From January 2019, all VAT-registered businesses established in Italy will need to comply with e-invoicing requirements on both B2B and B2C transactions.
This is the last phase of a process of replacing paper-based reports which began in 2014. Making real-time electronic sales invoicing mandatory is aimed at enhancing tax transparency in Italy while also simplifying the VAT filing process. It should also make this information more readily available to the tax office.
VAT-registered businesses established in Italy must submit and receive their invoices through the SDI (interchange system). The SDI reports to the tax office or Revenue Agency (Agenzia delle Entrate), all relevant fiscal invoice information through a directly-linked platform.
The first phase of the e-invoicing process back in 2014 required e-invoices to be used for businesses engaging in operations with public bodies (B2G transactions). The next phase, in July 2018, included businesses operating in the public sub-contracting sector and duty-free shops. From 1 January 2019, e-invoicing must be used in all B2B and B2C transactions among Italy-established organisations.
Transactions involving businesses not established in Italy are not covered by the e-invoicing regulation. They should instead report to the tax office using the Cross-borders Transaction Report. It should be transmitted in the month following the invoice date (for the sender) and the reception date (for the receiver).
What changes from January?
Applicable businesses will need to do the following to comply with mandatory e-invoicing.
- Submit/receive their invoices in xml format through the SDI. Where a transmission to the SDI System is missing or a file is rejected, the invoice is considered omitted for VAT purposes.
- Retain their e-invoices in digital form. Paper-based retention will no longer meet the legal requirements.
- Report those invoices issued to and received from, subjects without an established organisation in Italy through the Cross-borders Transactions Report.
How to prepare
In the transmission phase, e-invoices must be adequately prepared and forwarded to the recipients in xml format through the Interchange System.
There are several ways to forward the xml file of the e-invoice to the SDI:
a) Tax Office web services (portal, app)
b) Certified Email (PEC)
c) Telematics channels (FTP or Web Services)
The choice of transmission channel will depend on the number of transactions for the business and their degree of IT expertise.
Suitable channels to receive the xml files containing the e-invoices are via:
a) Certified e-mail (PEC)
b) Web services: through the creation of a seven-digit SDI code.
Recipients should communicate this information to their vendors, who will include it in their e-invoices. Alternatively, the files can be automatically directed to the designated channel by subscribing to the service on the tax office website.
For the transmission and receipt of e-invoices, taxpayers can rely on local intermediaries such as TMF Italy. Businesses that don't choose to work with a local partner should take action now to make the necessary adjustments to their IT systems, buying and installing relevant compatible software.
Compliance with the e-invoicing regulation is not optional. Non-compliance by businesses will result in penalties ranging from 90% to 180% of the VAT omitted, with a minimum of €500 (between €250 and €2,000 where the violation does not refer to taxable transactions).
Where a document doesn't meet e-invoice requirements, recipients have four months from the operation date to regularize the transaction by self-issuing an invoice through the SDI system. If the transaction is not regularized, penalties equal to 100% of the undocumented VAT will apply.
Omitted or incorrect cross-border operations reports will result in a penalty of €2 per invoice, with a maximum of €1,000 per quarter. The quarterly sanction is reduced by 50%, to a maximum of €500 whether corrections or delayed reports are filed within 15 days of the deadline.
Tax Transparency is the new trend
Italy is among a long list of countries around the world that are enhancing tax transparency standards in their systems (eg. Making Tax Digital in the UK). Our VAT Health Check service can evaluate your current VAT risk and review all your historic data, so that you are fully prepared for these changes.
TMF Italy's fully certified platform can meet your e-invoicing requirements. We can provide you with ongoing assistance from transmission to receipt and retention of your e-invoices.
We can also take care of the necessary registrations and accreditations with the tax office.
Need more information? Contact us today.
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.