Italy: Mandatory Reverse Charge
Tuesday March 16, 2010
Legislative Decree No. 18 published last month introduces changes to domestic Italian legislation including VAT Package and the introduction of a mandatory reverse charge.
The VAT Package changes take effect from 1st January 2010. The decree introduces a compulsory reverse charge for all domestic supplies of goods and services by non-established suppliers to VAT registered customers established in Italy. This rule is irrespective of whether the non-established supplier has a VAT registration in Italy. This means that the customer has to account for VAT under the reverse charge and the supplier does not charge VAT.
The compulsory reverse charge is effective from 20th February 2010.
If the supplier makes acquisitions of goods in Italy from other Member States, it will still have to register to account for VAT on the acquisition even though no VAT is chargeable on the subsequent sale in Italy because of the extension of the reverse charge.
Suppliers that incur Italian VAT on local purchases will have to consider how to recover this VAT as it will no longer be possible to offset it against VAT due on sales to Italian customers.