On 10 February 2023, the Italian Tax Authority introduced the possibility for 2.4 million professionals and companies to view and download the pre-filled Annual VAT declaration related to transactions carried out in 2022.

Who does this impact?

The service is available for taxpayers defined by the provisions of announcement no. 183994 of 8 July 2021 and announcement no. 9652/2023 of 12 January 2023.

These are taxable residents established in Italy who carry out quarterly VAT payments. Exclusions include those operating in sectors of activity or for which special regimes are provided for VAT purposes, including:

This service is not available for companies established outside of Italy that are registered for VAT in Italy through direct registration or a fiscal representative.

What does it mean for the taxpayers impacted?

The Italian Tax Authority prepared the pre-filled draft thanks to the following data:

How can I view the declaration?

Taxpayers can access this new functionality by entering their credentials in the ‘Invoices and fees’ (‘Fatture e corrispettivi’) portal of the Italian Tax Authority. They must access the section dedicated to pre-filled VAT documents where the new “Annual VAT return” section is present.

Can the pre-filled return be amended?

Pre-filled returns were made available on 15 February. Since then, taxpayers have been allowed to modify the pre-filled draft, integrate it and proceed with the submission.

Additional benefits

Do I have to perform a cross check with the pre-filled Annual VAT Return?

Taxpayers should cross check the data in the pre-filled Annual VAT Return and the data in their management systems and edit the return accordingly before accepting and submitting.

More Questions? Ask our experts

If you have more questions about the pre-filled Italian annual VAT return or need support with tax compliance in Italy talk to our experts.

The Italian Customs Authorities recently updated their national import system by applying the new European Union Customs Data Model (EUCDM). These new changes came into effect on 9 June 2022.

According to the new procedure, the old model of paper import declarations has been abolished. The import declarations are now transmitted to the Italian Customs Authorities’ information system with a digital signature.

What does this mean in practice?

The acceptance of a customs declaration is notified to the economic operator (that can be the importer, the Customs Agent, etc.) through a Master Reference Number (MRN), an alphanumeric string of 18 characters.

The old IM message (telematic track to be submitted at the time of the import to the Italian Customs Authorities through the Customs Telematic Service (i.e. Servizio telematico doganale (STD)) has been replaced by the following paths as defined by EU legislation:

How can I know how much import VAT is due on goods imported from outside the EU into Italy?

At the time of the release of the goods, Italian Customs Authorities make available the “summary statement for accounting purposes of the customs declaration” (prospetto di riepilogo ai fini contabili della dichiarazione doganale). The summary includes all data necessary to detect customs duties, import VAT and any other charges due.

The summary mentioned above is made available to the importer and the declarant/representative in the reserved area of the single portal of Italian Customs Authorities through the “Document management – customs declarations” service.

We recommend that importers contact their Customs Agent to receive a copy of this summary for their accounting purposes.

How and when can I recover my Italian import VAT?

As per Italian VAT Law, possessing a Single Administrative Document (SAD) is needed to exercise the right to recover import VAT in Italy. As the SAD is now unavailable, Italian Customs Authorities, in agreement with the Italian Revenue Agency, agreed that the new accounting summary is sufficient to allow the importer to exercise the right to recover the import VAT.

Therefore, the new accounting summary is needed to exercise your right to recover the import VAT paid to the Italian tax authorities.

Moreover, the right to recover import VAT is exercised only once the summary is reported in the Purchase VAT Ledger as per art. 25 of Italian VAT Law.

Finally, the import document must be included in your quarterly VAT return and your annual VAT return which must mirror your Italian VAT Ledgers.

To ensure your import VAT is not lost, we recommend considering that the last day to recover the import VAT, related to an import of goods carried out in 2022, is 30 April 2023.

Further documents introduced from June 2022

In addition to the Summary Prospetto di riepilogo ai fini contabili della dichiarazione doganale, discussed above, economic operators will be able to receive:

Italian Customs Authorities advise customs operators to provide the Prospetto di svincolo to transporters as proof of the fulfilment of customs formalities in the case of checks.

