Indirect tax ebook - Italy

Registration

Any legal or physical person who carries on a business or undertakes an artistic or professional activity independently from an employer, or who sets up a permanent establishment in Italy, must register for VAT, by filing a specific application form with the Italian tax Authority.

Simplifications are foreseen for business with a turnover below € 30,000. The foreign European Union TaxPayers, without a PE in Italy, can register for VAT in the two following alternative ways:

• by asking directly for a VAT registration number (this possibility being barred to extra-EU taxpayers);
• by appointing an Italian entity as its VAT representative.

In Italy application for VAT registration is required within 30 days of:

• starting up a business, artistic or professional activity in the Italian territory; or
• setting up a permanent establishment in Italy.

A foreign business without a permanent establishment in Italy is required to register only if its Italian supplies are towards persons who are not themselves VAT-registered in Italy. Foreign businesses making taxable supplies to Italian businesses may avoid appointing a fiscal representative or having a VAT number because, in such circumstances, the Italian purchaser of the goods or services is entitled (obliged in some cases) to account for the VAT on the supplies received under the ‘reverse charge’ procedure.

VAT on e-commerce

For electronic sales there are two kinds of commerce: 

1. Indirect e-commerce
   It refers to the transfer of material goods in which the parties make use of electronic means to perform the sale contract and make the relevant payment, save sending the goods as in the case of mail order sales. For this kind of commerce no specific provision has been laid down as this trading system does not affect the existing rules for mail order sales because it is based on ordinary exportations, importations and intra-EU supplies.
2. Direct e-commerce
   It refers to the electronic transfer of virtual goods or services which allows the parties to perform the transaction by downloading the purchased good under an electronic file format and to make the relevant payment on-line at the same time. For the goods and services provided electronically to intra-EU taxpayers by extra- EU suppliers, the rate applied is the rate of the Country where the service is used/enjoyed.
   However, a special VAT regime providing for the direct identification of the extra- EU taxpayer in one EU country, where the total amount of output VAT will be paid, has been established.

Distance sales 

Should purchasers be either Italian resident taxpayers or non-resident taxpayers identified in Italy and holding an Italian VAT number and should the goods be delivered to Italy, the general rules provided for intra-EU transactions will apply: the seller will not levy any VAT on sale while the national purchaser will apply VAT on the EU purchase by adding the VAT amount to the foreign invoice and it will also comply with all the subsequent rules.

Any transfer of tangible movable assets carried to Italy by the EU seller, no matter how the terms of said transactions, will be liable to VAT in Italy, either through direct identification or an appointed fiscal representative, provided that they are carried out in favor of private end-users. However, if an EU seller carries out distance sale transactions in Italy for an overall annual amount below €35.000, it does not have to apply the VAT in Italy but in the origin country, unless it opts to do so in Italy.

The distance sale rule does not apply to the supply of new means of transport or to the supply of goods supplied under a supply and installation contract.

Group registration

The national rules provides for a special offsetting treatment likely to help groups of companies. While the EU rules regard a group as one single entity from both a legal and a fiscal point of view, despite addressing independent legal persons, our system still regard each one of the group companies as independent entities that: (i) participate in the offsetting, but they will keep their legal and fiscal separate identity; (ii) they are individually bound to all legal obligations as taxpayers; (iii) they will remain under the exclusive jurisdiction of the Revenue Office within whose territory they are fiscally resident in, as far as tax return checks, amendments and penalties are concerned.

The offsetting procedure provides that regular payments (either monthly or quarterly) as well as the year-end adjustment must be made by the holding company, which will also establish the amount due or the group VAT credit, by calculating the algebraic sum of the accounts payable and receivable arising out of VAT computation of all the involved companies’ and the subsequent transfer of said amount to the group. The law allows to automatically offset the accounts receivable in the hands of some companies against the accounts payable in the hands of others within the group, thus establishing a simplified means of VAT receivable collection.

Only the entities meeting with several requirements can benefit from the group consolidation. In particular, (i) over 50% of a company’s share capital must be held by another company, and (ii) said investment must be held uninterruptedly at least from January 1 of the solar year prior to the year at issue.

• Introduction
• Scope
• Registration
• Tax rates
• Reporting & filing
• General tax application/Time of supply