VAT (Value Added Tax), known locally in Italy as Imposta sul Valore Aggiunto (IVA), was introduced in 1972 and has integrated the rules and directives set by the European Union, of which Italy if a founding members.
rules that Italy follows are contained within the VAT Law
, while tax authorities issues administrative doctrines that include statements on the VAT compliance rules. The Ministry of Finance
oversees the entire VAT System. The current VAT
rate applied in Italy is 22 percent.
The Italian legislation states that any type of companies formed in Italy that are trading in Italy and supply taxable goods or services must follow specific steps, such as registration for the Italian VAT, complete regularly the Italian VAT return and other declarations and comply with the VAT rules.
What types of companies should register for VAT in Italy?
VAT registration in Italy is mandatory in some cases. Understanding the current conditions not only for registration but also for declaring and paying this tax is important for resident as well as non-resident companies. Our team of agents who specialize in company formation in Italy is able to provide complete assistance, as needed. We can answer any additional questions, apart from the ones discussed herein.
The criterion for registration is whether or not the company carries out taxable supplies in the country. Many types of business activities or services are considered for this purpose, such as financial services, medical services, export sales as well as selling different types of goods, from foodstuffs to books and periodicals.
Non-resident companies that provide goods or services may be required to register with the Italian tax authorities as taxpayers. This is usually required if a company buys and sells goods within Italy and the supplier and customers are not Italian companies with VAT registration, if a company deals with provision or acceptance of intra-community suppliers, receipt of goods as acquisition from other EU States. On the list, there are also sales to individual customers using the internet, as they are subject to the Italian distance selling restoration threshold.
Non-resident taxable individuals who will derive income from the country are also required to comply with certain requirements and should follow these steps for VAT registration in Italy:
submit the ANR/3 form to Agenzia delle Entrate (this can be done personally, by express courier or by registered mail with return receipt – it cannot be submitted electronically);
enclose the documents, such as a copy of the applicant’s identification details, a recent statement from the country or origin’s Chamber of Commerce stating that the applicant is treated as a taxable person for VAT purposes in his country.
a self-statement on the activities the applicant undertakes/will plant to undertake in Italy.
An individual who registers in such a manner for VAT purposes in Italy will receive the credentials that will allow him to submit the VAT return and make the necessary payments online. This example of VAT registration in Italy can apply to individuals who are entrepreneurs, artists or self-employed. One of our agents who specialize in company incorporation can provide more details for those who are interested in coming to the country and deriving income from their activities.
When it comes to European Union, if your company is in Italy and you want to run your business outside Italy, you need to ask for the “VAT identification” in a few EU countries.
How is VAT declared and paid in Italy?
Companies that have received a VAT number in Italy are expected to comply with the requirements for declaring and paying this tax. Monthly payments are common, however, companies may also opt to make the necessary payment on a quarterly basis. For this to be possible, the said company needs to have a turnover of no more than 700,000 EUR (in those cases in which the activity of the company includes more than the supply of services) or, alternatively, below 400,000 EUR when the activity of the company is composed only of the supply of services. Investors should know that when they select the quarterly payment they will be subject to interest (1% of the due VAT per each quarter).
Retailers are required to store the data on the business-to-customer transactions using electronic means (including for transactions that are not documented via an electronic invoice, such as the sale of items in a shop). Starting with 2020, this applies to retailers with an annual turnover of less than 400,000 (although some exemptions will still apply).
Our team can provide investors with detailed information on how to fill in the forms (for example the F24 form) as well as other needed statements.
What are the VAT rates in Italy?
The value-added tax rates in Italy are the following:
- 22%: this is the standard VAT rate applicable to many of the common types of goods and services offered by companies.
- 4%: applicable to some foodstuffs, medical equipment, books, newspapers, periodicals, etc.
- 5%: applicable to the transport of passengers (in some cases) and to certain types of foodstuffs for which the 4% rate does not apply.
- 10%: applicable in case of water supplies, pharmaceutical products, admission to cultural services (cinema, theatre, shows).
- exempted: VAT exemptions apply to medical services, gaming and gambling, export sales, the contribution of assets to a company and others.
As seen from above, the reduced rates can apply to more than one category, in some cases, when this is the case (for example, in case of foodstuffs), entrepreneurs should obtain more information on the particular sub-categories to which a certain value will apply. One of our agents who specialize in VAT registration in Italy can provide you with more details on the current rates and the categories to which they apply.
An increase of the VAT rate took place in September 2013. Friday, September 27, 2013 was the day that marked the decision to raise the VAT tax rate from 21 percent to 22 percent, despite the expectations. Initially, the Italian government planed on raising the VAT rate starting October 1, 2013 until January 1, 2014. Article 6 of the Italian VAT Decree offered reference to the tax point in order to ascertain the correct VAT rate. As such, if the tax rate occurred before October 1, 2013, the rate applied was of 21 percent. If the tax point was after October 1, then the 22 percent rate was applied.
How can VAT refunds be obtained in Italy?
Foreigners who visit Italy may receive a refund of the VAT tax paid on goods bought for deportation. In order to proceed with the refund, the visitor must present his passport, the receipts of the goods and a proof of the deportation of the goods to an Italian VAT refund station, usually found in airports, tourist offices or international travel hubs.
Companies that are an EU business but do not usually supply goods or services to Italy (and have thus never been subject to VAT registration in Italy) cannot deduct the VAT.
However, the VAT tax refunds are different by region; therefore, visitors should always check the terms and conditions of the Italian VAT refund.