Insurance Premium Tax in Italy is complex. This blog helps insurers navigate challenges in Italy, from IPT rates to reporting requirements. You can find all recent updates on IPT in Italy below in the update section.

Italian Tax Reform

The Italian Tax Reform Bill went into effect on 29 August 2023. The bill was adopted by the Italian Parliament on 9 August and published in the Italian official gazette on 14 August.

Only the general principles of the execution of the tax reform were laid down in this bill; no specifics or changes to existing tax legislation were made. On the other hand, the bill includes information about the timeline for these changes, stating: “The Government is delegated to issue, within twenty-four months from the date of entry into force of this law, … one or more legislative decrees that revise the tax system.”

Among other key taxes, such as VAT and the Corporation Income Tax (CIT), Article 17 featured a change in the timeframes for assessing IPT. The revision’s goal is to bring it in line with other indirect taxes. It also necessitates changes to the IPT penalty structure, as well as the procedures and criteria for tax application. Finally, it is said that the new guidelines should rationalise the applicable IPT rates.

The bill also includes generic principles that are applicable to all taxes, such as:

Article 21 envisages an Italian Unified Tax Code to be implemented by 29 August 2024. It will reorganise and combine existing tax legislation into a comprehensive tax code.

This tax code will be divided into two parts: a general part with unified regulations for the common elements of tax systems and a particular section with regulations for individual taxes.

Sovos will keep a close eye on the Italian Tax Reform process, so stay tuned for updates or contact our experts if you have any special queries.

What is the IPT rate in Italy?

Different IPT rates are applicable in Italy, depending on the type of insured risk provided to the policyholder. The rates vary from 0.05% to 21.5%.

For example, the highest IPT rate applies to legal expenses, whilst payments received from insurance policies covering risks of navigation of ships registered in Italy are subject to 0.05%. Some premium amounts are exempt from IPT.

It is important to note that the Italian class of business does not correspond to the European Solvency II Directive class of business. There are 33 business classes in Italy, numbered from AB1 to AB33.

What are the penalties and interest for IPT in Italy?

Italy is known for its strict application of laws and harsh penalty regime, charging up to 400% of the tax liabilities due. Penalties and interest for late payments are time-sensitive, calculated daily and payable alongside tax liabilities.

What is the basis of Italian IPT calculation?

The taxable premium is the income generated under an insurance contract, comprised of the premium plus any accessory fee stated in the contract of insurance (without any deductions). Any amount paid by the policyholder to the insurer is a taxable premium.

What parafiscal charges exist in Italy on the top of IPT?

Beyond IPT, premium amounts derived from various risks trigger parafiscal charges. The most significant parafiscal charge is the CONSAP (Solidarity Fund for Extortion and Usury Victims) with a rate of 1%.

Is IPT due on returned premiums in Italy?

If an insurance company receives a premium, IPT is due even if the insured is subsequently reimbursed.

IPT credits relating to policy cancellations or adjustments are not permitted and should not be reclaimed from the Italian tax authorities, nor offset against current liabilities. According to art. 4. Law 1216/1960, IPT “does not cease to be due even if the premium is fully or partially returned to the policyholder for any reasons”.

Italian trade body ANIA clarified the applicability of this provision, permitting tax reclaims only if the tax has not been fairly collected. This provision includes clerical errors or an incorrect qualification of the risk or scope of the insurance contract based on the information available when the policy was written.

For example: if the insurer mistakenly overcharged the policyholder and the policyholder overpaid the tax, the overpaid IPT can be deducted from tax liabilities arising in the same reporting period, i.e., the calendar year.

What are the IPT filing and payment frequencies in Italy?

Italian IPT is payable monthly, whereas the return is due annually. Prepayment is also necessary with a deadline of November and equals 100% of the IPT plus CONSAP paid in the previous calendar year.

Some parafiscal charges such as EMER are declared and paid alongside the IPT, whilst others like RAVF and HAVF have different deadlines.

Although insurers pay tax liabilities monthly, and file declarations annually, there is a legal obligation to maintain IPT books. IPT books are chronological ledgers on a policy level that must be readily available should the Italian tax authorities request the company records. The authorities mainly request IPT books for tax office audits, investigations or to support formal requests by an insurer.

