Compliance updates - Italy

According to Article 1 of the Legislative Decree No. 50/2017, this regime has been prolonged until 30 June 2023. This will leave enough time to assess the effectiveness of the measures implemented by Italy with the aim of reducing tax evasion in the sectors concerned.

Italy was originally authorised to apply the Implementing Decision (EU) 2017/784 until 30 June 2020. On 27 March 2020, Italy modified its request to make the requested prolongation identical in scope to the authorisation granted by the decision mentioned above. Italy had requested that the authorisation to apply the special measure to be extended due to the difficulties caused by the COVID-19 pandemic. 

This decision has been in effect since 1 July 2020. Without retroactive application of this decision, companies applying the split payment mechanism would have to change their invoicing systems to accommodate for the changes overnight. The tax administration would have to implement similar adaptations to its systems. Due to those difficulties, it does not seem appropriate to request businesses and the tax administration to undertake these changes at this moment. It is therefore appropriate to apply this decision retroactively to ensure legal continuity of the measure.

The scope of the special measure is restricted to supplies of goods and services to public authorities. Italy is authorised to require that VAT due on supplies to public authorities is to be paid by those authorities to a separate and blocked bank account of the tax authorities. This special measure is part of a package of measures introduced by Italy in order to counter tax fraud and evasion. This split payment mechanism has proved to be more effective in combatting tax fraud than mandatory e-invoicing in Italy.

The European Commission (EC) released a memorandum explaining Italy’s recent request for a derogation from Article 285 of the VAT Directive. Now that the request has been approved, all businesses with thresholds lower than EUR 85 000 are retroactively exempt from VAT obligations from 1 January 2023 until 31 December 2024.

Consequently, this measurement has an implication on related matters, such as exempting businesses from using SDI. According to previous data, this derogation will impact more than 63 000 enterprises, specifically the smaller ones.

Although the EUR 85 000 threshold has been the highest requested and approved in the EU, the incentives behind this proposal are aligned with the European Union’s objectives and consistent with existing policy provisions.

Previously, the EU expressed its commitment to supporting small businesses, which goes in harmony with the impact this measurement will have on small companies in Italy as it will relieve these businesses from costs that regard administration and compliance.

As Italy was the first country in Europe to have implemented countrywide B2B e-invoicing, the authorities have constantly monitored and improved its CTC models to fight tax evasion.

Starting 1 July 2022, the following taxpayer groups will be obliged to comply with the Italian e-invoicing mandate via the SDI platform:

• Taxpayers inside the flat-rate (regime forfettario)

• Amateur sports associations and third sector entities with revenue up to EUR 65 000

The entities to still be exempted from this mandate are microenterprises with yearly revenues or fees up to EUR 25 000, but they will be required to start issuing and clearing e-invoices as of 1 January 2024.

The new taxpayers in the scope of this mandate will be allowed to issue e-invoices within the following month when the transaction was carried out, without penalties being applied. The transition period will be applicable from 1 July 2022 until 30 September 2022. It will give the new taxpayers more time to conform to the general rule for electronic invoices to be issued within 12 days from the transaction date.

These developments were announced in the draft Decree-Law Decreto Legge PNRR 2 – Piano Nazionale di Ripresa e Resilienza (available in Italian).

As of July, business operators will have to report their cross-border transactions via Sistema di Interscambio (SDI).

To help you ensure compliance of your operations with the upcoming mandate, we provide an overview of steps to take in our latest blog.

Read the full article here.

As we reported in an earlier update, the Tax Work Decree in relevance with the 2022 Budget Law (DL 146/2021) has been already approved by the Senate but has been awaiting approval from the Chamber. Initially, it was estimated that the law will enter into force by the end of 2021.

On 30 December 2021, law no 234 was published in the Official Gazette and came into force on 1 January 2022. This means that Italy officially postponed the cross-border e-invoice reporting mandate for six months- from 1 January 2022 to 1 July 2022.

As we reported in an earlier update from last month, the European Commission released a proposal to the Council Implementing Decision to prolong the Italian B2B e-invoicing derogation deadline.

On 13 December 2021, the European Council approved the proposal authorizing Italy to maintain the mandatory electronic invoicing until 31 December 2024 by Council Decision no 2251 published in the European Official Gazette, n. L 454 of 17 December 2021.

