Italian Revenue Agency sets up special division for CBR 

Italy took part in the pilot project on the preliminary handling of VAT issues arising from cross-border transactions, i.e., the so-called "Vat Cross Border Rulings" (CBR). The project allows taxable persons, which are planning to carry out cross-border transactions within two or more participating Member States, to request preliminary rulings on the VAT treatment applicable to said transactions. In this regard, the Italian Revenue Agency has lately set up a dedicated division to which the requests for preliminary ruling shall have to be filed. 

Domestic Reverse Charge extended to supplies of services made by companies that are members of a consortium  

Italy has introduced a new case of domestic reverse charge. In particular, such mechanism is applicable to supplies of services made by companies which are members of a consortium to the consortium itself in case the latter acts as contractor for a public entity and it issues an invoice for the supplies made. 

New reduced VAT rate 

A new reduced VAT rate of 5 percent has been introduced and applies to supplies of social and health care services rendered by social cooperatives and their consortia. 

New penalties for the omitted application of the reverse charge system  

Penalties applicable in case of incorrect application of the reverse charge mechanism have been modified. In particular, a flat penalty ranging from EUR500 to EUR20,000 now applies in case the purchaser of goods/services subject to the reverse charge mechanism does not carry out the relevant VAT formalities. Such penalty applies, provided that the relevant invoice has been registered in the accounting ledgers for direct taxes purposes; out of that case, a proportional penalty ranging from 5 percent to 10 percent of the VATable amount applies. 

Extension of the statute of limitation 

The statute of limitation for tax audits has been extended for one year, i.e., from 31 December of the fourth year to 31 December of the fifth year following that in which the relevant VAT return was filed. 

VAT and transfer pricing policy 

The Italian Customs Authority issued its guidelines for the quantification of the value of goods in case of intra-group transactions (i.e., Circular Letter n. 16 of 6 November 2015). In particular, the Customs Authority acknowledged the possibility for multinational companies to adopt for customs purposes the OECD criteria for the determination of the fair market value and to file a preliminary ruling with the Tax Administration to obtain green light on the correctness of the transfer pricing policy adopted.