Italian VAT reverse charge

The reverse charge mechanism is designed to reduce the frequency with which companies trading across Europe must VAT register.  It works across the EU.  Italy uses the reverse charge system less than most other EU states.

It allows any transactions to be recorded through the Italian VAT return of the customer, so alleviating the need for the foreign supplier to VAT register in Italy.

When is the Italian VAT reverse charge used?

The reverse charge mechanism is applied in the following circumstances:

  • Non-resident supplier with IT VAT number and customer is resident with IT VAT number
  • The supply of services to an Italian VAT registered business (2010 VAT package).
  • Other various minor situations.

What is the tax point for the Italian reverse charge?

The tax point (when the VAT is due) for the reverse charge is the end of the month following the month of supply.

However, if the vendor raised an invoice prior to the supply, then it is that date which should be used.

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The EU VAT Directive has been updated from 1 January 2019 to introduce a voluntary generalised reverse charge measure on domestic transactions in member states.