What are the prepayment rules in Italy?

Insurers are required to make an annual prepayment to the Italian tax authorities in anticipation of future tax liabilities. Prepayment is due by 16th November each year. It is calculated as a percentage (100% for 2022) of total IPT and Consap contribution made in the previous year, deducting any IPT paid in respect of Motor Third-Party Liability business.

Once settled, this prepayment can be offset against IPT liabilities (excluding Motor Third-Party liabilities) arising from February, when the January tax liabilities are due.

Are life and sickness policies exempt from Italian IPT?

Life plans are exempt from IPT in Italy unless they have been written prior to 1 January 2001. If the life insurance policy was purchased before this date, the premium is subject to a 2.5% IPT rate.

What reports do foreign insurance companies in Italy have to submit?

On top of the annual IPT return, insurance companies must file a variety of reports to several governmental agencies including the Italian Tax Office. The Motor report is embodied in the annual IPT return. There is an obligation for domestic and EU and EEA-based foreign insurance companies to submit separate reports about written insurance contracts, premiums and claims.

There are also a growing number of reports that foreign insurance companies need to submit to the Italian Supervisory Authority (IVASS).

What are the IPT challenges in Italy?

Many factors make IPT in Italy unique and one of the most challenging jurisdictions from a compliance perspective. This includes monthly tax settlements, an annual declaration, prepayment rules, treatment of negative premiums and the various reports that need submitting to the Tax Office, regional municipalities or IVASS.

Updates on Insurance Premium Tax in Italy

Italian Tax Office postpones penalty regime application date

The Italian Tax Office released a new circular on 19 April 2023 granting the opportunity to benefit from the 1/18 penalty regime. This follows the Legislative Decree n. 34/2023 from 30 March 2023.

With Circular No. 9/E, the Italian Tax Office has clarified the procedure, the extent of the measure and the ways of access. The circular emphasises that payments can be made in instalments, up to 20 equal payments over a five-year period.

The application date has been pushed out from 31 March 2023 to 30 September 2023.

Italy implements new tax break measures

The 2022 Italian Budget (Law 197/2022) introduced new measures under the ‘tax break’ scheme (“tregua fiscale”) to promote the settlement of tax irregularities and pending tax assessments.

The Italian tax authority (Agenzia delle Entrate) issued Circular letter no. 02/2023 to provide further clarification and guidance on the new tax measures.

The new regulation allows taxpayers the choice to regularise their tax positions for prior years up to 2021. If they choose to do so, the penalty associated with the regularisation decreases to 1/18th of the minimum penalty – provided that they complete the regularisation by 31 March 2023. In addition to submitting the corrective tax returns, taxpayers must pay the outstanding taxes, penalties and interest by this date.

The law allows taxpayers to make the payments in eight quarterly instalments, with the first due by 31 March 2023. An interest rate of 2% per year applies to the following instalments, which they must pay by 30 June, 30 September, 20 December and 31 March each year.

Additionally, the legislator extended the application of the reduced penalty regime to tax assessments and tax notifications (“avvisi di accertamento, rettifica o liquidazione”) which are already submitted. This ruling applies if the submitted regularisation was not appealed before 1 January 2023, when the regulation came into force, as long as payment is made by 31 March 2023.

Italian parliament approves changes to IPT prepayment rates

The Italian Parliament approved the 2019 Budget Act on 30 December 2018. As anticipated, the approved budget includes increased IPT prepayment rates. The approved rates are as follows:

For completeness, these new rates overrule those approved in last year’s Budget Act. However, the deadline remains 16 November each year.

Take Action

At Sovos, our experienced IPT specialists can help your business ensure compliance in Italy. Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.

Annual reporting requirements vary from country to country, making it complex for cross-border insurers to collect the data required to ensure compliance.

Italy has many unique reporting standards and is known for its bureaucracy across the international business community. Italy’s annual reporting is different due to the level of detail required. The additional reporting in Italy requires an in-depth list of policies and details including inception and expiry dates, cash received dates, policyholders’ names, addresses, fiscal codes and premium values. This makes the annual reporting a significant undertaking. Refer to this blog about IPT in Italy for an overview.

