Sept 2024: Reductions in penalty fines for VAT compliance and payment infringements
Italy has softened many of the rules and rates around its VAT penalty regime from 1 September 2024. Specific measures relate to:
- Fines for late returns;
- Fines for unpaid VAT;
- Penalties on late or no invoicing, including failure to report via Italian SdI e-invoicing; and
- Tougher rules for zero-rating intra-community supplies and exports.
Read more in our Italian VAT guide. See Legislative Decree No. 87/2024, published 28 June 2024.
Delayed and missed VAT settlements
For missed VAT payments, the penalty will be cut to 25% of the VAT, a 5% reduction For late payments within 90 days will incur a 12.5% penalty, while payments within 15 days will incur a daily penalty of 0.83% of the VAT due.
Penalties Related to Invoicing
The penalty for failing to issue and register invoices for taxable transactions will be reduced to 70% of the undocumented VAT, with a minimum penalty of €300. For exempt transactions, the penalty will be 5% of the value, also with a minimum penalty of €300. Unlawfully deducted VAT will suffer a 70% penalty on the VAT, down from 90%. In cases of incorrect application of VAT, penalties will be capped between €250 and €10,000.
90-day rule on Intra-Community Supplies of Goods
Under the new rules, Italian VAT taxpayers engaged in zero-rated intra-EU supplies of goods under article 41 of Decree Law no. 331/1993 will face tougher fines. If the goods do not arrive in the destination Member State within 90 days of their delivery in Italy, a 50% penalty on the VAT amount will be imposed. However, if the invoice is corrected and the VAT is paid to the Treasury within 30 days after this 90-day period, the penalty can be avoided. This measure is aimed at ensuring that goods are properly accounted for across EU borders.
Export infringements
There are three new penalty changes for goods leaving the EU via Italy, ‘exports’. Failure to transport goods outside the EU within 90 days will result in a 50% penalty on the VAT. A 70% penalty will apply to regular exporters who fail to submit the required declaration of intent. Incorrect declarations in customs documents will now attract a 70% penalty, reduced from the previous 100%-200%.
Italy VAT country guide
| Highlights | Local term | Imposta sul valore aggiunto, IVA |
| VAT Rates - standard | 22% | |
| Rate news | Fuel and food temporary VAT cuts | |
| VAT Rates - reduced | 10%; 5%; 4% | |
| VAT number format | IT 12345678901 | |
| Registration threshold | €85,000 per annum; nil for non-residents; €10,000 for pan-EU digital services and goods OSS return. Intra-community acquisitions €10,000; €85,000 for 15% flat rate | |
| VAT Group | Yes - two optional types: liquidation group for sharing credits against group member liabilities; regular group per VAT Directive since 2018 | |
| VAT recovery foreign businesses | Yes, but requires reciprocity agreement for non-EU businesses | |
| Fiscal Representative | Required (Norway and UK excepted) for non-EU businesses | |
| Currency | Euro €, January 1999 | |
| Administration | Introduction | VAT introduced in 1973. Italy is a founding member of the European Union |
| VAT laws | VAT Act (DPR 633/72); Also EU VAT Directive which takes supremacy as part of EU membership | |
| Tax Authorities | Agenzia delle Entrate; Ministry of Finance. Pescara regional office manages non-resident businesses | |
| VAT Rates | Standard rate | 22% |
| Rate news | Fuel and food temporary VAT cuts | |
| Reduced rates | 10%: restaurant and catering services, including takeaway; medicines; baby products; feminine hygiene products. 5%: health and education by welfare associations. 4%: Basic foodstuffs: pasta, bread, and daily bakery products; medical equipment; books and journals | |
| Zero-rated | Intra-community passenger travel by air and sea; Exports and intra-community supplies of goods; gold to central banks | |
| Exempt | Education; financial services; health, hospital, and social welfare; postal; letting immovable property; betting and gambling; welfare services | |
| Scope of VAT | Scope of VAT | Provision of domestic taxable goods and services; EU imports; intra-community acquisitions; Distance selling of goods B2C (OSS or IOSS); receipt of services or goods via the reverse charge |
| Time of supply | Goods & Services (general rule) | Goods: earliest of date of delivery; payment; date of invoice. Services: earliest of invoice issued or full/partial payment |
