Reverse Charge in Italy
Italian reverse charge for non-established suppliers
According to art. 194 of the VAT Directive, Member States may implement an optional reverse charge on supplies made by non-established businesses. Italy has introduced an extended version of this reverse charge.
Where a non-established supplier sells goods or services to an established and VAT registered client, domestic reverse charge applies. It is not relevant if the supplier is registered or not. Regarding the customer, he must be established and VAT registered.
Italian reverse charge on B2B services
Article 196 of the VAT Directive requires the reverse charge mechanism on all services subject to the B2B rule introduced in art. 44 of the same Directive. The B2B rule locates the transaction where the business customer is located. In case the customer is a private individual, B2C rules locate the transaction where the supplier is located. According to the general B2B rule, any business not established in Italy supplying services to an Italian registered customer will not charge any VAT and the transaction will be reverse charged by the customer. There are however a number of exceptions to this rule. Where these exceptions apply and the above conditions are met, reverse charge is still applicable in Italy provided the customer is established and VAT registered:
- Services connected to immoveable property are located where the property is located
- Passenger transport services will be located where the transport takes places (apportioned if necessary)
- Catering services are located where the catering takes place
- Short term leasing of means of transport are located where the vehicle put at the disposal of the customer
- Access to conferences, fairs and exhibitions is located where the event takes place
Italian reverse charge on specific goods
Domestic reverse charge may also apply on certain goods with different conditions in each case. This regime is often introduced on products that are more likely to be used for carousel fraud purposes.
The conditions for reverse charge to apply change depending on the goods traded.
- IT equipment: Reverse charge applies on mobile phones, video-consoles, laptops and tablets. This scheme includes components such as chargers, cables and accessories, as well as micro-processors and integrated circuit devices.
- Supplies of investment gold and gold of a purity higher than 32.5%
- Certain supplies of immoveable property under the option of taxation (article 17 (6-a-bis), of Presidential Decree no. 633/1972).
- Supply of construction work, including supply of staff working in the construction sector, repair, cleaning, maintenance.
- Supply of services under contract work – for example, contractors, subcontractors, etc., when the service is mainly carried out at the customer’s premises and using assets its assets. Also, general contract work services related to construction work.
- Supply of gas and electricity to a taxable reseller, including gas and electricity certificates.
- Supply of emission allowances and similar units.
- Supply of used materials, scrap, and waste.
- Supply of recycled pallets.
Generally, the above reverse charge scenarios apply provided that the customer is an Italian taxpayer, ie, that is VAT registered in Italy. In consequence, the purchase of the above products or services does not ring for a mandatory VAT registration of the customer in Italy.
