Italy: The Beginning of the End of the EU Approach on E-Invoicing?

Filippa Jörnstedt
June 22, 2017

We have previously discussed how the Italian government is leveraging tax incentives to help boost e-invoicing adoption between private companies. After all, B2G e-invoicing has been mandatory in Italy for a couple of years now, but that has not led to a particularly impressive increase in the total amount of B2B e-invoices. Tax incentives that the government put on the table were mostly related to the simplification of administrative burdens related to VAT reporting. In hindsight, these incentives may have seemed attractive but have been insufficient in increasing the level of B2B e-invoicing in Italy.

Closing the VAT gap through related B2B e-invoicing

We often reiterate that the most fundamental driver for governments to regulate the e-invoicing process is the need to close the VAT gap – and Italy is by no means an exception. So when paper invoicing is still the predominant process in the country and when increasing the tax rates even more is not really on the table for politicians, what else is there to do? In an extreme measure to help close the country’s remarkably large VAT gap, the Italian government has recently announced that it aims to make also B2B e-invoicing mandatory.

Seen from a global perspective, this makes complete sense – just take a look at the success story that is Mexico. However, seen from a European Union perspective, the idea is problematic to say the least. The EU VAT Directive (2010/45) clearly states that a buyer must agree to exchanging e-invoices and for Italy to by law force buyers to agree is in violation of that principle. The Italian government has acknowledged this, but at the same time has declared its intent to negotiate with Brussels, thereby hoping to become the first EU Member State to get an exception from this principle. We’ve already seen how this legal inhibitor in France has driven a similar well-intended legal change into the wall – although the fact that the proposed law was called ‘loi Macron’ may give it a second chance after the recent elections.

Mandatory B2B e-invoicing – a shift in EU policy

A successful outcome of the negotiation for the Italian government would constitute a significant shift in EU policy. It’s not going to be an easy negotiation, but an Italian victory could have some significant side benefits. Allowing mandatory B2B e-invoicing could be the start of a solution to some of the worrying trends we’re seeing right now. Bit by bit, countries such as Portugal, Spain and Hungary are regulating the VAT reporting process in a very fragmented way simply because they can get away with it without EU approval. If B2B e-invoicing started becoming mandatory throughout the EU, it would be hard for Brussels to continue its ostrich politics on the cacophony created by this uncoordinated introduction of automated reporting.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Filippa Jörnstedt

Filippa Jörnstedt is a Regulatory Counsel at Sovos TrustWeaver. Based in Stockholm, Filippa’s background is in international e-invoicing compliance and global regulatory developments. Fluent in English, Italian, French, Romanian and her native tongue Swedish, Filippa earned her degree in Law from Lund University in Sweden.
Share This Post

LATAM VAT & Fiscal Reporting
May 20, 2020
Sovos Acquires Taxweb, Extends Tax Determination Capabilities in World’s Most Challenging Compliance Landscape

Earlier this month Sovos announced its second acquisition of 2020, completing our solution for Brazil with an unparalleled offering that solves tax compliance in the place where it is most challenging to do so.  Too many companies doing business in Brazil have been burdened by managing multiple point solutions for continuous transaction controls (CTCs), tax […]

Sales & Use Tax United States
November 24, 2020
Dissecting the Rhode Island Economic Nexus Sales Tax

Prior to the South Dakota v. Wayfair, Inc. decision, Rhode Island had already enacted legislation related to economic nexus and remote sellers. Effective August 17, 2017, remote sellers needed to comply with certain registration or notice requirements depending on whether the seller qualified as a “non-collecting retailer,” a “retail sale facilitator,” or a “referrer.” Depending […]

Sales & Use Tax United States
November 23, 2020
Yes, there are Sales Taxes, and the Impact on Holiday Shopping is Real

How much can I expect to spend on holiday shopping this year? Well, that may depend on where you live and shop. You see, your location can play a huge role in dictating the final price of an item. This is due to the fluctuation in sales tax rates across the country at both the […]

Sales & Use Tax United States
November 23, 2020
Basics of the Indiana Sales Tax Nexus

The South Dakota v. Wayfair, Inc. Supreme Court decision allowed states to require sellers with no physical presence to collect and remit sales tax if they have an economic nexus with the taxing state. Indiana responded by enacting an economic nexus law like the one upheld in that case. Indiana HEA 1129 was challenged by […]

Sales & Use Tax United States
November 23, 2020
Alaska Sales Tax Nexus Details

While there is no state-wide Alaska sales tax, numerous local cities and boroughs have their own sales tax ordinances. After the South Dakota v. Wayfair, Inc. decision, several of these local governments established the Alaska Remote Seller Sales Tax Commission and adopted the Uniform Alaska Remote Seller Sales Tax Code to have a system to […]

Tax Compliance United States
November 20, 2020
Is it Time to Level the Tax Playing Field when it Comes to Food?

By Kelsey O’Gorman & Denise Hatem In the United States, food is the third-largest expense for lower-income households, after housing and transportation. For higher-income households, food ranks fifth, following housing, transportation, pension contributions and health care. While income disparity can skew percentages of spending on essential items such as food and housing, there are also […]