| Reverse Charge | For services, when completed or payment if earlier | |
| Continuous Services | Date of payment due. Annual if no invoice or contract provided | |
| Imports | At time of clearing into free circulation in Italy | |
| Goods on approval and return | Earliest of goods accepted or 12 months after dispatch | |
| Registration | VAT registration threshold | €85,000 per annum; nil for non-residents; €10,000 for pan-EU digital services and goods OSS return. Intra-community acquisitions €10,000; €85,000 for 15% flat rate |
| Voluntary VAT registration | No | |
| VAT number format | IT 12345678901 | |
| VAT Group | Yes - two optional types: liquidation group for sharing credits against group member liabilities. May include EU non-residents with an Italian VAT registration. Members retain their VAT numbers and obligation to file returns. Secondly, since 2018, regular group per VAT Directive since 2019 with single VAT identity. Excludes non-residents | |
| Non-residents | Similar to residents. There is extensive use of the reverse charge in Italy (see separate section) so limited cases where registration permitted e.g. intra-community supply or B2C supplies. Will have to request permission to be registered for intra-community supplies at the time of registration and inclusion on the VIES register | |
| Fiscal Representative | Non-EU businesses required to appoint a resident fiscal representative. Exception where EU mutual assistance agreement e.g. the UK and Norway | |
| Digital Services | Italy participates in the EU single One Stop Shop (OSS) VAT return for digital, telecoms and broadcast services. This was formerly the MOSS regime until 30 June 2021 | |
| Pre VAT registration costs | Businesses may use their first annual VAT return to reclaim pre-registration costs directly related to the business | |
| VAT Invoices | Issuance | See separate section on e-invoicing. Must be submitted within 12 days of tax point. Customers may report VAT paid if not issued with an invoice after four months. Not required for retail transactions unless requested by customer. Same for hotels and restaurants. |
| Content | Date; unique sequential invoice number; name and address of supplier and customer; Customer VAT number for intra-community supplies or reverse charge; date of supply or advance payment if different from invoice date; Description, quantity or units etc of supply of goods or services; price per unit; taxable amount; VAT charged; rate (broken out if supplies at different rates); total; explanation if zero-rated supply; fiscal representative's details if applicable | |
| E-invoices | Italian SdI e-invoice obligations | |
| Simplified invoices | For transactions not exceeding €400. Excludes intra-community supplies. Details must still be submitted to SdI e-invoice regime | |
| Self-billing | Yes, by agreement between parties - need not be written. Third parties may also be made responsible for issuing invoices | |
| Retention of invoices | Five years after the end of the accounting period related to the invoice or similar ledger and supporting documentation. May be kept outside of Italy. Electronic archiving permitted under strict rules on integrity and security for at least eight years | |
| FX rules | May use other currencies, but VAT amount must be stated in € using European Central Bank rate prevailing | |
| Invoice corrections | Via credit notes with reference to the original invoice within 12 months or original invoice. Customers may request refund from tax office of incorrectly charged and paid VAT on their supplier invoices for up to two years previously | |
| Compliance | Right to deduct | Excluded: food and drink; business gifts above €50; passenger transport; accommodation; 60% of car-related expenses |
| Call-off stock | Following the EU's 2020 Quick Fix harmonisation reforms, stock may be transferred from an EU state to an customer location/warehouse in Italy without triggering a VAT registration and supply for a non-Italy supplier. Title has not passed until the customer takes the goods for production and sale. At which time a zero-rated transaction may be effected. This must happen within 12 months of the original movement | |
| Reverse Charge - B2B | Reverse charge applies on supplies by non-residents to any Italian established customer. Domestic reverse charge applies on supplies of: certain precious metals; computers mobile phones games consols; scrap; cleaning and demolition services; construction; labour intensive services | |
