VATLive > Blog > Italy > Italy withdraws VAT rise to 25% on COVID-19 worries

Italy withdraws VAT rise to 25% on COVID-19 worries

  • May 15, 2020 | Richard Asquith

Italy has withdrawn a planned increase in its standard VAT from 22% to 25% on 1 January 2021. The increase was a budget measure to cover the risk that Italy would breach Euro currency zone limits on budget deficits.

The move is part of a range of measures announced 14 May 2020 to support the economy during the COVID-19 crisis. 

The rise has already been delayed twice. Italy had already rolled over the planned VAT rise from 2020. The plan was for the current standard rate of 22% to rise to 25% in January 2021, and then to 26.5% in January 2022. This was contained within the 2020 Budget Law. There would also have been an increase in the reduced rate of 10% to 12% in January 2021.

The new measures announced this week effectively block this rise.

The increase had originally been scheduled in the 2019 Budget Law for 1 January 2020. It had already been delayed one year in 2018. It was designed to ensure Italy remained within the Euro currency budget deficit rule of 3% of GDP. However, on both previous delays, compromises have been found to avoid the rise.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.
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