VAT registrations and simplications in Italy
VAT number Italy
As a general rule, a foreign business must register for VAT in Italy as soon as a taxable supply is made. The following are some usual examples of taxable transactions:
- Domestic supply of goods not reverse charged: A supply of goods located in Italy to an Italian customer where the supply is not subject to reverse charge requires a VAT registration of the supplier.
- Supply of services not reverse charged: Foreign non-established businesses supplying services on which Italian VAT is due must register for VAT. These services are rather exceptional, as the general B2B rule would apply.
- Export: Exporting goods to a non-EU country requires a VAT number before the export is made.
- Intra-Community acquisition: Acquiring goods from another Member State where all conditions for intra-Community movements are met requires the customer to register for VAT.
- Intra-Community supply: Supplying goods another Member State is also a taxable transaction that obliges the supplier to register for VAT.
- Distance sales: When applicable in case the Seller has not joined OSS. See the E-commerce manual for more information.
Voluntary registration is not possible in Italy. This is, companies cannot register if they have not made a taxable transaction. There is no registration threshold in Italy for non-established companies. Any company foreign and non-established company performing taxable transactions should register for VAT before the first supply is made. Tax authorities may impose a penalty amounting from EUR500 to EUR2,000 for failing the obligation of registering in Italy.
A backdated registration is not possible in Italy. In case the taxpayer has performed taxable transactions before the VAT registration, a regularization is mandatory. This is known as ravvedimento operoso: you must calculate all VAT due together with the applicable penalties and submit all the pending VAT returns.
Italian VAT number Format
- Country code: IT
- Structure: IT99999999999
- Format (excludes 2 letter alpha prefix): 1 block of 11 digits
Italian fiscal representative
Non-EU businesses must appoint an Italian fiscal representative when registering for VAT purposes in Italy. Like other EU countries, the fiscal representative is jointly and severally liable for the tax debts of the company.
In practice, where a fiscal representative is appointed, this representative may require a bank guarantee to cover the risk of tax liabilities imposed by the Italian authorities. This guarantee is different from the bank guarantee required when requesting a VAT refund.
EU businesses can register directly for VAT purposes. This means that the legal representative of the company can sign the registration form without any local Italian involvement. UK companies can also register directly for VAT purposes, not requiring the appointment of a fiscal representative.
Contact us if you need more information on Italian registration requirements for EU and non-EU companies.
Italian VAT groups
There are two VAT grouping arrangements in Italy.
The joint VAT registration is an administrative simplification for VAT groups in Italy. Group members can net off their VAT credits and debits into one consolidated annual VAT return. However, intra-group transactions are subject to VAT and each member maintains an individual VAT number. The parent company uses its own VAT number to identify the group.
In January 2019, Italy introduced the full VAT groups regime. Where more than one taxable persons are closely bound by financial, economic, and organizational links, these companies may form part a VAT group and be treated as a single taxable person for VAT purposes in Italy. A VAT group implies that there is a company and one or more controlled entities.
Concerning the VAT group conditions, financial links exist when the same person or business directly or indirectly holds more than 50% of the voting rights. Organizational links exist when the management of the controlled entities is fully dependent of the controlling entity. Economic links exist where the entities exercise one main activity of the same nature, of interdependent activities or complementary, ancillary and auxiliary.
In addition, the following VAT grouping rules apply in Italy:
- Italian established taxable and non-taxable persons can be part of a VAT group. Also, the Italian subsidiaries of a foreign company can form a VAT group provided that the foreign entity is established in a country with an exchange of information agreement in place with Italy.
- VAT grouping is optional in Italy. Companies can apply for a VAT group when meeting the requirements or they can choose to remain separate entities for VAT purposes. However, if the option for a VAT group is made, all the related companies must be part of it.
- There is a specific time frame to apply for the VAT groups regime: the option can be applied until the 30 September for being effective from January of the following year. The application form is AGI/1.
- Once the application is approved, a group VAT number is granted to the group. While the VAT group is active, the individual VAT numbers are dormant.
- Intra-group transactions are disregarded for VAT purposes, but they must keep records of these transactions. This does not apply to supplies made or receive to an overseas branch or head office – implementing the ECJ decision on the Skandia case.