Contracts and Premiums Report – due by 16 March each year in respect of previous calendar year

The Italian legislation and regulations require insurance companies writing business in Italy to submit annual reports with the purpose of collecting information that facilitates the tax authorities’ control of activities on taxpayers.

These reports should list all the insurance contracts in place in the relevant year with a policyholder (individual or entity) subject to Italian taxes. Policies covering Liability, Assistance and any risks written as ancillary to an underlying Liability or Assistance policy don’t need to be included in the report.

If there were no contracts in place in the previous calendar year, there is no requirement to submit a Nil report.

Claims Report – due by 30 April each year in respect of previous calendar year

Claim payments made during the previous year in favour of beneficiaries (individuals or entities) who possess an Italian fiscal code must be reported to the Italian tax authorities by the end of April.

If there are no claims to be reported for the previous year, Nil reports are not required.

Motor Report – part to the annual IPT report due by 31 May each year in respect of previous calendar year

As an integral part of the annual Insurance Premium Tax (IPT) return due by the end of May, insurance companies writing compulsory motor third-party liability must report the amount of IPT paid in the previous year to each of the Italian provinces. Details required include province policy number, fiscal code, vehicle plate number, premium, IPT rate and IPT.

Why planning ahead of the reporting season is vital

The additional reporting in Italy requires that certain elements are present before submission. To submit the Contracts and Premiums report an insurance company needs:

Many insurance companies work with third parties, and the policy information they collate might not always include all required details. Incomplete and incorrect data prevent the successful submission of the annual reports and can lead to costly fines and reputational damage.

Navigating annual reporting alongside regular monthly and quarterly reporting can feel overwhelming. The more that can be prepared in advance, the smoother the reporting process. Understanding Italy’s specific annual reporting requirements will ensure insurers remain compliant and avoid any unnecessary delays or corrections.

TRENDS AND UPDATES ON VAT COMPLIANCE

Trends 13th Edition 2022

TRENDS AND UPDATES ON VAT COMPLIANCE

Trends 13th Edition 2022

Welcome to the 13th edition of Sovos’ annual Trends report where we put a spotlight on current and near-term legal requirements across regions and VAT compliance domains.

This report provides a comprehensive look at the regulatory landscape as governments across the globe are enacting complex new policies to enforce VAT mandates. It examines the demanding and unprecedented insight now required into your economic data so that regulatory authorities enforce standards and close revenue gaps.

This year’s report examines the evolution of law and practice around the four emerging megatrends that Sovos experts identified in the 12th edition. These trends, many of which revolve around tax compliance and controls being ‘always on’, have the potential to drive change in the way organizations approach regulatory reporting and manage compliance.

Authored by a team of international tax compliance experts, we provide extensive recommendations on how companies can prepare for and thrive through these changes.

Get the report

The four mega-trends that we examine are:

Continuous Transaction Controls (CTCs) – Countries with existing CTC regimes are seeing improvements in revenue collection and economic transparency. Now, other countries in Europe, Asia and Africa are moving away from post-audit regulation to adoption of these CTC-inspired approaches. The report highlights how countries like France and Hungary have accelerated their transition to CTCs, and how many jurisdictions are combining invoice controls with CTC transport documents, thereby expanding their real-time reach from financial to physical supply chains.
A shift toward destination taxability for certain cross-border transactions – Cross-border services have historically often escaped VAT collection in the country of the consumer. Due to a large increase of cross-border trade in low-value goods and digital services over the past decade, administrations are taking significant measures to tax such supplies in the country of consumption or destination.
Aggregator liability – With the increase of tax reporting or e-invoicing obligations across different taxpayer categories, tax administrations are increasingly looking for ways to concentrate tax reporting liability in platforms that naturally aggregate large numbers of transactions already. Ecommerce marketplaces and business transaction management cloud vendors will increasingly be on the hook for sending data from companies on their networks to the government, potentially even inheriting liability for paying their taxes. The report notes how the July 2021 introduction of sweeping changes in e-commerce VAT legislation via OSS and IOSS are confirming this trend.
E-accounting and e-assessment – Combining CTCs with obligations to synchronize entire accounting ledgers makes onsite audit necessary only in cases showing major anomalies across these rich data sources. Over time, the objective is for VAT returns and other tax reports to be prefilled by the tax administration based on taxpayers’ own, strongly authenticated source system data. A brief deep-dive into the origins and potential future of SAF‑T shows how this trend is evolving to become a solid companion to CTCs globally.

