With Law Decree no. 50, published on 24 April 2017, in the Official Gazette no. 95, the Italian Government introduced various tax measures which are effective from 2017. The most relevant tax measures for VAT are the following:
Split Payment (art. 1)
As of 1 July 2017, the split payment mechanism will also apply to the supply of goods and/or services rendered to companies directly or indirectly controlled by the State or by territorial public bodies as well as to companies listed on the FTSE MIB index of the Italian stock exchange. Moreover, such mechanism has been extended to supply of services subject to withholding tax. Formerly, the split payment mechanism was limited to supplies made vis-á-vis Public Bodies and it was expressly excluded in case of services subject to withholding taxes. Under such mechanism, the purchaser of relevant goods or services shall pay the VAT amount directly to the Tax Authority rather than to the supplier. Within the next 30 days, the Italian Ministry of Finance shall issue a decree providing for the relevant implementing rules.
VAT deduction (Art. 2)
The period of time to deduct input VAT has been limited. In particular, according to the new version of art. 19, par. 1 of the Presidential Decree 633/1972 (Italian VAT Law), the right to deduct input VAT shall be exercised at the latest with the annual VAT return related to the year following that in which the right to deduction arose. Formerly, the right to VAT deduction could be exercised with the annual VAT return relating to the second year following that of reference. Given the above, input VAT accrued on purchases carried out during 2017 can be ultimately deducted with the annual VAT return for 2018 (to be filed in 2019).