Italian VAT recovery
If foreign companies incur Italian VAT, but are not Italian VAT registered, then there is another mechanism – VAT Recovery. This requires a special application to be completed on a quarterly basis, with one final annual reclaim in the following year.
There are two different VAT reclaim mechanisms for EU and non-EU businesses.
How do EU companies reclaim Italian VAT?
Foreign businesses established in another EU country can reclaim any Italian VAT through the EU 8th Directive VAT system. The system for the reclaim of Italian VAT for companies from other EU companies was overhauled and simplified in 2010.
EU companies can now submit Italian VAT recovery applications through an online portal operated by their own national tax authority. This is then processed and submitted to the Italian tax authority which must refund the VAT directly to the company. The deadline for submissions is 30 September of the year following the year in which the invoice was raised.
How do non-EU companies reclaim Italian VAT?
Non-EU companies use a different process for VAT recovery in Italy – the 13th VAT Directive. Non-EU companies must first ensure that there is a tax reciprocity agreement between Italy and their home territory. If not, then no Italy VAT may be reclaimed. For example, US companies cannot recover Italian VAT.
If there is reciprocity, the business can complete and submit a special form to the Italian tax authorities. This should generally be accompanied by supporting original invoices, plus a local tax certificate. Italian VAT reclaims must be submitted by 30 June of the year following the year in which the invoice was raised. If this deadline is missed, then the VAT is lost. Non-EU companies must appoint a fiscal representative for the purposes of recovering VAT.
What type of Italian VAT can be recovered?
Under the EU’s free market principles, foreign companies are permitted to reclaim the same VAT incurred as a resident Italian company.
Need a fiscal representative in Italy?
Non-EU businesses selling in Italy will need to appoint a fiscal representative alongside completing VAT registration and returns.
Fiscal representatives are responsible for the accurate VAT submissions of their non-EU clients.
Avalara offers a Fiscal Representative Service as part of its international VAT and GST Registration and Returns Service.
Need help with your Italian VAT compliance?
Researching Italian VAT legislation is the first step to understanding your VAT compliance needs. Avalara has a range of solutions that can help your business depending on where and how you trade.
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