Invoicing and Tax regulation in Italy

Itaily initiated the modernization of its transaction processes in 2014 by introducing mandatory B2G e-invoicing and in 2019 with introduction of mandatory B2B and B2C e-invoicing. Digitalization proved to be a success, which brought to a mandatory cross-boarder e-invoicing in 2022. Despite the shift being obligatory, companies benefit from the transition. They have recognized significant savings in terms of money, time, and reduction in manual errors, which are particularly prevalent in tax reporting. Given the standard VAT rate in Italy at 22% and the corporate tax rate at 24%, minimizing errors is crucial to avoid increased liabilities and penalties.

 

To ensure compliance with the regulations and save a few bucks, check out complete guide on (E-)invoicing, tax regulations and digital reporting in Italy.

 

Electronic Invoicing Regulations

Electronic invoicing, or e-invoicing, is the digital exchange of invoice information between a supplier and a buyer. In 2014, Italy implemented mandatory B2G e-invoicing, which proved to be a success and expanded to mandatory B2B and B2C e-invoicing in 2019 with an addition in 2022 for mandatory cross-border e-invoicing. Even though the shift is mandatory, companies benefit from electronic invoicing. E-invoicing streamlines the accounts payable process by automating data entry, improving efficiency, and ensuring the integration of invoices directly into the accounts payable systems of buying organizations. Benefits also include improved efficiency, faster payments, and compliance with tax authority regulations, making it superior to traditional paper invoicing.

Italian e-invoicing regulations align with Directive 2014/55/EU, which mandates public entities to be equipped to receive and process e-invoices that adhere to the European standard EN-16931. This directive is part of the European Union's efforts to enhance the internal market through standardized e-invoicing, promoting interoperability among countries and supporting the functioning of the internal market. Furthermore, Italy participates in the PEPPOL network, enhancing standardized cross-border e-invoicing within the EU. To support these requirements, the Italian government utilizes SDI (Sistema di Interscambio), a centralized platform designed for the receipt and processing of e-invoices in dealings with public sector entities.

 

E-invoicing Process

Taxpayers in Italy must register on the Agenzia delle Entrate’s online portal. The platform allows them to manage tax-related activities, including the submission of electronic invoices. E-invoices contain structured invoice data that facilitates automatic processing and validation.

The process follows:

Completing a transaction: Italian taxpayers are required to issue e-invoices for each transaction at the time of sale.

Upon submission: Each invoice is sent through the Sistema di Interscambio (SdI), the government’s electronic exchange system. This system reviews each electronic invoice, checking its compliance to regulatory standards;

After validation: If the invoice meets all requirements, the SdI assigns a unique identification code and a timestamp to the invoice, effectively validating it. The SdI then forwards the validated invoice to the recipient.

The customer receives this invoice: E-invoice includes the unique identification code and the timestamp, serving as proof of the validated and submitted transaction.

Customers or other interested parties can verify the transaction: through the Agenzia delle Entrate’s online portal. This system allows for the direct access and verification of invoice details, ensuring transparency and accountability in financial transactions.

 

Governmental Body Responsible for E-invoicing

Responsibility for e-invoicing regulations in Italy lies with the Agenzia delle Entrate (Revenue Agency).

 

E-invoicing Formats

E-invoicing formats in Italy align with the national standard FatturaPA. The system for e-invoicing is managed through Sistema di Interscambio (SDI).

E-invoicing formats commonly used in Italy:

FatturaPA	Internationally recognized standard in Italy, XML-based business document designed to facilitate e-invoicing within the country.
PEPPOL BIS	Used for international transactions, ensuring compatibility with European standards, utilizing XML format as well.

 

E-invoices Validating

Ensure that your e-invoices comply with the European standard EN 16931 as well as specific Italian requirements. Further validation of e-invoices is not mandatory in Italy, but you can use a qualified digital certificate. If employed, the certificate must be verified to ensure that the invoice remains unaltered and originates from a trusted source.

