italy
Summary

Standard VAT rate: 22%
E-Invoicing: live
Real-time reporting: mandatory
Digital service tax: yes

Compliance and rates

VAT number format

All EU member states have a fixed format for their VAT numbers. In Italy, it includes 11 digits and the prefix IT (i.e. IT 123456789 10 11).

VAT rates

VAT rates

The standard VAT rate in Italy is 22%, with reduced rates of 10% and 4% on certain goods and services.  A number of services are exempt from Italian VAT, such as insurance and special financial services.

22% (Standard) – Applies to all taxable supplies, with certain exceptions

10% (Reduced) – Some foodstuffs, electric power supplies for listed uses, medicines and pharmaceutical products (including homeopathic medicines), some tourism services, building renovations, garbage collection

4% and 5% (Reduced) – Some foodstuffs, drinks and agricultural products (livestock), printed newspapers, existential products/products of primary importance

0% (Zero) – Insurance services, special financial services, supply, leasing of particular immovable property.

VAT payments and returns

Businesses with an Italian VAT number must submit periodic payments. VAT filings and payments are submitted either monthly, quarterly or annually, and VAT returns are submitted annually or quarterly.

VAT Payment frequency

Monthly – 16th day of the following month

Quarterly – May 16th for Q1, August 16th for Q2, November 16th for Q3 and March 16th for Q4. If the due date falls on a Saturday, Sunday or bank holiday, the date is shifted to the next working day.

Annual – March 16th

VAT Returns frequency

Quarterly – Last working day of the second month following the quarter

Annual – April 30th of the following year

Penalties in case of late filings or misdeclarations

Late filing – EUR 25 penalty if submitted within 90 days after the deadline. Minimum EUR 258 and between 120% and 240% of the VAT due if submitted after 90 days following the deadline.

Late payment – A general penalty of 30% of the VAT due will be applied, but as follows. If paid within 30 days following the deadline: Penalty of 1/10 of the 30% of VAT due. If paid within 15 days following the deadline: Penalty of 1/15 of the 30% of VAT due. If paid after 30 days following the deadline, but before the deadline to submit the annual return: Penalty of ⅛ of the 30% of VAT due.

Detected discrepancies – Any identified discrepancies between VAT filings and VAT payments will be subject to additional questioning from Italian authorities and insufficient explanations (or failure to observe the deadline) and may result in penalties of between €500 and €2,000.

Invoice requirements

Invoices must contain at least the following information:

  • date of issuance
  • a unique, sequential number of the invoice (generally, per calendar year)
  • supplier / issuer data (company name, address, VAT number and, in some cases, also the company’s tax code)
  • customer data (address and other data if available)
  • full description of goods and services – quantity and price
  • any discounts, ancillary costs and expected expenses (if applicable)
  • the net, taxable value of the invoice
  • rate and amount of VAT applicable for the category of goods and services provided
  • the invoice total, gross amount

E-Invoicing

Italy has introduced mandatory real-time electronic sales invoice issuance and reporting from 1st January 2019. E-invoices must be issued in a prescribed format XML, digitally signed to guarantee the authenticity of origin and the integrity of the content and be sent to the Exchange System (SDI – Sistema di Interscambio) by the taxpayer directly or through designated intermediaries.

Detailed invoice information of foreign sales and purchases will still have to be submitted to the tax authorities through a new ‘cross-border communication’. This is due by the end of the month following the reporting period

Once an invoice is received by SDI, and before it is sent to the recipient, an initial formal check is made, to monitor the validity of the invoice format and content, as well as its compatibility with data already in the hands of tax administration.

All invoices shall be issued within 12 days after the registered (completed) sale.

Real-time reporting

Real-time reporting to Italian Financial Authorities (Sistema di Interscambio – SDI) is mandatory for all taxable persons in Italy.

How does it work?

  1. Entrepreneur sends XML data message about the transaction to Italian Financial Authority, Sistema di Interscambio (SDI)
  2. Sistema di Interscambio sends back confirmation of receipt
  3. A copy of the electronic invoice and paper invoice should be issued to customer directly by the supplier
  4. Sistema di Interscambio notifies the customer by e-mail about the transaction

Who is affected by this obligation?

Electronic invoices must be submitted for all goods or services sold by taxable persons established in Italy.

Digital Service Tax (DST)

As the first country in Europe, Italy introduced a Digital Service Tax (DST) from 1st January 2020. 

Given the adoption of Digital Service Tax, all taxable persons/businesses that, individually or group-wide have (a) a total worldwide revenue higher than EUR 750 million and (b) revenues obtained from the digital services in Italy higher than EUR 5,5 million during the calendar year must pay Digital Service Tax. Digital Service Tax shall be calculated by applying the 3% rate to the taxable revenues obtained by the taxable person during the calendar year.

Same as for other taxes in Italy, taxable persons are required to pay the Digital Service Tax by 16 February of the calendar year subsequent to the one of reference and to file by 31 March of the same year.

The Italian digital tax hits transactions such as advertising, as well as services such as cloud computing, sparing digital content streaming services such as tech giants Amazon, Netflix and Spotify.

The European Union had attempted to agree on a uniform digital tax across the Union, but that idea was shortly abandoned because of opposition from countries such as Ireland that are home to the regional headquarters of several large US tech companies. Regardless, it is expected from other EU countries to adopt similar digital tax regulations in the upcoming years to prevent their budget deficit growing caused by the VAT gap, but also to bring new money to their budget. This is supported by the fact that Italy has a forecast that the digital tax will bring EUR 700 million.

Turnkey invoice compliance.

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