Italy - Modifications of VAT Law Concerning Tax Penalties

Following the Ministry of Economy and Finance's proposal, the Italian government published Legislative Decree No. 87/2024. It made amendments concerning the approach to the framework of the Act reserved for tax offenses and related penalties.

The Decree will become effective from September 1, 2024. 

Modifications to the VAT Act

Concerned changes can be classified into the following groups:

• New penalties for intra-community supplies of goods,

• Violations related to the filling of the annual VAT return,

• Violations related to the issue and registration of invoices,

• Violations related to the export of goods,

• Omitted and late VAT payments.

Italian VAT-registered taxpayers that make zero-rated supply of goods will be subject to an administrative penalty of 50% of the VAT if the goods are transported to another Member State (MS) by the buyer or third parties and do not arrive in that MS within 90 days from the moment the transport begins.

To avoid penalties, Italian taxpayers should charge Italian VAT to the buyer and remit VAT to the Italian Tax Authority within 30 days of the expiry of the 90-day deadline if no evidence is obtained that the goods arrived in another MS.

The new rules significantly reduce penalties for violations related to filing the annual VAT return. The penalty for failing to file an annual VAT return will be 120% of the VAT due, with a minimum penalty of EUR 250. This represents a substantial reduction from the previously set penalty between 120% and 240% of the due VAT.

Also, the penalty for filing an inaccurate annual VAT return will be 70% of the additional VAT or the lower VAT credit and a minimum penalty of EUR 150, a decrease from the previous penalty of 90% to 180% of the additional VAT or the lower VAT credit.

For violations related to the issue and registration of invoices, such as failure to issue and register invoices for taxable or non-taxable transactions, undue recovery of input VAT, failure to regularize omitted or incorrect invoices, or omitted reverse charge, penalties are also set at lower percentages than they were up to this point. In addition, minimum EUR penalties are also now defined for each violation.

For exports, if goods are not transported outside the EU within 90 days of delivery, a 50% VAT penalty applies. Incorrect application of zero-rating for habitual exporters without a declaration of intent incurs a 70% penalty. Misstating quality, quantity, or price information in invoices or customs declarations results in a 70% penalty. 

The penalty is reduced to 25% of the unpaid VAT for omitted payments. Late payments incur a 12.5% penalty if made within 90 days of the due date and 0.83% per day of delay if paid within 15 days.

Conclusion

The amending measures and those newly introduced will create a system significantly different from the current one. These lighter tax penalties do not affect pending cases, and their main objective is to introduce lower penalties, thus making the current rigorous system closer to the principle of proportionality.

Source: Official Gazette - Legislative Decree No. 87/2024, KPMG