June 26, 2020
Italy lost €33.5 million in 2017 over tax evasion. A survey by the Bank of Italy shows that self-employed, younger, and less educated citizens have a higher likelihood to evade paying taxes. Deliberate or accidental omission of daily remote transactions by marketplace operators also contributes to the immense VAT gap. This means there is a large difference between the expected tax and that which is collected.
The negative effects of tax evasion in Italy are felt through a sluggish economic growth and high rates of unemployment. For these reasons, Italian tax authorities recently announced new VAT regulations for remote transactions according to the EU Directive 2017/2455.
In Italy, marketplace operators are expected to register for a VAT number before sending the goods to any consumers within Europe. Marketplace operators are taxable individuals who are liable to pay VAT for the sale of goods through an electronic platform like a portal or an internet marketplace. According to the VAT law decree no 34/2019, these individuals must report the details of their transactions. Nonresident taxable marketplace operators who are not based in Italy must also comply with this obligatory decree by first providing the appropriate identification or appointing a representative in Italy.
Marketplace operators should report each seller’s identification, the total number of units sold in Italy, and the total price per unit for all sales. All marketplace operators are expected to report information about their remote sales to the tax authorities within the deadline. Failure to transmit the correct records or sending incorrect or incomplete information is illegal. The merchant will be perceived to have received or supplied the goods and are supposed to pay VAT for those goods, even if they gave insufficient sales information.
The Italian taxman has only given two exemptions for these regulations. Firstly, if the supplier paid VAT for the goods before they were imported into Italy. Secondly, if the operator proves beyond any reasonable doubt that they never knew that the records were false.
Proper documentation like VAT returns, F24 payment forms, or wire transfer must be presented as proof that the supplier paid the relevant VAT. To prove that the merchant did not have any prior knowledge that the data they transmitted was incorrect, they must execute internal due diligence. The system will gather and analyze the appropriate information for documentation. If the operators discover that there were mistakes, they can amend them and file the appropriate records by the end of that month.
Merchants who fail to deliver the quarterly reports by the correct deadlines miss the opportunity to send correctional records the following month. They are also liable to pay VAT even for unreported sales. Marketplace operators should make the appropriate sales reports for both exports and imports. Authorities gave these directives for all operators and marketplaces, whether the goods from Italy are headed for the EU or vice versa. These regulations are meant to combat VAT fraud in e-commerce.
The European Commission has considered the negative effects of COVID-19 on the businesses of member countries. The pandemic has caused the production in Italian plants to fall sharply, causing a general economic slump. According to statistics, Italian imports fell to 14.9% by April 2020, with businesses in the import and export sector being critically affected by stringent travel bans.
Consequently, the European Commission suggested the suspension of the EU Directive 2017/2455 on e-commerce VAT for six months. If the suspension takes hold, it may apply from 1st July 2021. The reporting obligations may remain in effect until the VAT suspension is implemented.