- Every group member is jointly and severally liable for the VAT debts and penalties of the entire group.
- The minimum time period for a VAT group is three years. After the first three years, the option is automatically renewed until expressly revoked.
- Members of a VAT group submit one single consolidated VAT return – periodical VAT returns and the annual VAT return. It is not possible to file separate VAT returns for each entity.
Italian consignment and call-off stock
The EU introduced a call-off stock simplification that all EU Member States must implement. This simplification allows businesses to operate under a consignment stock structure without having to VAT register in the country of destination. Italy has implemented this simplification.
In the past, when a foreign supplier sent goods to an Italian warehouse to store these goods locally and supply them to an Italian customer as and when required by the client, this foreign supplier had to register for VAT purposes in Italy.
However, where the EU call-off stock simplification applies, the Italian VAT registration of the foreign business is not required, and the transaction is treated as a “direct” intra-Community supply of goods from the foreign business to the Italian client, allowing a reduction of compliance costs and administrative burdens, as well as cash-flow benefits for the client.
Bad debt relief in Italy
Bad debt is possible in Italy, however, compared to other EU countries, there are several requirements to be met.
In principle, it is possible to recover the VAT on bad debt if a credit note has been issued, but additional conditions apply:
- If the adjustment results from the agreement of the parties, the credit note must be issued no later than one year from the transaction date.
- In case of bankruptcy, the credit note must be issued no later than the deadline to submit the annual VAT return of the year where the deduction right arises.
- The previous terms for issuing the credit note may be extended under certain conditions.
Italian import VAT deferral and postponed import VAT
Normally, import VAT is paid upon arrival of the goods, directly to the Customs authorities. The customs document (bolleta doganale) is used as a proof of the import VAT payment.
However, to compensate for the cash flow disadvantages of these rules, most countries allow simplification where this VAT is either paid at a later stage (so called "import VAT deferral allowance") or import VAT is reverse charged in the next VAT return of the business importing the goods. Postponed import VAT accounting does not exist in Italy. It is not possible to report import VAT in the VAT return as input and output.
Deferring the import VAT allows for payment of import VAT by the last day of month following the month in which importation took place. A bank guarantee must be given by the importer. Also, Customs authorities may allow a further delay but upon the payment of an interest. Once the final terms of the deferral are agreed, the Customs authorities issue an authorization for the taxpayer. For example, where an import is made on 15 January, deferred import VAT can be paid by 28 February. Import VAT will be deducted when the VAT return is submitted. Italian import VAT deferral must be requested on a separate application to the tax authorities.
Italian customs and VAT warehouses
VAT warehouse simplification is available in Italy for EU cleared goods (T2). These goods have already paid customs duties. There is no VAT due on goods sold within a VAT warehouse. However, while goods are in a VAT warehouse, they cannot be sold to a non-taxable person. Once the goods leave the VAT warehouse regime, they will be subject to Italian VAT. This VAT treatment will depend on whether the goods entered the regime as a domestic purchase, in which case VAT must be charged, or they entered the goods as intra-Community acquisitions, in which case the reverse charge applies on the first supply following the VAT warehouse suspension. The warehouse keeper is jointly and severally liable for the payment of VAT of the first supplier. There is penalty of 30% of the VAT due foreseen on all missed payments related to the VAT warehouse regime. The following goods are not allowed to be stored in a VAT warehouse:
- Non-EU goods, except if the importer provides Customs authorities with a warranty for the amount of the import VAT. This warranty is not requested from Authorized Economic Operators and other taxpayers authorized by the Italian tax authorities.
- Temporarily imported goods.
- Goods stored temporarily before receiving a Custom destination.
- Goods imported as part of an inward processing relief.
The list of goods admitted in VAT warehouses is subject to changes. Contact us for more information. Customs or bonded warehouses are available for goods that have not cleared customs in the EU (T1). VAT and excise duties are not due when these goods are directly placed in the Customs warehouse. As soon as they exit this regime, these amounts are due. No VAT is due on the supply of goods in a Customs warehouse, but an invoice must be issued stating that the amount is not subject to VAT. Furthermore, in Italy there are VAT-free zones. Here, goods can be transformed, processed or stored without paying VAT or customs duties.