CTCs have emerged as the primary concern for multinational companies looking to ensure compliance despite growing diversity in VAT enforcement approaches. Tax authorities are steadfast in their commitment to closing the VAT gap and will use all tools at their disposal to collect revenue owed. This holds especially true in the aftermath of COVID-19, when governments are expected to face unprecedented budget shortfalls.

The potential costs and risks associated with the trends highlighted in the report cannot be effectively mitigated with a reactive or opportunistic approach. The digital transformation of tax administration can – if approached as just an evolution of the legacy ‘post audit’ VAT world – significantly contract the digital transformation of businesses. This report suggests an analysis framework that companies can use to ensure ongoing VAT compliance whilst maximizing the opportunities of modern information and communication technologies for their own benefit.

In addition, Trends includes a major review of the country and regional requirement profiles. These profiles provide a snapshot of current and near-term planned legal requirements across the different VAT compliance domains.

A tax authority audit can come in various forms, whether it be directly to the insurer itself or indirectly through a policyholder or broker.

It can be targeted, for example, where an insurer has been specifically identified to be investigated due to a discrepancy on a tax return, or it can be indiscriminate in its nature as part of a wider exercise being carried out by an authority.

Whatever form the audit takes, the key to responding is in the preparation beforehand.

What information should be kept for a tax authority audit?

First and foremost, insurers should ensure they are retaining copies of evidence that can be used to justify the tax amounts declared and settled. This may include the insurance contracts themselves, the invoices issued to policyholders and a record of their data that comprises the declarations that have been made.

It’s worth noting that in Italy there is a formal requirement to maintain IPT books which detail each of the premiums received during each annual period. Although this is not necessarily a specific requirement in other countries, applying this approach to all premiums received will put an insurer in a strong position if an audit is carried out.

Further documentation demonstrating compliance is also useful. If external advice has been sought, e.g., to determine the appropriate class of business for a policy and the consequent tax application, then retaining a record of this advice is advised in case this is required later.

There may be cases where a tax authority’s advice has specifically been sought and such correspondence will inevitably hold considerable weight if tax treatment is queried during a subsequent audit. Documentation of any processes in place to ensure compliance is also valuable.

As statutory limitation periods vary across jurisdictions, evidence should be kept as long as is practicable (subject to relevant data protection laws where applicable) so that it can be produced if an audit takes place.

The consequences of noncompliance

In the digital age, this practice should hopefully not seem overly burdensome. It’s worth referring to the penalty regimes in place in some countries to put the potential repercussions of an unsatisfactory audit into context.

The UK is an example of where a behaviour-based approach to determining penalties is used, with the highest level of penalties reserved for cases of deliberate and concealed undeclared tax where the authority itself has prompted the declaration.

Lower penalties (or indeed no penalties at all) will be levied where reasonable care is taken, and reasonable care will be far more likely to be considered to have been taken where records are kept in the ways described.

Audits can happen at any time so it’s important insurers have taken the necessary steps to ensure information and data to demonstrate compliance is available to the tax authority when requested.

Ensuring the accurate and timely submission of tax returns is likely to reduce the possibility of a targeted audit. The IPT managed services team at Sovos has a huge amount of experience with tax filings in the UK and across Europe and has assisted many insurers with unexpected audits.

This will address the tax challenges of an increasingly digital worldwide economy. As of 9 July 2021, 132 of the 139 OECD/G20 member jurisdictions have agreed to the Inclusive Framework on BEPS.

Pillar Details

Pillar 1 gives a new taxing right, Amount A, to market countries to ensure companies pay tax on a portion of residual profits earned from activities in those jurisdictions, regardless of physical presence. Pillar 1 will apply to multinational enterprises (“MNEs”) with global turnover above 20 billion euros and profitability above 10%.

