Italy’s 2025 Budget Law: Key VAT Changes and Compliance Insights

January 14, 2025

The 2025 Budget Law (Budget Law) adopted by the Italian Parliament was published in the Official Gazette on the last day of 2024. The Budget Law included the legislation adopted in November 2024 and some other amendments to the VAT Law.

Some of the key VAT measures included in the Budget Law, which came into effect on January 1, 2025, are the extension of the reverse charge in the logistics sector, the ability to charge VAT for training services provided by qualified training entities, the small businesses VAT scheme, VAT on online events, and the secondment of staff rules.

Key Rules Under Budget Law

Under the published Budget Law, the reverse charge mechanism applies to manpower-based services performed at a customer's premises using the customer's capital goods, specifically for transport, goods handling, or logistic companies. Exemptions from these rules are services supplied to public entities, where VAT is dealt with through the split-payment mechanism, and to qualifying employment agencies.

The Italian Budget Law referenced the Legislative Decree No. 180/2024, which implemented the EU Directive 2020/285, establishing a special cross-border VAT exemption scheme for small businesses. The small businesses regime, which took effect on January 1, 2025, allows eligible businesses, based on turnover, to apply for VAT exemption for goods supplied or services provided in other EU Member States.

Referenced Legislative Decree no. 180/2024 also implemented the EU Directive 2022/542, which determines that the place of supply for VAT for streaming events is where the recipient is established or resides, regardless of whether it is B2B or B2C supply.

Conclusion

Businesses involved in cross-border supplies and those engaged in transport, goods handling, or logistics should carefully consider the implications and effects of new rules on their operations. Correctly applying newly established rules and regulations is essential to ensure tax compliance and avoid potential issues with the Italian Tax Agency.

Source: EY

What are the key VAT changes introduced in Italy’s 2025 Budget Law?

The key changes include the reverse charge for logistics, VAT on streaming events, and special exemptions for small businesses under EU directives.

How does the reverse charge mechanism apply to logistics under the new rules?

The reverse charge applies to manpower-based services performed at a customer's premises, such as transport or goods handling, using the customer’s equipment.

What is the small business VAT exemption scheme under the 2025 Budget Law?

Eligible small businesses can apply for VAT exemption for goods and services supplied in other EU Member States, as per Legislative Decree No. 180/2024.

How has VAT for streaming events changed under the new rules?

VAT for streaming events is now determined based on the recipient’s location, applying to both B2B and B2C transactions, per EU Directive 2022/542.

Are there any exemptions from the reverse charge mechanism?

Yes, exemptions apply to services supplied to public entities (handled via split-payment) and qualifying employment agencies.

What steps should businesses take to ensure compliance with the new VAT rules?

Businesses should review their VAT processes, update systems for compliance, and consult tax professionals to avoid issues with the Italian Tax Agency.

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