Amendment of the tax rules on VAT warehousing in Italy.
The Italian amending Finance Bill 2017 “decreto legge 22 ottobre 2016, n. 193” rescinded the benefit of reverse charging VAT on goods from the warehouse.
With effect from 1st April 2017, VAT will have to be paid to the Italian authorities on goods coming out of the warehouse, which cancels out the benefits of this procedure.
However, Italian industry associations have challenged this decision. They have submitted an application to maintain the current system for imported goods.
To date, the Government has not yet communicated its decision.
Already, there is provision for an amendment for buying and reselling operations in Italy which will be excluded from this regime.
On the question of imports, we shall update our article when the Italian Government has published its decision. (Ministerial decree not published to date).
Reminder of the VAT system in Italy
VAT in credit must be indicated in the form of a monthly communication.
Only the annual declaration, filed between 1st January and 28th February of the year n+1, can officially trigger the application.
Notes: the deadline for the 2016 declarations has been moved to 28th February instead of 30th September in previous years.
Refund applications are legal proceedings which are subject to systematic checking.
Once the refund authorisation has been granted, there are two possible scenarios for obtaining the funds:
- • Either the deposit of one or two bank guarantees (depending on the amounts) for a period of three years in the amount of the refunds;
- • Or waiting until the end of the limitation period which changed to 6 years with effect from 1st January 2016.
Note: the threshold triggering the security deposit rose from 15,000 euros in 2016 to 30,000 euros for 2017.
A complaint was made in 2014 to the Brussels commission, which requested Italy to amend this refund situation for taxable companies not established in Italy. The situation discriminates between Italian companies which invoice inclusive of all taxes and non-Italian companies which invoice exclusive of tax. Not only was no simplification made by Italy but, on the contrary, it increased the limitation period from 5 to 6 years, which extends the refund timeframe.
Change of system, solutions
Given the impact of this amendment on cash flow, only three solutions can be considered for purchases for resale in Italy.
Note: we shall review the situation of imported goods when the decision is published.
1. Continue the current flow and accept the deferred cash flow in terms of the conditions above;
2. Change goods flows by transiting them through another EU country to benefit from the VAT exemption on intra-community deliveries.
CAUTION: goods must physically transit through the other EU country which will engender additional transport costs. ASD services can help you with the establishment and administrative monitoring of these flows.
3. Create a permanent establishment in Italy to be able to invoice with Italian VAT. ASD Italy services can provide you with a domicile and manage your permanent establishment in Italy.
CAUTION: permanent establishment creates additional requirements such as the management of transfer prices, the calculation of corporate tax which may be a flat rate in Italy based on sales-related expenses.