• The VAT rate(s) applied and the breakdown of VAT per rate;
• Invoice Total.

Additional information required in particular cases:

• Exemption reference – guaranteed by precise norm;
• Reverse charge – description;
• Self-billing – description;
• Tax Representative information.

Foreign Currency Invoice in Italy

In Italy, it’s permissible to issue tax and/or electronic invoices in foreign currencies, but it’s suggestive that the taxable amount and VAT amount should be indicated in EUR, as well as exchange rate and conversion detail in both cases(paper-based and eInvoice). 

VAT Returns in Italy 

Domestic Returns

Domestic taxpayers and non-established foreign businesses registered for VAT who conduct business under the national VAT rules in Italy should submit monthly or quarterly declarations and payments depending on the reporting period. 

The economic operator should use the F24 form for this periodic reporting and settlement.

Taxpayers have additional obligations related to settlements and payment of VAT, which is they should submit annual returns. Some specific groups of economic operators are not obliged to do so.  

This reporting obligation is processed exclusively by compiling the form Dichiarazione IVA for the reporting year in question. 

The periodic monthly or quarterly declarations and the annual ones must be submitted to the Revenue Agency exclusively online. 

The annual return should be submitted to the Revenue Agency between February 1 and May 2 in the year following the reporting period. 

Penalties for late reporting and omitted declarations

Taxpayers should charge VAT Italy on their transactions unequivocally and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted time frame.  

When taxpayers don’t comply with the VAT rules in Italy, the responsible tax authority can impose a fine for non-compliance. 

Penalties for late or incorrect submission of periodic declarations: 

The applicable provisions stipulate that a fine between EUR 500 and 2,000 is applicable for the omitted, incomplete, or inaccurate online transmission of VAT periodic settlement information.

Penalties for late or incomplete submission of annual VAT declarations: 

For the late submission to the extent of 90 days, the taxpayer can reduce the penalty fee to 1/10 of the fixed fine through voluntary compliance, which is shown by paying the sum of EUR 25(1/10 of a fixed penalty of EUR 250) 

A return submitted more than 90 days after the deadline is to be considered omitted, with the consequence that the penalties cannot be spontaneously regularized through the institute of voluntary compliance.

The Revenue Agency can impose an administrative penalty from 120% to 140% of the tax due for the tax period. The penalty cannot be less than EUR 250. 

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