The EU has approved Italy’s request to implement a “split payment” VAT system.
Italy has been applying this system since 1 January 2015 but the EU Council only granted approval following a period of consultation. The approval has been granted with retrospective effect from 1 January 2015 and it will run until 31 December 2017
The payment system obliges public bodies to pay VAT they incur on their costs directly to the State and not the supplier. Italy has implemented this procedure in order to cut down on the level of fraud it was experiencing in this sector – often the VAT paid by public bodies would never reach the Government as the suppliers who should have been declaring it either disappeared or fraudulently held onto the money.