Navigating the various regulations around "improper" exports is no easy feat in Italy. The current regulations raise doubts and do not comply with EU laws, as confirmed by a ruling of the European Court of Justice. Even the Italian tax authority has changed its attitude on several points.
What are "improper" exports?
These are those goods sent outside the European Economic Community by (or on behalf of) a non-resident, within 90-days of delivery. The transport must be handled by the non-resident transferee, rather than the Italian national supplier/transferor, and a copy of the invoice must be stamped by the Customs Office or Post Office to endorse the export.
It's important to be aware that a tax-exemption only applies if the export is completed within 90 days from the delivery of goods to the non-resident transferee, and the goods should be exported without being processed in the transferee's country.
The delivery time is defined as either the actual time of delivery (when the transferee takes physical possession of the goods) or the time when documentation (required to obtain the goods) is transferred. If the 90-day window is not respected, the goods are no longer exempt from tax and the national transferor must apply VAT to the transaction. If the situation is not rectified, a penalty ranging from 50-100% of the tax applies.
What's important to note is that this penalty is applied against the national supplier/transferor and not the non-resident transferee. For suppliers operating in Italy, the challenge is to know how and when to act, if goods are not exported in time, and how to recognise the transaction in the annual VAT statement.
"Improper" exports in action
The following scenario explains what actions must be taken to mitigate the risk of a penalty.
- An invoice for "improper" export goods is issued on 1 January 2016 (pursuant to section 8, paragraph b) of the Presidential Decree 633/72).
- The goods must be exported by (or on behalf of) the non-resident transferee before 30 March 2016 (within 90 days). Proof of export must be provided back to the national supplier/transferor.
- If the export does not take place within the above period, one of two actions must be taken:
- the transferor must apply and pay the VAT within 30 days (by 29 April 2016). The transferor can regularise the transaction by issuing a journal entry applying only the VAT, or by reversing the original invoice with a credit note and issuing a new invoice showing the relevant tax (so that the VAT in question will be accounted for in the April payment). Regardless, the transaction is no longer considered to be non-taxable.
- if the invoice has not been regularised and the tax has not been paid a voluntary correction should be filed. After the correction, the transaction is no longer considered non-taxable.
- Once a transaction has been regularised, the national seller must enter the transaction as taxable in its annual VAT return.
Current Italian regulations raise some doubts about precisely when the 90-day period begins: from the transfer of ownership or the invoice date. The different provisions in the law suggest that, in the case of movable property (not registered), the 90-day term should be calculated from the date of the invoice (if there is no proof of delivery), while for registered goods, the period should begin from the transfer of ownership of the goods sold.
It's also important to be aware that the 90-day term set forth by Italian law does not comply with EU laws. In December 2013, the European Court of Justice challenged the Italian law on the basis that it denies the benefit of non-taxability even when it may be demonstrated that goods indeed left the customs territory of the EU (but did so after the 90-day period had expired).
Even the Italian Tax Authority has changed its attitude, admitting that the non-taxability of exports is applicable when:
- the seller obtains proof that goods were exported on time only after the 30-day period given to regularise the transaction has expired
- goods leave the EU territory after the 90-day term has expired, as long as proof of the export is obtained.
As a result, it is expected that Italian law will be updated to align with EU regulations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.