Mandatory E-invoicing
Electronic-invoicing is mandatory for almost all B2B (Business to Business) and B2C (Business to Consumer) transactions made by an Italian VAT registered business. The Italian system has been in force since 1 January 2019 (after it became compulsory for invoices to public administrations in 2014–2015).
Every invoice must be created in the official FatturaPA XML format and transmitted through the government’s Sistema di Interscambio (SdI – Electronic Data Interchange). The SdI validates the invoice (checks VAT numbers, mandatory data, etc.), delivers it to the recipient, if the recipient is also registered with the SDI , and returns a delivery receipt to the sender.
Where an Italian VAT registered business invoices a client who does not access the SDI, (e.g. a client resident outside Italy), they should send a pdf “courtesy” copy of the e-invoice.
The obligation to issue e-invoices applies to all VAT-registered persons (titolari di partita IVA) in Italy, regardless of turnover or tax regime (including flat-rate/forfettario taxpayers). The E-invoices must be kept in digital “conservazione sostitutiva” format for at least 10 years (simple PDFs are not enough).
Penalties for non compliance with Italy’s e-invoicing rules within the deadlines can be very steep.
Exemptions
There are a few very limited exemptions to the obligation to issue an e-invoice, but these come with terms and condition, requiring analysis of the position in each case (e.g OSS thresholds, type of service, place the client belongs, type of client). Not issuing an e-invoice may anyway mean extra tax reporting, expensive professional advice to explain the rules, and/or an expensive dispute with the Tax Agency.
The rules on e-invoicing are in constant evolution and even if you are exempt from issuing e-invoices now, you may not be in the future.
Automatic Booking of Purchase Invoices
As a VAT registered business you take advantage (unless you are on the Regime Forfettario as you cannot get a tax deduction for costs but still useful for tracking costs) of the e-invoicing system receiving invoices from suppliers via the SDI. this means that amounts paid to Italian VAT registered suppliers) are automatically booked in your tax records. For this you need to set up the account with your supplier, giving details of your SDI registration., so they have the requisite details to be able to issue you with an e-invoice.
If you are registered for VAT you should therefore keep a note (e.g. on your phone) of your billing details (Name, address, fiscal code number, VAT number and SDI code), and/or indeed a QR code that you can download from the Tax Agency web site, to give to suppliers, ahead of payment of an invoice. You should ensure that business related supplies are electronically invoiced by setting up an account with online suppliers (e.g. Amazon Business )such that you receive an electronic invoice for purchases. Note that all not all suppliers on e.g. the Amazon market place are able to issue an e-invoice, – you will get a warning. The goal is that as many of your business suppliers as possible (telecommunications, travel, web hosting/cloud services etc. who are registered in Italy are set up to issue you an electronic invoice.
All of the information reported via the SDI (invoices issued and received) can be found on the Tax Agency personal web portal providing a summary of invoices issued and received in a tax period.
No VAT Credit for Purchases if not E-invoiced
The right to claim credit (“detrazione”) for input VAT is conditional on receiving a valid electronic VAT invoice that is properly issued and received according to Italian VAT law, where the supplier sis registered for VAT in italy (or where the supplier should be registered for VAT) this means a VAT invoice that has been transmitted through the SdI. If the supplier does not issue the invoice through the SdI, then for the Italian purchaser:
- the invoice is not considered “fiscalmente emessa”
- the invoice is not recognised for VAT purposes,
- the purchaser cannot exercise the right to deduct the related VAT.
The Italian Tax Agency treats such a document as not having been issued for tax purposes.
If an Italian VAT registered business receives a invoice from a foreign supplier who is not required to register for VAT in Italy they must follow Italy’s “reverse charge” procedures. This basically means that where a VAT registered business in Italy, receives an invoice from a foreign supplier where VAT has not been charged, by the suppliers or at customs entry points for imports of goods) the need to issue a self-invoice – literally an invoice to themselves. The input VAT so charged on an e-invoice of this type will then be available for credit against the output VAT in the normal way.,
VAT paid in another jurisdiction outside Italy cannot be claimed for credit against Italian VAT. You may be entitled to refund of non Italian VAT, from the foreign tax authority but you can never use foreign VAT as credit against Italian output VAT.
VAT on invoices
One of the main challenges of running a business from Italy, especially where you have a mix of Italian, EU, non EU, private and business clients, is the correct Italian VAT treatment of a particular transaction.
Italy’s E-invoicing procedures offered by Italian software packages (of which there are many in addition to the Tax Agency offering) encourages you to identify the correct VAT treatment, choosing the appropriate code, and insert the description of the enable you to flag the correct VAT treatment in the client database for each client.
If you are running an online Italian VAT registered business invoicing using e.g. Stripe you will find add-ons and apps via the relevant marketplace or extensions store that will integrate with your systems and which can be configured to issue electronic invoicing.
See this post for a table of VAT Invoice Codes
