This blog was last updated on October 18, 2019
With just 6 months until e-invoicing becomes mandatory for all domestic Italian supplies, there is still a lot of confusion over the timeline, scope and the steps Italian taxpayers have to take to ensure they are compliant.
This lack of clarity, even though the mandate was originally introduced back in December 2017, and despite the fact that the first deadline for certain sectors and supplies is already in force, is probably what prompted the Agenzia delle Entrate (the Italian tax authority) to issue a circular document (on July 2, 2018) that it hopes will clarify the most relevant and frequently asked questions. Below, our experts look at the 4 most pressing areas that have been clarified in this document:
The Fuel Sector
The first topic tackled was the use of e-invoicing for the purchase of supplies in the fuel sector. This is probably the one area where there has been the most confusion, debate, and protest – due in part to the fact that it was one of the sectors to be hit with the earliest deadline of July 1, 2018. The clarification provided by the Italian tax authority concerned:
- The sale of fuel intended for use by roadside gas and service stations: all transactions involving the supply of petrol and diesel intended for use in cars and road vehicles, throughout the entire supply chain, are subjected to the use of mandatory e-invoicing from July 1, 2018.
- The sale of fuel from roadside gas and service stations: originally mandated to come into force on July 1, 2018, the supply of fuel roadside gas and service stations was postponed at the last minute in a decree by the Italian government. The new deadline for this sector is now January 1, 2019.
- All other fuel supplies: supplies across the entire fuel chain for aircraft, boats, agricultural and forestry tractors have to be compliant as of January 1, 2019.
In addition, the Italian tax authority clarified that if a supplier, at any step along the fuel chain is uncertain about the intended use of the supply, then the supplier must ensure that it complies with the use of mandatory e-invoicing.
Resident, established or identified?
When the mandate was introduced back in December 2017 its scope imposed the use of mandatory e-invoicing for the “supply of goods and services performed between residents, established or identified in the territory of the State”. However, when the European Council approved its implementation, back in April 2018, it limited the scope to only those persons established in Italy.
The clarification provided by the Italian tax authority confirms that the e-invoice obligation will only cover organizations who are permanently established in Italy. Having an Italian VAT registration alone will not be enough to infer that the business must comply.
Permanent Establishment Explained
The term ‘permanent establishment’ is generally defined as a fixed place of business through which the business of an enterprise is wholly or partly carried on. The term permanent establishment typically includes organizations with a place of management, a branch, office, factory, workshop or a mine, oil or gas well, quarry or any other place of extraction of natural resources.
However, the Italian tax authority does go on to reinforce that its Sistema di Interscambio (SDI) platform is compatible with, and can be used by organizations within the EU and further afield. Potentially any organization can register with the SDI platform to receive e-invoices from their Italian buyers or suppliers. The only obligation here is that an Italian company must be able provide a hard copy of the invoice if requested.
When invoices related to intra-community transactions and transactions with non-EU persons are transmitted through the SDI it removes the need for domestic reporting regulations. If however, transactions aren’t facilitated in this way, then organizations need to comply with the reporting obligations established by the Italian tax authority.
Dealing with rejected invoices
With the Italian tax authority placing itself at the heart of the transaction between buyer and supplier by approving the transaction – what happens when an invoice is rejected? Can the buyer proceed with a new submission of the same document or do they have to create a new one?
To clarify this, the Italian tax authority outlines the process by which a rejection takes place:
- In the case of failure, the SDI platform will issue a “rejection receipt” within 5 days.
- This rejection gets issued through the same channel the invoice was transmitted.
- At this point, the invoice or invoices are not considered valid legal documents.
- The supplier should correct the document by issuing a new one with the same date and number of the initial document. If however, this main rule cannot be followed (i.e. the issuance of the e-invoice with the same number and date is not possible), then there are two possible alternative routes available to create a new invoice:
- Back-up option A: The supplier can issue a new invoice with a new number and date that contains a link to the previous invoice that was rejected by the SDI platform.
- Back-up option B: The supplier can issue a new invoice with a new number and date that contains a specified mark-up highlighting the fact that it is amending the previously rejected document.
Archiving requirements
Finally, the Italian tax authority also provided clarification on the archiving requirements of e-invoices:
Format: Despite the fact that all invoices sent through the SDI platform need to be issued in the FatturaPA XML format, taxpayers can choose other formats for their independent archive, such as a PDF, JPG or TXT.
Location: Electronic invoices don’t have to be stored in Italy but can also be stored in another European Union Member State. In addition, it is possible to use the free archiving system provided by the tax authority to archive B2B, B2C, and B2G e-invoices, which is subject to signing a service agreement with the tax authority.
