Italian Tax Controls: Five Key Facts to Know Before the New Year

While Italy rolled out its continuous transaction controls (CTC) reform in 2019, 2020 has been a year of expansion. Italian authorities plan to leverage all potential benefits of the successful implementation of the country’s central e-invoicing platform. Many of the updates will either be launched or enforced in the upcoming year, or later in 2022.

5 key facts on Italian tax controls

Here is our definitive list of the key changes that businesses must be aware of and prepare for ahead of next year:

• FatturaPA and SDI: New schema and validations

In February this year, the Italian tax authority published new technical specifications for the FatturaPA, and the validations performed by the SDI. Although the new technical specifications were originally set to be enforced in October 2020, Italy postponed the mandatory use of the new schema and the new validations performed to 1 January 2021.

Last week, the tax authority published newer technical specifications complementing those that will be enforced on 1 January. The new rules change the criteria for validations of certain fields and reintroduce a temporary code “Z” to be used in the field CausalePagamento until 31 December 2020.

• New rules for e-archiving

The Agency for Digital Italy (AGID) introduced a new set of archiving rules that will be enforced on 7 June 2021. This means that businesses storing e-invoices under Italian law must comply with new requirements that include new standards and the indication of more granular metadata.

• New rules for the conversion of paper invoices into electronic invoices

Along with the archiving rules above, and also entering into force on 7 June 2021, the AGID has also published new rules for the conversion of paper into electronic invoices. Although most Italian invoices are issued and exchanged electronically, some documents can still be issued by other means, such as cross-border invoices.

The rules include new standards and clarifications about the certification process performed in massive dematerialization of paper documents. The certification aims to ensure the correspondence of the content and form of the electronic output file with its hard copy.

• Pre-filled VAT returns

At the end of 2019, Italy announced its intention to make a pre-filled VAT return available to its taxpayers, using data submitted to the SDI platform through e-invoices, the Esterometro (the report for cross-border transactions) and the corrispettivi elettronici (the B2C register of sales, including the daily aggregated report). The initial plan was to roll-out the pre-populated VAT returns in July of this year, but Italy postponed the project once it was clear that it would require changes in the FatturaPA schema.

The project encompasses the creation and availability of a draft of the VAT return, and of the register of incoming and outcoming invoices from transactions carried out after 1 January 2021. Further clarifications on how taxpayers will access or change data in the pre-populated document are expected.

• The sunset of the Esterometro

Italy will discontinue the Esterometro in 2022. According to the 2021 Italian Budget law, instead of submitting the Esterometro, Italian taxpayers performing cross-border transactions (e.g. carrying out or receiving cross-border supplies) must transmit the cross-border transactional data through the SDI platform using the FatturaPA schema. The changes introduced in the new FatturaPA schema being enforced on 1 January 2021 will enable the tax authority to access more precise cross-border transactional data than before.

With the end of 2020 fast approaching, companies trading must prepare for the upcoming changes to Italian tax controls before they take effect in 2021 and beyond.