As with other members of the EU, Italy is obliged to follow the rules of EU-wide VAT, set out in VAT directives for Italian VAT registrations and returns. These rules set standard Italian VAT compliance requirements for each country. However, the setting of the main standard Italian VAT rate still rests with the Italian authorities.
The Italian VAT law is contained within the specific VAT legislation and is backed up by case law from the Italian tax commission (Commissione Tributaria Provinciale). It is administered by the Ministry of Finance and the local tax offices.
Foreign companies may register in Italy for VAT without the need to form a local company; this is known as non-resident VAT trading. There is no VAT threshold in Italy for the registration of non-resident traders; a VAT number must be in place before the commencement of taxable supplies.
There are strict rules on the situations where a registration is permitted. Common scenarios which require an Italian VAT registration include:
Importing goods into Italy
Organising live events, conferences, etc. in Italy
'Supply and install' services over 12 months
Supply of goods located in Italy to non-taxable persons or non-established business
Selling goods from Italy to other EU countries
Acquiring goods from EU countries
Distance-selling to private individuals in Italy, e.g. internet retailing.
Registering for Italian VAT generally takes two to three weeks, although this can vary.
There are detailed rules controlling the recording and processing of Italian transactions. These include guidelines on:
Italian invoice requirements, including dedicated invoice numbering
Foreign currency reporting and translation
Correcting errors from prior returns
Credit notes and corrections
Which accounting records must be maintained.
In Italy, there are strict rules on the layout and format of VAT records to be kept by companies or their tax agents.
The standard VAT rate in Italy is 22%. There are also reduced VAT rates of 10% for pharmaceuticals, passenger transport, admission to cultural and entertainment events, hotels and restaurants; and 4% for foodstuffs, medical, books and e-books. There are many variations to the rates above, including exempt taxable supplies. Please contact us to learn more.
Companies with an Italian VAT number must submit periodic payments. In Italy, payments are generally submitted monthly.
Italy has one of the harshest regimes for VAT non-compliance, and companies should ensure they are properly registered before they start trading. There is also a requirement to submit two annual returns in Italy in the following year.
In addition to VAT returns in Italy, companies may be required to submit additional statistical information.
The Italian Intrastat, which lists sales (dispatches) and purchases (acquisitions), within the EU region must be filed monthly once the annual threshold is exceeded.
If a foreign company is providing taxable supplies in Italy, but is unable to obtain an Italian VAT number, or is incurring Italian VAT on local goods or services, then Italian VAT may be recovered through a VAT reclaim.
VAT refund applications are made through the tax authorities of the applicant’s home country.
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