 

E-invoice Archiving

In Italy, you must archive e-invoices for a minimum period of 10 years. The archiving period starts from the end of the year in which the invoice was issued. Archiving abroad is allowed under specific conditions.

 

 

Tax Regulations

The standard VAT rate in Italy is 22%, applying to most goods and services. A reduced VAT rate of 10% applies to various items, like medicines, and some tourism services. An exception are foodstuffs and books with an even lower VAT rate of 4%.

 

Corporate Tax

The standard corporate tax rate in Italy, known as IRES is 24%. Companies in Italy are also subject to a regional tax known as IRAP with a standard rate of 3.9%, but it can vary depending on the region and specific local regulations.

 

VAT on Digital Products

In Italy, the VAT rate applied to digital products, such as software, digital books, and online services, is generally subject to the standard VAT rate of 22%. Digital services provided to consumers in the EU, need to charge VAT at the rate applicable in the consumer's country if the provider is located within the EU.

 

 

VAT Payments and Returns

In Italy, businesses are required to file a VAT Return with the Italian Revenue Agency (Agenzia delle Entrate) to declare the VAT they have collected and the VAT they have credited for business purchases. The VAT Return should detail:

VAT collected on sales,

VAT credits for VAT paid on business purchases.

The net VAT amount, which is the difference between the VAT collected on sales and the VAT credits on purchases, is indicated on the VAT Return and must be paid to the Italian Revenue Agency (Agenzia delle Entrate). If the VAT credits exceed the VAT collected, the business can claim a refund.

The reporting frequencies are:

Monthly: Reports must be submitted by the 16th day of the month following the reporting period. Mandatory for businesses with a turnover exceeding €500,000 for services and €800,000 for goods.

Quarterly: Reports must be submitted by the last day of the second month following the quarter's end. Mandatory for businesses with a turnover less than €500,000 for services and €800,000 for goods.

Annually: Reports must be submitted by the 30th April of the year following the reporting year.

The Italian Revenue Agency encourages the electronic filing of VAT Returns and Payments through its online portal (Entratel/Fisconline).

 

VAT Registration Threshold

VAT registration threshold for domestically established businesses is €85,000.

For EU-based businesses engaged in distance selling of goods or services to Italianconsumers, the threshold is €10,000.

Non-EU businesses selling into Italy have no VAT registration threshold; they are required to register for VAT immediately upon beginning sales of goods or services to Italian consumers.

 

 

E-invoice Requirements

In Italy, e-invoice requirements adhere to EU standards, demanding components such as:

Unique Identification Number;

Date of issuance;

Reference number for tracking;

Identification of the Seller and the Buyer: full name, address and VAT identification number;

Tax Representative Information (if applicable): the VAT number and address, if the supplier is not based in Italy.

Information about Goods or Services Provided: description, quantity, unit price;

VAT Information: total amount excluding VAT, applicable VAT rate, different VAT rates(if they apply) and total VAT amount;

Total amount Including VAT;

Payment terms: details of the payment terms, including due date and payment method;

Regulatory Information: Any additional legal information required, such as reverse-charge transactions, exemptions, or intra-community supplies.

For businesses with repeating customers, setting up recurring invoices can streamline the billing process by automating regular, automatic payments.

 

Utilizing invoicing software can significantly benefit businesses in creating, sending, and managing e-invoices in compliance with Italian regulations. These tools not only help in generating professional invoices but also in streamlining the invoicing process, improving cash flow, and ensuring that payments are received on time.

See how Space Invoices can help.

 

B2G E-invoice Specifications

For B2G transactions, it may be necessary to include codes specific to public administration, such as IPA (Indice delle Pubbliche Amministrazioni) codes.

 

B2B E-invoice Specifications

For B2B transactions, you will need an electronic code (Codice Destinatario), if the recipient is registered in the SDI system. If not registered, a certified email address can be used instead. B2B transactions also require a detailed breakdown of VAT rates applied to various items or services.