There will be a new nexus rule permitting allocation of Amount A to a market jurisdiction when the in-scope multinational enterprise derives at least 1 million euros in revenue from that jurisdiction. For jurisdictions with a GDP less than 40 billion euros, the nexus will instead be set at 250,000 euros.

The “special purpose nexus rule” determines if a jurisdiction qualifies for the Amount A allocation. Furthermore, countries have agreed on an allocation of 20-30% of in-scope MNE residual profits to market jurisdictions, with nexus using a revenue-based allocation key.

Revenue will be sourced to the end market jurisdictions where goods or services are consumed, with detailed source rules still to come.

More details on segmentation are still in the works, as is the final design of a marketing and distribution profits safe harbour that will cap the residual profits allowed to the market jurisdiction through Amount A.

Lastly, countries have agreed to streamline and simplify Amount B with a particular focus on the needs of low-capacity countries. The finalised details are expected to be completed by the end of 2022.

Pillar 2 consists of Global anti-Base Erosion (“GloBE”) Rules that will ensure MNEs that meet the 750 million euros threshold pay a minimum tax rate of at least 15%. The GloBE Rules consist of an Income Inclusion Rule and an Undertaxed Payment Rule, the latter of which still needs to be finalised.

Pillar 2 also includes a Subject to tax rule, which is a treaty-based rule, allowing source jurisdictions to impose limited source taxation on certain related party payments subject to tax below a minimum rate. The rate will range from 7.5 to 9 percent.

When Will the Plan be Implemented?

There is currently a commitment to continue discussion, in order to finalise the design elements of the plan within the agreed framework by October 2021. Inclusive Framework members will agree and release an implementation plan.

The current timeline is that the multilateral instrument through which Amount A is implemented will be developed and opened for signature in 2022, with Amount A coming into effect in 2021. Similarly, Pillar Two should be brought into law in 2022, to be effective in 2023.

More Details to Come

Although the key components of the Two-Pillar Solution have been agreed upon, a detailed implementation plan that includes resolving remaining issues is still to come.

As many countries could be implementing these changes in the near future, it is important for businesses active in the digital economy to carefully track and understand the developments surrounding the OECD/G20 Base Erosion and Profit Shifting Project.

Since 1993, supplies performed between Italy and San Marino have been accompanied by a set of customs obligations. These include the submission of paperwork to both countries’ tax authorities.

Building SDI connectivity to San Marino

Italy and the enclaved country of San Marino will abandon paper-based customs flows.

The Italian and Sammarinese tax authorities have decided to implement a “four-corner” model, whereby the Italian clearance platform SDI will become the access point for Italian taxpayers, while a newly created HUB-SM will be the SDI counterpart for Sammarinese taxpayers.

Cross-border e-invoices between the countries will be exchanged between SDI and HUB-SM. The international exchange system will be enforced on 1 July 2022, and a transition period will be in place between 1 October 2021 and 30 June 2022.

FatturaPA: The format of choice

HUB-SM’s technical specifications are now available for imports from Italy to San Marino, and exports from San Marino to Italy. The countries have also decided to choose FatturaPA as the e-invoice format, although content requirements for export invoices from San Marino will slightly differ from domestic Italian FatturaPA e-invoices.

The SDI and HUB-SM systems will process e-invoices to and from taxpayers connected to them, or under each country’s jurisdictions.

In other words, Italian taxpayers will send and receive cross-border invoices to or from San Marino via the SDI platform, while Sammarinese taxpayers will perform the same activities via HUB-SM.

Both platforms will deliver invoices to the corresponding taxpayers through the Destination Codes assigned by the respective tax authorities. This means HUB-SM will also assign Destination Codes for Sammarinese companies.

Integration documents for Sammarinese companies

Inspired by the Italian methodology for fiscal controls in cross-border transactions, San Marino will require Sammarinese buyers to fill out an additional integration document (similar to a “self-billing” invoice created for tax evidence reasons) upon receipt of the FatturaPA. This document will be filled out in a new XML-RSM format created by the enclave and sent to HUB-SM.

