,

Italy to Introduce Pre-Completed VAT Returns by July 2020

Kelsey O'Gorman
November 19, 2019

The Italian government has introduced an ambitious new program for collecting VAT, under which the tax authorities will pre-populate VAT returns on behalf of taxpayers. This program is aimed at reducing the VAT gap in Italy, which reached 33.5 billion Euros in 2017 – in absolute terms, the largest loss of revenue in the European Union. While pre-populated VAT forms might simplify VAT collection for the tax authorities, businesses may be faced with new challenges, detailed below.

Background

Article 16 of recently enacted Decree n. 124/2019 provides that data gleaned from transactional information supplied from electronic invoices via SDI, cross-border transactions, as well as data collected on fees electronically, will be used by Italy to pre-populate a VAT return to be later submitted by the taxpayer. For now, this program applies only to businesses resident and established in Italy. A representative of the tax agency has stated that the pre-populated forms will be regarded as drafts, with taxpayers having an opportunity to amend incorrect data; however, it is not yet clear how much leeway will be given.

Why is this important?

The jump to pre-completed VAT returns in Italy is a full manifestation of what it means to transfer data to the government in real time – which all comes back to the VAT gap.  Italy is following in the footsteps of Chile and their recent success of minimizing the VAT gap with the help of pre-completed VAT returns.

It would be unwise for businesses to think of this new simplification as a diminution of responsibilities in producing a VAT return.  In fact, one could argue that this creates an equal responsibility for businesses to know the ins and outs of their data – as each business should be prepared with any information needed to challenge inaccurate data prepared by the Italian government.

Companies that don’t have a reliable automated solution for both electronic invoicing and Esterometro may struggle to reconcile their internal VAT figures with the figures presented to them by the government.  Therefore, having a dependable tax automation process is arguably more important in the new digital age; the more businesses automate, the more knowledge businesses will have about their own data which will allow them to question the government’s data.

Much is yet to be understood as to how this experiment will play out in Italy, but the Government is clearly expecting a positive outcome as the plan is to extend this regime to non-resident businesses as early as 2021.  We expect new information will be available in the upcoming months and will continue to monitor any additional tax changes.

Take Action

To find out more about what we believe the future holds, download Trends: e-invoicing compliance and follow us on LinkedIn and Twitter to keep up-to-date with regulatory news and other updates.

Sign up for Email Updates

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

Author

Kelsey O'Gorman

Kelsey O’Gorman is a Regulatory Counsel at Sovos. Within Sovos’ Regulatory Analysis function, Kelsey focuses on global sales tax and VAT issues, supporting both the tax determination and reporting engines. Kelsey received her B.A. in Psychology from University at Buffalo and her J.D. from Roger Williams University School of Law. She is a member of the Massachusetts Bar.
Share This Post

North America Sales & Use Tax
June 1, 2023
3 Things to Remember if You Get a Sales Tax Notice

Have you ever received a sales tax notice from a state department of revenue? Whether you answered yes or no, there are important things to keep top of mind to help keep your business prepared. Finding out that you have failed to comply with one or more of your sales tax obligations can be startling. […]

North America Unclaimed Property
May 30, 2023
How to Set Up a Successful Unclaimed Property Program

Unclaimed property compliance can be difficult and overwhelming. Clients often ask what they should be doing to ensure they are compliant with the various laws and regulations. It isn’t easy, especially if you have multiple property types such as checks, credits or customer accounts that have the potential to become unclaimed property in multiple states. […]

North America ShipCompliant
May 30, 2023
How Hold At Locations Improve Your Customers’ Wine Delivery Experience

Direct-to-consumer shipping wine lovers enjoy the convenience of having their favorite vinos shipped to their front door. But what happens when, for whatever reason, they aren’t available to accept their wine deliveries? Whether they aren’t available during the day or they don’t have someone 21 or older available to sign for their package, these challenges […]

North America Sales & Use Tax
May 30, 2023
Identifying Sales Tax Liabilities and Why They Matter

By Steve Claflin, CLA It’s incredible that it has now been five years since the landmark Wayfair decision. It seems like just yesterday we were reading the case, alerting clients and tracking the ever-developing state guidance. Unfortunately, many companies still are not familiar with their sales tax filing obligations caused by economic nexus, or they […]

North America ShipCompliant
May 25, 2023
Out-of-State Breweries Gain Self Distribution, DtC Rights in Oregon

Under a settlement agreement, breweries located outside of Oregon now have more options for selling into the Beaver State, including direct-to-consumer (DtC) shipping and self-distribution to retailers. The settlement arose out of a lawsuit filed by a group of Washington breweries last year challenging Oregon laws that limited beer self-distribution to in-state breweries and DtC […]