Consequently, taxable persons who incur VAT in Italy and who are established in the EU but with no permanent establishment in Italy can request a refund within the revised time limit which is 2 years from the date of payment.  As a result of the reciprocal arrangements that have been signed with Switzerland, Norway and Israel, taxable persons in these countries can also make claims within the increased time limit.

This increased time limit will be of benefit to taxpayers who have not requested refunds for 2008.

The Italian Tax Authority has issued a Circular Letter clarifying the position for Italian taxable persons who receive services falling under the new place of supply general rule from an EU supplier in a member state other than Italy. 

The Circular clarifies that the invoice from the supplier can be used both to account for output tax under the reverse charge and to recover the corresponding input tax subject to normal rules. 

This is a departure from Italian law which states that the recipient must issue a “self invoice” (autofattura).

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.

Starting from January 1st 2010, the Italian government will increase the scope of reverse charge to all supplies of goods and services made by non-resident suppliers to Italian business customers.

The new rules mean non-resident suppliers, including those who have an Italian VAT number through a direct registration, will no longer be required to charge Italian VAT to resident business customers.

VAT will, however, continue to be chargeable on supplies made to private clients or non-resident customers who are not permanently based in Italy.

In addition, VAT registration will continue to be required for exports and intra-Community purchases and supplies.

Italy’s current rate of VAT stands at 20 per cent, with a reduced four per cent and ten per cent rate on basic products. VAT is charged on assets and services, as well as on imports into the country.