Regulatory updates - Italy

Legislative Decree 1/2024 on Rationalization and Simplification of the Rules on Tax Compliance was published early in 2024, aiming to simplify compliance and efficiency for businesses. Article 24 of this Decree allows the use of software solutions as an alternative to traditional telematic registers for the storage and transmission of daily receipt data (corrispettivi giornalieri). The software solution must allow a secure and fully integrated method as well as integration and interaction between the daily receipt registration and the electronic payment processes.

The Revenue Agency submitted the draft technical specifications to the EU Commission in August this year under EU Directive 2015/1535. This Directive specifies that technical drafts must be submitted for review before adoption, and drafts can be reviewed in the EU's Technical Regulation Information System (TRIS) database.

Following the end of the three-month standstill (review) period in November, during which the Member State could not adopt the technical regulation, it is now expected that the Revenue Agency (Agenzia delle Entrate) will finalize the technical specifications. While there are no specified timelines for this development, it is expected to happen soon.

In April 2024, Italy requested authorisation from the European Commission to continue applying electronic invoicing obligation. The main reasons for it were combatting tax fraud and evasion, simplifying tax compliance, and reducing business administrative costs.

The proposal decision published on 10 October 2024 specifies that Italy should be granted further derogation either until 31 December 2025 or until the date from which the Member States may apply national decisions following the adoption of the ViDA proposal, whichever occurs first.

The EU Council has previously amended the initial decision from 2018 by EU 2021/2251, authorising Italy to apply the special measure until 31 December 2024, continue applying mandatory e-invoicing and extend the scope to cover small enterprises.

On 28 June 2024, Decree n. 87/2024 was released, amending several regulations of the tax sanction system. The updated regulations apply to violations committed from 1 September 2024.

Some of the most pertinent changes include, but are not limited to:

• The penalty for sellers is 70% of incorrectly documented VAT, as opposed to the previous 90% and 180 with a new minimum of EUR 300 instead of EUR 500;

• A violation of invoicing and/or registration of exempt, non-taxable amounts not subject to VAT or reverse charge is 5% (previously ranging between 5% and 10%) of the fees, with a minimum of EUR 300 as opposed to EUR 500;

• Intra-Community supplies of goods (new): The Italian supplier will be subject to penalties equal to 50% of VAT for goods transported by the customer (or its appointed third party) to another Member State if the goods have not been received in the EU country of destination within 90 days from its delivery. The supplier can regularise the transaction by rectifying the invoice and charging VAT within the following 30 days from the 90-day deadline;

• In the event of an omitted or incorrect invoice within 90 days from the deadline of when the invoice should have been issued or from the date the incorrect invoice was issued, penalties equal to 70% (reduced from 100%) of the undocumented VAT. The buyer can regularise the transaction by self-issuing an invoice through the SDI system;

• A violation of the obligations subject to reverse charge ranges between EUR 500 to EUR 10 000, as opposed to the previous range between EUR 500 and EUR 20 000. The buyer can regularise the transaction by issuing a self-invoice through the SDI system, followed by the applicable invoice report (TD16-TD19) within 90 days from the deadline when the invoice should have been issued or the date the incorrect invoice was issued;

• Regular Exporters regime (It.: Esportatore Abituale): Transactions without charging VAT for goods supplied and not covered by a letter of intent (It.: Dichiarazione d'intento), are subject to 70%, compared to prior ranging between 100% and 200% of the VAT.

Italy expects to submit a report to the European Commission addressing effectiveness of the split payments regime.

On 25 July 2023, the European Commission granted Italy a derogation until 30 June 2026. The derogation applies to Articles 206 and 226 of the VAT Directive with EU 2023/1552  on the special measure of the common system of value-added tax.

The extension of the special measures for the split payment regime was granted with one exception, to honor Italy’s commitment to gradually phasing out this special measure. From 1 July 2025, the scope will be restricted and exclude supplies of goods and services to companies listed on the stock exchange included in the FTSE MIB index.

The timeframe set by the Commission will allow the affected taxpayers to perform the necessary operational adjustments and the local authorities to evaluate possible alternative measures.

The split payment regime means that when VAT is invoiced by a supplier, the VAT amount must be paid by the buyer/recipient of the invoice to the tax authorities. This process enables the authorities to perform cross-checks and is part of the country’s program for combatting tax fraud and evasion.