 

B2C E-invoice Specifications

For most B2C transactions you can issue simplified e-invoices, which require less information compared to full invoices. These invoices generally do not include the buyer's VAT number, unless the consumer specifically requests a FatturaPA for purposes such as tax deductibility or other reasons.

 

Cross-Boarder E-invoice Specifications

Cross-boarder transactions demand for detailed information on VAT treatment depending on whether the goods or services are exported or imported. It is important to note, that the information about the foreign buyer or seller must comply with the invoicing requirements of the buyer’s or seller’s country.

It is also essential for you to specify the currency used for the transaction, as the involved countries may have different currencies.

 

Simplified E-invoice Requirements

In Italy, you can issue simplified e-invoices for transactions where the total invoice amount does not exceed €400.

Simplified invoices include:

Date of Issue;

Unique Invoice Number;

Supplier Information: Name or company name, address and VAT number;

Customer Information: only the name, if the consumer is not registered for VAT;

Description of Goods or Services;

Taxable Base;

VAT Rate and Amount;

Total Amount Due: Gross total, including VAT.

 

 

Digital Reporting R

In Italy, digital reporting involves the real-time or near real-time transmission of data to the Italian Revenue Agency and is mandatory for all transaction types, including B2B, B2C, B2G, and cross-border. When a business issues an invoice, it is transmitted to the Sistema di Interscambio (SdI), which verifies the invoice's compliance with legal requirements. If the invoice recipient is another business or a consumer, the invoice is stored digitally. Pertinent tax data is relayed to tax authorities in near real-time.

Although data collection occurs in real-time or near real-time, businesses are also required to provide quarterly summaries of their VAT liabilities and credits. This requirement helps to enhance the detail and accuracy of the information available to tax authorities.

 

SAF-T

SAF-T is not yet mandatory in Italy.

 

Data Breaches

If a data breach occurs, companies are obligated to inform the Italian Data Protection Authority (Garante per la protezione dei dati personali) within 72 hours of becoming aware of the incident. If the breach is likely to pose a significant risk to individuals' rights and freedoms, affected individuals must be notified without undue delay.

 

 

Penalties

If an e-invoice is sent late to the Sistema di Interscambio (SDI), penalties range from €250 to €2,000 per invoice.

For e-invoices not issued in the required XML format, the penalty can range from 90% to 180% of the VAT amount on the invoice. If a purchase invoice is issued to a client without following the mandated requirements, a penalty of 100% of the VAT amount could be imposed.

If the invoice is not correctly communicated, there is an administrative penalty ranging from €2 to €400 for each invoice. The penalty is halved if the correction is made within 15 days.

 

GDPR Penalties

Failure to comply with the GDPR’s data breach notification and handling requirements can result in fines up to 10 million EUR or up to 2% of the total worldwide annual turnover of the preceding financial year

 

 

Streamline Global Invoicing and Digital Reporting with Space Invoices

One way to comply with (e-)invoicing, tax and reporting regulations in Italy is to use a provider like Space Invoices.

You will be able to:

Have one API for current and future worldwide compliance, including Italy

Support and upsell your clients worldwide, including Italy

Become the one-stop shop for current and future clients

Save time and money streamlining the process and eliminate manual errors

Rest assured all documents are archived and successfully reported to responsible institutions

Save time and money with less than a week-long integration

 

Having questions how to achieve compliance in Italy?

We are ready to help.

 

 

Space Invoices does not provide professional tax opinions or tax management advice specific to the facts and circumstances of your business and that your use of the Specification, Site, and In addition, due to rapidly changing tax rates and regulations that require interpretation by your qualified tax professionals, you bear full responsibility to determine the applicability of the output generated by the Specification and Services and to confirm its accuracy. No professional tax opinion and advice.

Looking to automate real-time reporting and tax compliance for Italy? Let's talk