The Tax Work Decree (It.: Decreto Fisco-Lavoro), linked to the 2022 Budget Law (DL 146/2021), was approved on 3 December 2021. It lists economic and fiscal measures required to take effect immediately to protect employment and other needs.

One of the major changes is the postponement of the Esterometro report abolishment in favour of transactional reporting of cross-border invoices via SDI, which was previously going to take effect on 1 January 2022.

The new timeline when Esterometro will be completely abolished is 1 July 2022.

The Decree has been passed to the Chamber, who will work on it starting 13 December 2021. Due to the urgent measures the Decree implies, it is expected to be passed into law on 20 December 2021.

However, businesses that are willing to opt-in for the new reporting schema now instead of continuing with Esterometro reports may do so.

On 5 November 2021, the EU Commission released a proposal to amend Implementing Decision for Italy to continue implementing mandatory electronic invoicing between businesses. The derogation previously granted to Italy expires on 31 December 2021, and the new deadline will prolong its effect for three years until December 2024.

The Italian government has imposed countrywide B2B e-invoicing mandates since July 2018. According to the estimations from Italy, electronic invoices have enhanced VAT compliance by ca. EUR 2 billion. In addition, between 2019-2020, the e-invoicing obligation has helped identify intra-community fraud for an amount of around EUR 1 billion.

The deadline extension would support the Italian tax administration’s efforts in combating tax evasion and businesses in increasing efficiency. The Decision is awaiting final approval from the EU Council, which is likely to happen, considering the positive outcome of e-invoicing in the country.

As part of the planned changes that have been delayed but are going to take place in 3 months from now, AGID intends to introduce a new set of mandatory metadata elements that must be stored along with the e-invoices. A suggested structure for maintaining the metadata is part of Appendix 5 in the new regulations (Section 2 with the XSD schema indicated in Section 2.1).

Furthermore, AGID has modified the metadata requirements. This includes adding new metadata elements and changing the description of some fields.

Together with the updates for e-archiving and metadata, there is an introduction of new standards and references such as the recently revised UNI 11386, with the purpose to ensure interoperability in the maintenance process.

The new guidelines and associated appendices can be found here.

Therefore, business operators in Italy now have to prepare for the new requirements for e-archiving and cross-border e-invoicing, which enter into force on the same date.

A month after the governments of Italy and San Marino have made the decision upon the e-invoice issuance, the Decree of 21 June 2021 was published in the Official Gazette No. 168 of 15 July 2021. It covers the requirements for the upcoming electronic invoicing as well as the document flows between these countries.

How will e-invoice submission work?

When shipping or delivering the goods to San Marino from Italy, e-documents such as e-invoices and credit/debit notes related to the transportation or shipment of goods on the San Marino territory must be submitted via Sistema di Interscambio or SDI. After that, the SDI would forward the electronic documents to the San Marino Tax Office which, in turn, would validate the invoice and communicate the outcome to the Italian Tax Authorities electronically.

The Italian Tax Authorities would then inform the suppliers whether the invoice has been validated via a web portal made available by the Revenue Agency. In addition, the Italian Revenue Agency will be sending send a certified e-mail with the same information about the invoice transmission. Such e-mail will be sent to the address listed in the National Index of PEC addresses of companies and professionals (INI-PEC) established at the Ministry of Economic Development.

As the Article 3 of the Decree states, if San Marino Tax Office does not validate the invoice within the 4 months since its original issuance, the Italian suppliers will have to issue a credit note via SDI, in accordance with the Article 26, par. 1 of the Presidential Decree No. 633/1972. No penalties will have to be paid in this case.

In case of the supply of goods from San Marino to Italy, the Tax Office of San Marino will send the e-invoices to the SDI. The latter will communicate the information to the buyer based in Italy via the portal of the Revenue Agency.

E-invoicing between Italy and San Marino must take place via SDI and in accordance with the technical rules for the preparation, transmission and receipt of electronic invoices governed by the Provision No. 89757/2018 of 30 April 2018 and its subsequent amendments. Further technical specifications are listed in the Provision No. 2021/211273 from 5 August 2021.

Timelines

The Decree takes effect starting 1 October 2021, with a transition period beginning at the same time. The business operators will be able to opt for e-invoices until 30 June 2022.

As of 1 July 2022, issuing e-invoices between Italy and San Marino for the supplies of goods and services will become mandatory.