Indirect tax ebook - Italy

Time of supply rules 

Supply of goods

The VAT Law defines the supply of goods as all transfers for consideration of the ownership or other right in rem in tangible property.
If goods employed in the business are withdrawn from the business for the entrepreneur's personal use or otherwise removed from the business, the transaction is deemed to be a supply of goods at the arm's length value (self-supply).

Chargeable event
The chargeable event for the importation of goods from outside the EU is generally when the importation is made.
For goods purchased from another EU member state, the chargeable event which triggers the purchaser’s liability to VAT on the purchase, is either:

• the date when the supplier issues an invoice in respect of the transaction; or 
• if the purchaser has not been addressed any invoice by the month following the purchase, the purchaser must issue an invoice on behalf of the supplier.
  
  

The taxable event for VAT purposes is as follows: 

• for the supply of immovable goods, the earliest of the settlement of the relevant deed, the issuance of the invoice or the payment of the price;
• for the supply of movable goods, the earliest of the delivery, the issuance of the invoice or the payment of the price; and
• for the supply of services, the earlier of the issuance of the invoice and the payment of the price.
  
  

Subject to EU approval, VAT on transactions between taxable persons for which the taxable event has occurred, but for which no price has as yet been paid, shall not be remitted to the state until the earliest of the payment of price and one year after the transaction.


Time when tax is due as a main rule
Tax is ‘due’ if a taxable person has supplied taxable goods or services and in effect creates a liability for VAT, even though the actual accounting of the VAT may not be made to the tax Authorities until a later date. The distinction between tax ‘due’ and tax ‘payable’ is important.

As explained, tax due merely indicates that a transaction generating a VAT liability has been completed. When the date for payment of the actual tax charge arises the tax is said to be ‘payable’.

The general rule in relation to the time when tax becomes due is set out in art. 13 of the VAT Act which provides that:

• where a VAT invoice must be issued to the customer the tax is due at the time of issue the invoice or if the invoice is not issued, on the 15th of the month following the month in which the supply was made;
• where tax has been incorrectly stated on an invoice or credit note or, where tax has been invoiced by a non-registered person, the tax becomes due at the time of issue of the relevant invoice or credit note (Art. 37 VAT Act).

In any other case the tax becomes due at the time the supply is made.

Exemptions to main rule
In Italy, certain activities are VAT exempt, as a consequence input VAT incurred on goods and services referring to such activities cannot be recovered.

The following list is not exhaustive and reference should be made to the legislation:

• insurance;
• postal services;
• betting, gaming and lotteries;
• finance;
• education; 
• supplies, financial leases, rental of land and farming enterprises, areas not dedicated to parking of vehicles, and any kind of building, unless :
• leased or rented to VAT taxpayers allowed to recover up to 25% of VAT;
• individuals; 
• the lessor opts for accounting the VAT on the relevant contract.
• supplies of any kind of building, excluding commercial and industrial buildings, unless
• supplied by the constructor within the fourth year after their construction or after the end of the works of restructuring as defined by Law no. 457/1978 (art. 31) ;
• supplied to taxpayers allowed to recover up to 25% of VAT;
• supplied to individuals;
• the seller opts for accounting the VAT on the relevant contract.
• health and welfare including medical and paramedical care; 
• burial and cremation; 
• the supply of goods and services referable to the aims of trade unions, professional associations, etc., upon the payment of a membership subscription;
• organs and blood as well as other human source products used for medical purposes;
• supplies of gold in ingots, bars and granules;
• certain gifts of goods for the benefit of those who have suffered a natural calamity or disaster;
• services of libraries, galleries, museums, etc.;
• supplies for the welfare of personnel; and
• supplies of goods bought or imported without original partial or total right of deduction.
• gold and silver ingots or bars which weigh more than one gram, and have a 995 per thousand grade of purity; and
• gold coins with 900 per thousand grade of purity and minted after the year 1800, where the market price thereof does not exceed 80% of the price of gold.
  

Time when tax is payable
With monthly taxpayers, the payment should be made no later than the 16th day of the following month. With regard to quarterly taxpayers, the payment should be made no later than the 16th day of the second month of the following quarter.

Monthly and quarterly taxpayers are required to make a payment on account by 27th December.

VAT to be paid for a period is determined through the VAT liquidation, which consists of the difference between output VAT (VAT on supplies) and input VAT (VAT on purchases) of the relevant VAT supplies made during the period. If the input VAT is higher than the output VAT the difference is a VAT credit, which may be carried forward and added to the input VAT of the following period. If the output VAT is higher than the input VAT then the difference has to be paid.

The final settlement of VAT due following the annual return should be made no later than 16th March of the following tax year. However, this VAT can be paid in nine monthly installments (from 16th March to 16th November). In this case a 0,40% monthly interest rate must be added to each installments.

Supply of services

The general rule is that services are deemed to be supplied at the place where the supplier belongs to, generally being the location of the business establishment from which they are supplied.
However, this rule is varied for a number of services, and any supplier may make supplies to a customer in another member state which are deemed to be made in that state. If this occurs, and the supplier is not registered for VAT in that member state, the customer may be liable to pay the VAT on the supply directly to the tax authorities. Alternatively, the supplier may have to register for VAT in the other member state.

Services
The services subject to special rules which may result in them being regarded as supplied in another member state, even though you are not established there, are: 

• services connected with land; 
• certain services treated as supplied where performed;
• certain services treated as supplied where received; and
• services of intermediaries.

Intra community services
Services connected with land are regarded as being supplied where the land is. The services covered are:

• the grant, assignment or surrender of interests in or rights over land, options to obtain such interests or rights, licenses to occupy land, and contractual rights over or in relation to land; 
• works of construction, demolition, alteration, repair, etc. of any building or civil engineering work; and
• services such as those supplied by estate agents, auctioneers, architects, surveyors, engineers and others involved in matters relating to land.

The following services are regarded as supplied where they are performed:

• cultural, artistic, sporting, scientific, educational or entertainment services;
• services relating to exhibitions, conferences or meetings; 
• services ancillary to supplies under (1) or (2) above (including services of organizing them);
• the valuation of goods, or work carried out on goods;
• the transportation of passengers; and 
• ancillary transport services.
  

Certain services are regarded in EU VAT legislation as supplied where the customer belongs to, if supplied to an EU customer who receives them in the course of business or to a non-EU customer acting in any capacity. These are: 

• transfer and assignments of copyrights, patents, licenses, trade marks and similar rights;
• advertising services;
• services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services (but excluding services relating to land);
• data processing and the provision of information (but excluding services relating to land);
• the acceptance of any obligation to refrain from pursuing or exercising, in whole or in part, any business activity or any such; 
• banking, financial and insurance services (including reinsurance, but not including the provision of safe deposit facilities); 
• the supply of staff; 
• the letting on hire of goods other than means of transport; 
• telecommunications; 
• radio and television broadcasting services; 
• electronically supplied services.
  
  

Italian legislation generally reflects the EU provisions except that certain of the above intangible services if ‘used’ in Italy may be subject to Italian VAT when the supply is to a person based outside the EU. 
 

• Introduction
• Scope
• Registration
• Tax rates
• Reporting & filing
• General tax application/Time of supply