After the larger rollout of the SDI for B2B transactions in 2019, the platform has proven capable of adapting to new workflows and functionalities.

SDI has already debuted in the international arena through the acceptance of the e-invoices following the European Norm, which are mapped into a FatturaPA before being delivered to Italian buyers. This integration between SDI and HUB-SM might also reveal the early steps of interoperability between both tax authorities’ platforms for cross-border trade.

The new ‘Guidelines for the creation, management, and preservation of electronic documents’ (“Guidelines”) regulate different aspects of an electronic document. By following the Guidelines, businesses benefit from the presumption that their electronic documents will provide full evidence in court.

The postponement of the introduction of the Guidelines is a reaction from the AGID to claims of local organizations who have particularly expressed concern about the obligation to associate metadata with e-documents. The Guidelines set forth an extensive list of metadata fields for keeping alongside e-documents in a way that will enable interoperability.

Metadata requirements modified

In addition to delaying the introduction of the new e-document legislation, the AGID has also modified metadata requirements. They included new pieces of metadata and changing the description of some fields. The AGID has also corrected references – especially to standards – and rephrased statements to clarify some obligations.

The updated Guidelines and their corresponding Appendices are available on the AGID website.

Anyone predicting Italy’s clearance model e-invoicing system, FatturaPA, would undergo further reform would be right. Agenzia delle Entrate – AdE, the Italian tax authority, has issued new technical specifications and schemas for Italian B2B and B2G e-invoices. But – what do these changes really mean? And what impact do they have on business processes?

Technical and content updates

The inclusion of withholding taxes (especially social contributions) is one of the new content requirements for the B2B and B2G XML formats. There are also 12 new document types (including self-billed invoices and integration documents) and a further 17 new nature of transactions options (such as reasons for exemptions and reverse charges).

These content updates now require Italian companies to have a deeper understanding of the Italian tax system. The changes impact the moment taxpayers classify their supplies: under the current model, Italian companies don’t have to worry about this until the submission of their VAT returns but under the new schema this classification will be performed in real-time. These updates are likely to impact business processes. They are a necessary next step in paving the way ahead of the upcoming introduction of pre-completed VAT returns, an initiative largely considered to eliminate administrative burden and make life easier for most Italian businesses.

In parallel, further changes resulting from the new versions of the FatturaPA formats have a technical impact on businesses, demanding IT implementation readiness. Among the technical updates are the inclusion of additional fields, length of content, permitted characters, shifting from optional to mandatory field fulfillment and vice-versa, and how often a field can be repeated.

The new technical specifications also introduced new validations that will be performed by the Sistema di Interscambio – SDI, the Italian government-platform responsible for clearance of e-invoices. Most of the new validations check the content of the e-invoice against document types and the indicated nature of the transactions and require taxpayers to eventually be able to understand, process and react accordingly to new errors.

Implementation deadlines

The SDI platform will start processing B2B invoices in the new FatturaPA format from 4 May 2020, but the AdE will enforce use of the new schema on 1 October 2020, triggering new validations and errors only after this date as per the Provvedimento from 28 February 2020. Different deadlines apply to B2G invoices, unless of course the AdE publishes new transition rules for these invoices before that date. The enforcement of the new schema for B2G invoices is set to begin on 1 May 2020.

In practice, the effect of these deadlines mean that while the schemas for B2B and B2G invoices are indeed the same from a technical perspective, taxpayers will must be ready for different deadlines and be prepared to work with two different invoice schemas from 1 May until 4 May.

Important update

Italy has been at the forefront of B2G e-invoicing in Europe ever since the central e-invoicing platform SDI (Sistema di Interscambio) was rolled out and made mandatory for all suppliers to the public sector in 2014.

While a number of its European neighbours are slowly catching up, Italy is continuing to improve the integration of new technologies with the public administration’s processes. Its latest move is to make e-orders mandatory in public procurement. By leveraging the successful use of the public administrations’ Purchase Orders Routing Node platform (Nodo di Smistamento degli Ordini, or NSO) in the Emilia-Romagna region, Italy is now extending the functionality throughout the country.