| Cash discounts | Supplier may reduce VAT by credit note if option taken. But not mandated | |
| Bad debt relief | If both parties agree, permitted at least 12 months after original invoice date. Supplies now only have to wait till start of court liquidation proceedings to seek bad debt relief | |
| Import VAT deferment | Not available | |
| VAT warehouse | Permitted for EU goods unless permission and other restrictions. Bonded warehouses for VAT and customs exemption also operated | |
| Supply & install | ||
| Use and enjoyment services | Only applied on lease rentals of certain pleasure boats | |
| Capital goods adjustment period | Movable property: Five years. Immovable property: ten years | |
| Non-residents VAT recovery | EU businesses may apply for Italian VAT reclaims through the electronic portal of the tax authorities of their company of residency (8th Directive). Quarterly claims above €400 permitted, with final claim above €50 by 30 Sept of following year. Non-EU businesses must submit a paper-reclaim with supporting invoices via the Italian authorities directly (13th Directive). This is only permitted if Italy has a reciprocity agreement with home country of claimant. Non-EU businesses will have to appoint an Italian resident Fiscal Representative for the reclaim process | |
| VAT on Digital Services | Italy follows the EU VAT on digital services regime, introduced in 2015. This includes participation in the One-Stop-Shop (OSS) single EU VAT return (formerly MOSS until 30 June 2021) | |
| Live events | ||
| Distance selling threshold for goods | Nil. Following the EU ecommerce VAT package reforms from 1 July 2021, local Italian VAT must be charged on all sales by non-Italian EU e-commerce sellers shipping from within the EU. Imported distance sales not exceeding €150 liable to Italian sales VAT with IOSS return option | |
| Cash accounting scheme | Voluntary if sales do not exceed €2million per annum | |
| VAT registered cash tills | Italy VAT fiscal cash register rules | |
| Statute of limitations | Four years following tax year of submission of erroneous return; Five years for transactions | |
| Other | Italy operates a Split Payments regime for B2G transactions. This now includes listed public companies with a 70%+state ownership. This requires government customer to pay VAT element of supplier's invoice directly to tax authorities. Cash payments are limited to €4,999.99 (2023). | |
| VAT Returns | Frequency | Quarterly VAT communications if income does not exceed €700,000 goods or €400,000 services. In this case, quarterly VAT communications. Annual VAT return due sometime before end April of the following year. Payments are however monthly (see below). Italy has started a 2021 pilot for pre-completed resident VAT returns based on SdI e-invoice data. |
| Filing method | TARGET for payments | |
| Deadlines (inc payments) | For quarterly filings, the last day of the second month following the quarter end. 16th March for the final quarter communication. VAT payments are monthly, due by 16th of the month following the reporting month. For monthly filings, the end of the month following the reporting month end. Payments for monthly filers are also due by 16th of the month following the reporting month. Both quarterly and monthly filers must make an advance payment on their December VAT liability. This is due by 27th of December, and is generally 88% of the estimated VAT due. | |
| VAT credits | Quarterly refunds on application under strict rules. Will require a bank guarantee or statement from approved auditor if exceeding €30,000 | |
| Corrections | VAT communications may be revised. Most adjustments are posted through the final, Annual Return. Adjustments must be included by five years following the report period end | |
| Non-residents | As per resident businesses. Exempted from live SdI e-invoicing. Non-EU businesses will require an Italian fiscal representative unless mutual assistance agreement in place e.g. the UK and Norway | |
| Other filings | EC Sales Listing and Intrastat are combined in Italy. Intrastat ESL combined monthly by the 25th of the following month if above the quarterly sales reporting threshold in any one of previous four quarters: dispatches goods €100,000 ; sales services €nil; acquisitions goods €350,000; purchases services €100,000. | |
| SAF-T | N/a | |
| Penalties & interest | 2024 new Italy VAT penalty regime | |
| B2C Distance Selling returns | Italy participates in the One-Stop-Shop OSS pan-EU VAT return for distance selling, introduced in July 2021. |
