Businesses look to sell their Italian VAT credits following 2010 reverse charge
- 12 August 2013 | Richard Asquith
Since changes to the Italian Value Added Tax regime in 2010, many foreign traders have been left with VAT credits (input VAT suffered, due back from the Italian state). This has created cash-flow problems, and forced them into selling them at a discount
2010 Italian reverse charge forces registration of many foreign companies
At the start of 2010, Italy introduced the reverse charge mechanism on many domestic supplies or imports. This forced foreign companies with Italian VAT registrations to deregister. This meant they could not recover any input VAT, instead have to rely on 8th Directive VAT Recovery claims. These are notoriously slow in Italy, often taking years. This leaves companies seriously exposed to cash-flow problems and credit risk.
There are now many specialist factoring companies who will take on the credit, at a suitable discount of between 10% and 15% of the face value.