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Value added tax (IVA, Imposta sul Valore Aggiunto)

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Value-added-tax-1VAT is a general tax on consumption applied on the “value added” on goods and services, in particular tax is due on the increase in value of goods or services in the different phases of production and trade, until it reaches the final consumer who suffers the full cost of the tax.

Tax assessment basis and rates
The transactions are subject to VAT if the following requirements are met:
• objective requirement: there must be a transfer of goods or provision of services;
• subjective requirement: the operations must be carried out within the running of business or the prac- ticing of arts and professions;
• territorial requirement: the operations must be carried out within the Italian territory.
For VAT purposes, the “Italian territory” is considered to be the territory of the Italian Republic, excluding the Municipalities of Livigno, Campione di Italia and the waters of Lake of Lugano included in the Italian territory.
VAT substantially applies to the following operations:
• transfer of goods made in Italy while running business or practicing arts and professions;
• provision of services in Italy while running business or practicing arts and professions;
• intra-EU purchases of goods from another EU member state while running businesses or practicing arts and professions;
• purchases made by foreign countries of some services carried out in Italy while running businesses or practicing arts and professions;
• imports of goods from non-EU countries, made by anyone.
However, VAT does not apply to all the aforesaid operations carried out in the Italian territory. Some operations are, in fact, tax exempt, while others fall outside the scope of VAT.
The transactions VAT exempt are operations in compliance with the three above requirements, but they are ex- cluded from VAT application by express provision of law, such as financial expenses, medical services, insu- rance premiums, etc. While the operations out of VAT scope are not compliant at least with one of the requirements.
Applicable rates
The ordinary rate is 22%.
In addition to the ordinary rate, there are three reduced rates, 10%, 5% and 4%, and the “zero” rate which applies to certain so-called “non taxable” operations (exports of goods, provision of some international services or ser- vices relating to the international trade, transfers of goods to another EU Member State, provision of some ser- vices connected to transfers of goods to another EU Member State).
The Budget Law 2018 provides for an increase of the VAT rates starting from the fiscal year 2019, as follows:
The above increases of the VAT rates could be replaced, in whole or in part, by new regulatory measures that have the same effect on the Public Finances.
Registration for vat purposes
If a person (individual person, partnership, company with share capital or institution) intends to carry out an operation relevant for VAT purposes while running a business or practicing an art or profession, he/she/it is required to apply for an Italian VAT number before implementing the operation. VAT is applied through the reverse charge mechanism by the recipient of the goods or services.
If the foreign operator has a permanent establishment in Italy, he/she/it should apply for an Italian VAT number and comply with all legally required provisions, as if he/she/it were a national person.
If the foreign operator does not have a permanent establishment in Italy, he/she/it may also:
• appoint an Italian VAT tax representative, i.e. an individual person or institution resident in Italy, re- sponsible for fulfilling the obligations and exercising the rights laid down by the regulations on VAT; or
• identify itself directly for VAT purposes in Italy, directly fulfilling the obligations and exercising the rights laid down by the Italian regulations, if resident in one of the EU countries or in one of the non- EU countries with which Italy has reciprocal assistance agreements on indirect taxation.
The appointment of the tax representative or direct identification should follow a special procedure and should be notified to the other contracting party before making the first relevant operation for the purposes of Italian VAT.
In the event goods or services are supplied directly from abroad, the transaction shall be taxable in Italy through the reverse charge mechanism by the recipient (purchaser) if it is a taxable person in Italy for VAT purposes (so called B2B transactions).
However, notwithstanding the non-resident has been identified for VAT purposes, the Italian operator shall com- ply with all the obligations through the above mentioned reverse charge mechanism.
This scheme is applicable even if a foreign operator has a permanent establishment in Italy, when the goods or services have been provided by the non-resident entity.
Where goods or services are supplied directly from abroad to a final consumer (so called B2C transactions) applying for a VAT identification through their Italian VAT number (VAT Rep, Permanent establishment or direct identification) will be necessary.
The VAT position of a person remains valid until the termination of all activities.
Taxpayers’ obligations
Italian regulations lay down very detailed rules on the following:
• procedure and timing for the issue of invoices;
• content of invoices;
• procedure for the registration of invoices issued and received;
• procedure for the issue of credit and debit notes;
• calculation of VAT payable ;
• periods for settlements and payments of VAT;
• procedure for the completion and submission of VAT returns;
• procedure for the completion and submission of Communication of VAT settlements return;
• procedure for the completion and submission of the Communication of data of the invoices recei- ved.
Other vat systems
Customs warehouses and VAT warehouses

Special rules establish the conditions for creating and using:
• “customs warehouses” where products are kept without paying custom duties and VAT until they are removed from the warehouse;
• “VAT warehouses” where products are kept without paying VAT.
Special VAT systems
There are several special VAT systems that apply to anyone operating in particular sectors (e.g. agriculture, pu- blishing, travelling, tourism, etc.).
Group VAT settlement
Groups of national companies are able to make group VAT payments, offsetting the VAT debits and credits of the various companies. In certain circumstances an EU holding is also eligible to the above indicated procedure with reference to its Italian subsidiaries.

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