SALES TAX IN ITALY: ALL YOU NEED TO KNOW ABOUT IVA

The sales tax in Italy or VAT, is called IVA (Imposta sul valore aggiunto) and it is 22% of any taxable sales, including raw materials.

All businesses must collect this Value Added Tax on behalf of the government, pay it quarterly or monthly (depending on the annual VAT turnover) and file the quarterly VAT return.

The VAT tax in Italy has been increased in the last years, and the government was planning to increase it to 23%. Check out also our essential guide on VAT for business owners.

In the graph below you can see the variation of the sales tax in Italy since 2000.

If you visit Italy and you purchase items for a value over 175 € from a certain shop, you may be able to get a VAT refund once you come back to your country.
You will need to:

• Save the receipt for the goods you bought
• Having your airplane or travel back tickets ready to show
• Carry the items with you without giving them to a third person
• Go to a Italy’s VAT refund station (mostly located in airports, tourist points or travel hubs)
• Fill an official form (here you can find a good sample)

In general, 175€ is the minimum purchase amount to request a tax refund, but it can vary according to the country you are bringing the items to. In many European Union’s countries this threshold is actually lower.
If you do everything correctly you will receive a custom stamp for the items you purchased and you will get money at the refund station via cash and bank transfer.

Save the receipt with you

When you purchase from a shop, restaurant, or any other business in Italy, keep the receipt with you for some time, especially if you are in a touristy city; the finance police (guardia di finanza) has the power to stop you and fine both you and the shop-owner if you do not have the receipt on you.

There are different types of VAT’s rate in Italy.

1. The standard rate is, as mentioned above 22% and it applies to most goods and services.
2. A reduced 10% VAT rate applies to real estate maintenance services, electric power supplies for listed uses, and listed drug supplements.
3. A further reduced 4% VAT rate is exclusive to certain foods, drinks and agricultural products.
4. There are also specific supplies of goods and services exempted from VAT. These are the ones related to education, insurance services, specific financial services, supply or leasing of particular immovable property. Check Italian Presidential Decree n.633/72 for more info.

Key Features of IVA

1. Standard Rate: The standard IVA rate in Italy is 22%. This rate applies to most goods and services.
2. Reduced Rates: Italy has reduced IVA rates for specific categories:
   • 10%: Applied to certain foodstuffs, restaurants, hotels, and certain energy products.
   • 4%: Applied to basic food items, medical supplies, books, newspapers, and certain educational materials.
   • 5%: Applied to certain social services and some types of transport.
3. Exemptions: Certain services are exempt from IVA, including medical services, financial services, and educational services.

Registration for IVA

• Who Needs to Register?: Any business involved in the production, distribution, or provision of goods and services subject to IVA must register for IVA. This includes both domestic and foreign businesses operating in Italy.
• How to Register?: Businesses must register with the Agenzia delle Entrate (Italian Revenue Agency). This involves completing the appropriate forms and providing necessary documentation.

How IVA Works

1. Charging IVA: Businesses add IVA to the price of goods and services sold. This is the output tax.
2. Claiming IVA: Businesses can claim a credit for the IVA paid on purchases related to their business operations. This is the input tax.
3. IVA Returns: Businesses must file periodic IVA returns, usually quarterly or annually, detailing the IVA charged on sales and the IVA paid on purchases. The difference is either paid to or refunded by the tax authorities.

Invoicing Requirements

Invoices issued in Italy must comply with specific requirements:

• Details to Include: Invoices must include the seller’s and buyer’s details, a unique invoice number, date of issue, description of goods or services, price, and the IVA amount.
• Electronic Invoicing: Electronic invoicing (Fattura Elettronica) is mandatory for transactions between businesses and with public administrations. This system ensures compliance and reduces fraud.

If you have a VAT registered business you must submit and pay VAT returns and VAT ledgers every quarter. In general, any individual or legal entity that sells goods or services in Italy is liable for VAT.If you are a business legally established in Italy or a permanent establishment of a foreign business in Italy, then you must register for VAT purposes sending the Form AA7/10 to the Tax Office (Agenzia delle Entrate), within 30 days from the start of your activities.

Only if you are an individual occasionally selling an item or providing a service in Italy you fall outside of the scope of VAT and you do not need to worry about VAT registration.

Some categories are exempted from paying IVA such as the freelancer in Italy in the so called “regime forfetario” and the workers in “regime dei minimi agricolo”.

Lastly, if you are non-resident, and you sell goods directly to consumer online, you should fill in the ANR/3 form in order to register for VAT purposes, and send it to the Agenzia
In this case you should send through a courier:

• a copy of your ID
• a recent certification, released by your national Chamber of Commerce, demonstrating that you are a taxable person for Vat purposes in your Country. It should be included as well the name of the legal representative
• The foreign country VAT number
• a self-declaration about the business activities that you do in your Country and the business activity that you will perform in Italy.

This will allow you to register on the Tax Office website, so that you could get the credentials needed to submit your VAT and send your payments online.

When do you pay VAT taxes?

The VAT payment deadlines are listed below:

• 1st quarter due on/before May 16th
• 2nd quarter due on/before August 16th
• 3rd quarter due on/before November 16th
• 4th quarter due on/before March 16th (of the following year)

Be aware that if the annual turnovers of your company, which sells goods and services exceeds € 700,000 or € 400,000 in case you provide only services you should declare and pay your VAT tax monthly.

Are there other sales taxes due?

For more info, and according to your legal status there may be other taxes due. These could vary also according to the products or services you are planning to sell in Italy or on the amount of income you are generating.
Remember that international operations are VAT excluded. However, if the sales is done within the EU, you have to file the INTRASTAT model.

For more info check our article about income taxes in Italy as well.
If you want to open a business in Italy, consider reading article about freelancing italy or look at the video below.

​Want to read more? Check out also our articles about filing your taxes in Italy, airbnb taxes in Italy, or our guide for retiring in Italy.