It remains to be seen if the report will reopen for yet another extension of the timelines. 

On 4 April 2023, the Revenue Agency under the Ministry of Economy and Finance published its Provision of Activation of the API Management platform and General Conditions of use of free access services in API Management in the Official Gazette.

What is the purpose of the new platform establishment?

Aiming to simplify the administration and promotion of digital services, this Provision considers creating a new API[1] Management platform to provide free services available from 15 May 2023. The Platform allows interoperability between the Agency’s service-providing system and the system user[2] with methods enabling the integration of the respective applications.

The free access service is aimed at users interested in integrating it into their own applications.

Which services are available in the API Management platform?

The services of verifying the existence and validity of the following are available through the API Management platform from 15 May 2023:

1. The Tax code aimed at verifying the existence and correspondence between the Tax code and the personal data available in the Tax Registry.
2. The VAT number aimed at verifying the validity of the assigned VAT number and providing information relating to:

• the activity status of the VAT number,
• the name of the subject or, in the absence of this,
• the surname and name of the owner's natural person.

The services are made available by the Agency for five years, starting from the access date.

[1] Application Programming Interface – set of definitions and protocols with which application software is created and integrated.

[2] Users are public and private subjects who adhere to the envisaged General Conditions of specific use for each type of service with the features available in a restricted area.

The Ministry of Economy and Finance started a public consultation on the VAT in the Digital Age initiative, which allows different taxpayers to give their contributions and opinions on the proposed documents for consultation.

The ViDA proposal was published on 8 December 2022 and was released in all EU languages, including Italian, on 10 February 2023.

The deadline for sending contributions to this public consultation is 10 April 2023.

The European Commission (EC) released a memorandum explaining Italy’s recent request for a derogation from Article 285 of the VAT Directive. Now that the request has been approved, all businesses with thresholds lower than EUR 85 000 are retroactively exempt from VAT obligations from 1 January 2023 until 31 December 2024.

Consequently, this measurement has an implication on related matters, such as exempting businesses from using SDI. According to previous data, this derogation will impact more than 63 000 enterprises, specifically the smaller ones.

Although the EUR 85 000 threshold has been the highest requested and approved in the EU, the incentives behind this proposal are aligned with the European Union’s objectives and consistent with existing policy provisions.

Previously, the EU expressed its commitment to supporting small businesses, which goes in harmony with the impact this measurement will have on small companies in Italy as it will relieve these businesses from costs that regard administration and compliance.

As Italy was the first country in Europe to have implemented countrywide B2B e-invoicing, the authorities have constantly monitored and improved its CTC models to fight tax evasion.

Starting 1 July 2022, the following taxpayer groups will be obliged to comply with the Italian e-invoicing mandate via the SDI platform:

• Taxpayers inside the flat-rate (regime forfettario)

• Amateur sports associations and third sector entities with revenue up to EUR 65 000

The entities to still be exempted from this mandate are microenterprises with yearly revenues or fees up to EUR 25 000, but they will be required to start issuing and clearing e-invoices as of 1 January 2024.

The new taxpayers in the scope of this mandate will be allowed to issue e-invoices within the following month when the transaction was carried out, without penalties being applied. The transition period will be applicable from 1 July 2022 until 30 September 2022. It will give the new taxpayers more time to conform to the general rule for electronic invoices to be issued within 12 days from the transaction date.

These developments were announced in the draft Decree-Law Decreto Legge PNRR 2 – Piano Nazionale di Ripresa e Resilienza (available in Italian).

As of July, business operators will have to report their cross-border transactions via Sistema di Interscambio (SDI).

To help you ensure compliance of your operations with the upcoming mandate, we provide an overview of steps to take in our latest blog.

Read the full article here.

As we reported in an earlier update, the Tax Work Decree in relevance with the 2022 Budget Law (DL 146/2021) has been already approved by the Senate but has been awaiting approval from the Chamber. Initially, it was estimated that the law will enter into force by the end of 2021.

On 30 December 2021, law no 234 was published in the Official Gazette and came into force on 1 January 2022. This means that Italy officially postponed the cross-border e-invoice reporting mandate for six months- from 1 January 2022 to 1 July 2022.