E-ordering for purchases beyond healthcare products

As of 1 October 2019, all purchase orders from the Italian National Health System (Servizio Sanitario Nazionale, or SSN) must be delivered to and received by suppliers through the NSO platform. The suppliers affected by the mandate will be required to receive e-orders from public entities; the public administration will not proceed with the liquidation and payment of invoices issued by non-compliant companies. It is noteworthy that the mandate covers all purchase orders made by entities associated with the SSN, including office supplies and electronics, and not just health-related products.

In addition to mandatory receipt of e-orders, suppliers will also be able to send messages to the public administration. In cases where suppliers and the public administration have previously agreed, the supplying company may send pre-filled e-orders to the public administration buyer, which will confirm or reject the proposed supply.

Foreign suppliers and the new e-ordering mandate

Moreover, foreign suppliers must also comply with this mandate. The NSO mandate will have some impact on e-invoicing for Italian public administrations seeing as certain e-order data must be included in the e-invoices that are transmitted through the SDI.

The NSO system is built upon the existing SDI infrastructure, and as a result, the communication with the NSO requires similar channel accreditation as the SDI. Suppliers and intermediaries already performing the transmission of messages through the SDI platform are required to comply with complementary accreditation requirements, which are yet to be published. Furthermore, the technical specifications show that PEPPOL intermediaries may interact with the NSO platform through an Access Point service accredited with the NSO.

Regulatory Analysis

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Companies struggling to meet Italy’s electronic invoicing deadline of January 1 will get some relief from financial penalties if they can’t immediately issue invoices at the moment of supply, but it seems the Italian Tax Authority will not delay rolling out the system.

The government had stated that invoices that did not comply with the new mandate after January 1 would be subject to penalties ranging from 90 to 180 percent of the applicable tax. The tax authority will consider invoices not correctly formatted or not issued through the new SDI reporting system to be non-compliant.

But many businesses, especially smaller firms, have had trouble transitioning from their existing processes to the new e-invoicing framework that requires real-time e-invoice clearance through the state-operated Sistema di Interscambio, or SDI, platform.

In response to business concerns, the government is opening up to a grace period of sorts: Instead of postponing the e-invoicing roll-out as such, Italy will waive penalties for delayed clearance transmission. Furthermore, as of July 2019, Italy will loosen the main rule for when an invoice must be issued, which effectively will allow businesses more flexibility in the e-invoicing process.

Businesses get a grace period for Italian electronic invoicing penalties

The new rules on penalties allow for a short grace period. The tax authority will not apply penalties for e-invoices that are issued and cleared by the SDI within the VAT liquidation period to which the invoice belongs – in other words, by the 15th of the following month in which the invoice should be issued and consequently cleared (according to Decree n. 100 from 1998, updated in 2018). For e-invoices that the SDI issues and clears by the end of the following VAT liquidation period (usually the end of the following month), the tax authority will reduce the penalty by 80 percent.

For example, if a business can’t transmit invoices in compliance on January 1, it can delay the clearance transmission of an invoice that should have been issued to February 15 without any penalties for the delay. If the business still needs more time, it can delay the clearance transmission of invoices through the SDI until March 15 and pay an 80 percent reduction of the regular penalty.

Italy eases timing of electronic invoicing issuance

Italy is also loosening its requirement for the timing of issuing an invoice. Since 1972, Italian VAT law has stated that suppliers must issue invoices to the government at the point of supply. However, beginning in July, suppliers will be able to issue invoices through the SDI platform within 10 days of supply. Invoices not cleared by SDI are not valid for fiscal purposes, so taking 10 days to issue an invoice could cause delays in receiving payment.

For companies doing business in Italy, the relief is welcome, but it is also a sign that Italian e-invoicing is moving forward on schedule. That means companies with Italian operations need to get their systems ready to comply with the new mandate or face penalties by mid-February.

Takeaways: What this means for doing business in Italy

What is also clear from the latest developments is that e-invoicing regulations in Italy can change at any time. The problem becomes exponentially more difficult to solve when businesses figure in similar changes happening all over the world. Adopting a system that automates e-invoicing and provides a single source of truth for data in both accounts payable and accounts receivable is essential.