Italy Value Added Tax

General Principles:

• VAT (in Italian, Imposta sul Valore Aggiunto or IVA) is a consumption tax applied to the supply of goods and services carried out in Italy by taxable persons in the exercise of their business, art, or profession, and on the importation of goods into Italy.
• Intra-Community acquisitions of goods are also subject to Italian VAT under specific conditions.

VAT Rates:

• Standard Rate: The standard VAT rate in Italy is 22%.
  This rate applies to most goods and services.
• Reduced Rates:
  • 10%: Applies to specific goods and services such as water supplies, passenger transport, admission to cultural and sports events, restaurants, hotels, and certain foodstuffs.
  • 5%: Applies to certain foodstuffs and social services.
  • 4%: (Super-reduced rate) Applies to specific essential goods and services like TV licenses, newspapers, periodicals, books, and medical equipment for disabled individuals.
• Zero Rate (0%): Applies to specific transactions such as exports and intra-Community supplies of goods.
  While no VAT is charged, these transactions must still be reported on the VAT return, and input VAT related to these supplies is generally recoverable.
• Exemptions: Certain supplies of goods and services are exempt from VAT, such as specific financial and insurance services, postal services, healthcare, and education.
  
• Input VAT related to exempt supplies is generally not recoverable.

VAT Registration for Foreign Businesses:

• Having a Permanent Establishment (PE) in Italy: If a foreign business has a PE in Italy, it must register for VAT and comply with all Italian VAT obligations as if it were a resident entity.
• Supplying Goods or Services in Italy:
  • B2B (Business-to-Business) Transactions: The reverse charge mechanism may apply, where the Italian customer accounts for the VAT. However, registration may still be required in certain situations.
  • B2C (Business-to-Consumer) Transactions: If supplying goods or services directly to final consumers in Italy from abroad, VAT registration may be necessary. Specific rules apply to distance sales.
• Importing Goods into Italy: VAT is due on the importation of goods into Italy from outside the European Union.
• Carrying out Intra-Community Acquisitions of Goods in Italy: If a foreign business registered for VAT in another EU member state acquires goods in Italy.

VAT Compliance:

• VAT Identification Number: Once registered, a VAT identification number (Partita IVA) is issued. This number must be included on all invoices.
• Invoicing: Invoices must comply with Italian VAT regulations, including specific information requirements.
• Record Keeping: Businesses must maintain proper records of sales and purchases for VAT purposes.
• VAT Returns: VAT returns must be filed periodically (monthly or quarterly, depending on turnover) and payments made by the deadlines. The annual VAT return is also required.
• Intrastat Returns: Businesses engaged in intra-Community supplies or acquisitions of goods may be required to file Intrastat returns.
• VAT Payments: VAT payments are typically made electronically.