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May 2015
1 VAT in Italy
Reverse charge
mechanism Starting from 2015, the scope of reverse charge mechanism is extended to:• Cleaning, demolition, system
installation and completion of buildings;
• Transfers of green certificates and similar allowances,
• Supplies of gas and electricity towards “taxable dealers” (as per art. 38(2) of the VAT Directive).
Taxable persons predominantly performing the aforementioned supplies will be in a constant VAT credit position and are admitted to quarterly and yearly refund procedures.
OUR RECOMMENDATION:
to analyse the impact of new rules on the Company’s VAT cash flows and, in case a VAT credit accrues, to identify the solution that better maximizes the recovery and minimizes the associated financial and administrative costs.
“Split payment” mechanismStarting from 2015, supplies towards Public Bodies are subject to the “split payment” mechanism. Under this mechanism, the Public Body pays to the supplier the taxable basis only and remits VAT directly to the Treasury.
The rule applies to any supply of goods and services, subject to VAT, other than those subject to reverse charge mechanism or to special VAT schemes.
Taxable persons predominantly performing the aforementioned supplies will be in a constant VAT credit position and are admitted to quarterly and yearly
refund procedures. The payment of the refundable VAT credit is made with priority in respect to other VAT refunds.
OUR RECOMMENDATION:to analyse the impact of new rules on the Company’s activity and VAT cash flows. It could be complex to qualify the nature of a body as public or private, as well as to evaluate if the reverse charge or the split payment mechanism applies.
In case a VAT credit accrues, it is necessary to identify the solution that better maximizes the recovery and
minimizes the associated financial and administrative costs.
VAT in ItalyNew rules from 2015
VAT refundsHistorically in order to obtain the refund of VAT credits, Italian VAT taxable persons were required to file a bank or insurance guarantee in favour of Italian Tax Authorities for the amount asked for refund, plus interests, and for a duration of 3 years. This obligation, which has the aim of protecting the Treasury from undue, ungrounded or unlawful refunds, had serious negative impacts on cash flows generated by VAT for taxable persons.
Starting from 2015, the filing of a guarantee is mandatory only for taxable persons qualified as “risky” (depending on specific parameters). The normal procedure now requires that the existence of:• the VAT credit asked for refund is
certified by a chartered tax professional or an audit company;
• certain conditions required by law are certified by a self-declaration of the claimant.
New rules apply to VAT refund requests pending as at 1 January 2015, if no
guarantee has been filed yet. Said simplification reduces costs associated to the refund procedures and shorten the time for repayment.
OUR RECOMMENDATION:to make a recognition of the Company’s VAT refunds pending as at 1 January 2015 and to verify if the claimant meets the conditions to benefit from the new rules.
May 2015
2 VAT in Italy
Annual VAT returnThe Annual VAT return for FY 2016 shall be filed within February 2017 and no more within September 2017.
Normally, the form contains more than 400 boxes.
Filing of unfaithful Annual VAT Return is subject to administrative penalties quite severe and, in certain cases, it could be considered criminal offence.
OUR RECOMMENDATION:to assist the Company in setting up the proper administrative procedures that will allow the correct and complete filling in of the form in two months from the FY end.
VAT in ItalyNew rules from 2015
Usual exportersItalian VAT taxable persons that predominantly perform intra-EU supplies of goods, exportations or similar (so called “usual exporters”) are entitled to ask their suppliers (and Customs) not to charge VAT on operations (and importations). This with the aim to prevent a structural VAT credit position.
To benefit from said simplification, “usual exporters” are required to perform some fulfilments and, among others, to issue a declaration to suppliers/Customs.
Procedures related to this declaration changed significantly starting from 2015.
In case the taxable person violates these rules, penalties ranging from 100% to 200% of the VAT involved could be applicable.
OUR RECOMMENDATION:to make a check on the administrative procedures implemented by the Company to comply with new rules.
VAT warehouseThe Italian Tax Agency, by Circular, acknowledged the judgment of the ECJ of 17 July 2014, Case C-272/13 Equoland, according to which a VAT warehouse (differently from a Customs warehouse) is a real space where goods must actually and physically be placed or stored in order for the taxable person to benefit from the simplification (see point 29 of the Judgement).
The Circular clarified some practical aspects of the application of the VAT warehouse scheme.
By way of example, it has been explained that the simplification can be applied also to services performed in spaces neighbouring a VAT warehouse. In this case, it is not necessary that, before the services are carried out, goods are placed into the warehouse, then withdrawn and moved to the neighbouring spaces. Consistently, once the services have been performed, it is not mandatory for goods to be placed
into the VAT warehouse if they must be withdrawn for the purpose of a sale or a transfer in another VAT warehouse.
The Circular also states as “formal” some violations occurred in situations similar to the one of the case object of the ECJ Judgement, provided that the taxpayer acted in bona fide.
OUR RECOMMENDATION:To analyse the impact of clarifications provided by the Italian Tax Agency on Company’s purchases and sales carried out via the placing and/or storage of the goods in a VAT
warehouse.For those Companies who have not implemented the VAT warehouse scheme, to evaluate if such a simplification regime could be beneficial compared with the associated costs.
May 2015
3 VAT in Italy
VAT groupStarting from 2016 Italy should implement the VAT group regime as per art. 11 of the VAT Directive.This regime will be alternative to the financial VAT group, already provided by
the national law, under which entities who are part of the group offset each other VAT debt and credit positions.
E-invoicingThe Government intends to promote the
e-invocing and the e-transmissions of tickets (for retailers), granting a reduction of accounting and administrative fulfilments to those taxpayers who, starting from 1 July 2016, will issue invoices in accordance with principles set forth by art. 232 of the Directive 2006/112/CE. Alternatively, starting from 1 January 2017, the taxpayer can opt for the e-transmission of all purchases and sales invoices.
The Tax Agency will provide for free an e-invoicing system and the Ministry of Finance will provide for free the e-platform for the transmission of invoices.
The platform for the e-transmission of tickets already exist.
Simplifications granted includes the exemption for filing the List of Clients and Suppliers (“Spesometro”), the List of transactions with black-listed countries, the prioritization of VAT refunds, the one-year reduction of the assessment period, both for VAT and income taxes.
VAT in Italy Rules to be enacted…
Processing on goods The legislator is amending VAT provisions on goods transferred to Italy from another European Member State for processing, in compliance with the judgement of the European Court of Justice on joined cases C-606/12 and C-607/12 Dresser Rand.
Before the amendment, this transfer does not qualify as a (fictitious) intra-EU purchase of goods, if, after the processing, goods leave the Italian territory (i.e. are dispatched or transferred in another EU
or extra-EU country).After the amendment, this transfer
does not qualify as a (fictitious) intra-EU purchase of goods, if, after the processing, goods return back to the EU Member State of departure only.
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Contacts
Simonetta La Grutta
Partner, Head of VAT
T +39 02 7833 51
M +39 342 33 13 123
Mario Spera
Principal
T +39 06 3973 44 95
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20121 Milano
T +39 02 7833 51
F +39 02 7818 79
Lungotevere Michelangelo, 9
00192 Roma
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F +39 06 3973 41 24
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35137 Padova
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