Bad debt relief in Italy
Bad debt is possible in Italy, however, compared to other EU countries, there are several requirements to be met.
Recovering VAT from the authorities when these amounts have not been collected from your customer is allowed where bankruptcy proceedings have been initiated before the judge on or after 1 January 2016. In these cases, a credit note must be issued and an application must be submitted to recover the VAT amounts. Where the legal bankruptcy proceedings have been initiated before 1 January 2016, this process must be finalized and a decision must be made by the judge before VAT can be recovered in Italy.
The Italian tax authorities have announced plans to change the current bad debt regime by introducing the former rules again. This is, all legal proceedings must be exhausted before VAT deduction is allowed.