Starting from January 1st 2015 a particular mechanism, also known as “split-payment”, has been enforced by the Italian legislator: this foresees that the VAT charged on all invoices for the sale of goods and services to an entity considered as part of the Italian Public Administration has to be paid by the entity itself and not by the supplier (as usually happens).
The reference law is the Law 190/2014, paragraph 629, letter b), published on the Italian Official Gazette nr. 300 dated December 29th 2014, Ordinary Supplement nr. 99, that has added the new article 17-ter to the VAT general law (Republic Presidential Decree nr. 633/1972) with title: “Exchanges made with Public Entities”
First of all we need to understand which are the entities that are considered as part of the Italian Public Administration. Article 17-ter, paragraph 1, makes a reference to the sales of goods and service made to:
Italian State’s authorities incorporated as legal entities;
Territorial Public Entities and their consortiums (incorporated under article 31 of the Legislative Decree nr. 267 dated August 18th 2000, and following modifications;
Chambers of Commerce;
Local Healthcare Authorities (ASL);
It is still not clear if the above mentioned list is exhaustive or it can be extended to all Public Entities.
3. SPLIT PAYMENT FOR ALL PAYMENTS MADE TO THE PUBLIC ADMINISTRATION
With the press release nr. 7 dated January 9th 2015 the Ministry of Economy has clarified that the split-payment is applicable to purchases made by all Public Entities being them or not a VAT subject.
According to article 17-ter, paragraph 2 of the Republic Presidential Decree nr. 633/1972, amounts paid to self-employed subject to a withholding tax at source, are not to be considered for the purpose of the split-payment. It is still not clear if invoices showing withholding taxes on account have to be considered or not.
The supplier of the Public Entity has to issue its invoices, starting from exchanges made from January 1st 2015, charging VAT (22%) but also including a warning about the payment of that VAT under article 17-ter mentioned above (“VAT paid by the customer under article 17-ter of the Republic Presidential Decree nr. 633/1972”). That VAT will be processed in the supplier’s accounting as usual, but it will be immediately diverted from the amount due to the customer (credit), this in order to include the same in the supplier’s VAT registers, even if this amount will not concur to the periodical VAT payment.
5. SPLIT-PAYMENT IS NOT THE REVERSE CHARGE
We’d like to outline that the split-payment mechanism is not the reverse-charge mechanism although it brings to the same final effect. In fact, under the reverse-charge mechanism the invoice is issued without charging the VAT to the customer (who will process the same invoice, with the aim of VAT calculation, both for purchases and for sales), under the split-payment mechanism VAT is charged to the customer but it will not be included in the purchases VAT book.
HOW WE CAN HELP
Please kindly note that all the above mentioned information are for general purpose, so every specific case should be carefully evaluated with our professionals.
In case you’d like to have more information or you need further clarifications, do not hesitate to contact the professionals listed below, they will me more than happy to help.
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