On 27 September 2017, Italy submitted a formal request for derogation from two provisions in the European Union VAT Directive – a formal hurdle and legal necessity to be able to roll out the ambitious e-invoicing mandate for all domestic Italian invoices. While waiting for the decision from the EU Council, Italy proceeded with legal steps on a national level to make the plans a reality, by publishing the law Legge di Bilancio 2018.
The applicability of this law has however been contingent upon getting the necessary EU approval, as it would otherwise be directly conflicting with article 218 and 232 of Directive 2006/112/EC.
This much-awaited derogation was granted today (16 April 2018) by the EU Council. However, the derogation is formally only valid from 1 July 2018 until 31 December 2021. An extension of this period is possible but requires that Italy submits a request for an extension to the EU Commission, together with a report that assesses “the extent to which the national measures referred to in Article 3 have been effective in combating VAT fraud and evasion and in simplifying tax collection. That report shall also evaluate the impact of those measures on taxable persons and in particular whether those measures increase their administrative burdens and costs”.
Given that the necessary investments made both by the Italian state as well as by taxpayers are occurring now as the changes are being implemented, and not necessarily once the system is up and running, the risk of not obtaining extensions seems quite unlikely.
All in all – from a legal perspective the strictly necessary building blocks are in place. From a practical perspective, however, much is still needed in terms of guidance and advice from a national level. A guidance note/decree is expected before the entry into force of the first mandate on July 1 this year to clarify the impact on e-invoices relating to supplies of petrol/diesel for the purpose of motor fuel. Time is running out for meaningful clarifications, and while the industry has expressed a wish to postpone the entry into force, no such tendencies have been expressed from official sources. It remains to be seen if the first deadline will remain or will be postponed; we will continue to monitor the situation closely but assume that the deadline remains as is.