Few people will have failed to notice the extent of the ongoing VAT reform in Italy.
From 1 January 2019, it will be mandatory for all domestic invoices to be issued in electronic form and to have been cleared through the state-operated SDI platform. From this date, any invoices that aren’t created in the regulated FatturaPA XML format and not transmitted through the SDI platform will be considered as not issued, meaning any deduction of input VAT will not be allowed and penalties will apply.
However, what many still struggle to understand is the full impact of this mandate, more specifically its scope and effect on corporate business processes. The new e-invoicing framework will be mandatory for and applicable to all transactions towards taxable persons as well as towards non-taxable persons. This effectively means that as soon as a supplier is obliged to issue a domestic invoice, that invoice is subject to the new framework, regardless of whether it’s a B2B or B2C invoice.
Exceptions to the rules
There are some specific supplies exceptions which are already exempt from having to issue an invoice (Article 22, D.P.R. 633/1972). These include:
- The supply of goods in premises open to the public and by street vendors;
- The supply of food and drinks;
- Transportation of people;
- Hotel services; and
- Services supplied in open spaces or in clients’ homes, extended also to credit and insurance companies, telecom services, radio and TV broadcasting and other categories that provide high frequency services to the public.
There is an important caveat to the above exceptions – they only apply until the buyer requests an invoice. This effectively means that even though issuing an invoice for these services is not mandatory per se, it must still be provided if requested by the buyer and adhere to the new framework and be cleared by the SDI from 1 January 2019.
How does a B2C e-invoice differ from the regular B2B e-invoice?
The content and format for both B2B and B2C e-invoices are the same, but the delivery isn’t. This is because consumers don’t have to provide a Codice Destinatario or have a certified email – PEC – connected to the Aggenzia delle Entrate through which the invoice can be routed to the buyer.
Without a Codice Destinatario or PEC, the B2C e-invoice issued must state “0000000” in the Codice Destinatario field. In these cases, since the SDI can’t deliver the e-invoice to the consumer, the supplier must provide a copy of the electronic invoice in paper form or by email.
Beyond the mandate – closing the VAT data gap
One of the main reasons why so-called clearance systems were introduced and why they prove to be so successful, is that such e-invoicing systems provide the state with a complete view of the national economy – and Italy is by no means an exception. By introducing mandatory B2G e-invoicing a couple of years ago, and by now extending the same framework to B2B and B2C invoicing, the Italian tax authority will benefit from a complete picture of almost all transactions taking place in Italy. But there is still one gap left to close: the retail-type exceptions outlined above.
To tackle this data gap, a new legal obligation was recently introduced by the Budget Law for 2019 requiring that specific taxpayers must retain transaction-relevant data and on a daily basis electronically transmit the summarized information of all transactions carried out throughout the day. The taxpayers subject to this obligation are the ones excluded from the main rule to issue invoices for all VAT-able transactions (according to article 21 of the VAT law) and the goal is to keep track of the data that could otherwise fly under the radar of the tax authorities as most of the time an invoice isn’t issued for those specific transactions. The obligation only applies if the customer hasn’t asked for a formal invoice. In this way tax authorities will obtain information of all supplies made.
As logical as this clearance extension may be, it doesn’t leave much time for taxpayers to adapt. For taxpayers with a turnover above €400,000, the obligation starts on 1 July 2019 and for all others from 1 January 2020. In this interim period before the reporting requirement becomes mandatory, taxpayers must still register/book these transactions in accordance with the old rules provided in Article 24 of the Decree n. 633 of 1972.
Interestingly enough, detailed information has yet to be published about how the reporting system to meet this obligation should work; technical specifications are eagerly awaited in the coming months.
Sovos has been keeping companies compliant in Italy for more than a decade. Find out how Sovos saves clients from penalties, other potentially expensive e-invoicing pitfalls.
About the Author
Lara Nogueira is a Regulatory Counsel at Sovos TrustWeaver. Based in Stockholm and originally from Brazil, Lara’s background is in law and accounting with a professional focus on international tax law, tax planning, and tax compliance. Lara earned her degree in Law and specialisation degree in Tax Law in Brazil and her masters in European and Internal Tax law from Lund University in Sweden.
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