In the e-commerce field, the importance of Value Added Tax (VAT) in Italy is self-evident.

For e-commerce operations within Italy, understanding and adhering to VAT regulations are crucial as they directly impact product pricing, cross-border transactions, and customer relationships.

If you plan to expand your business into Italy, it’s essential to comply with local tax regulations.

VAT in Italy

Value Added Tax (VAT) in Italy is a consumption tax applicable to goods and services sold within the country.

Its rates vary based on the classification of goods or services and generally include standard rates, reduced rates, and super reduced rates.

Cross-border e-commerce especially needs to accurately calculate and collect VAT, clearly state the tax amount on sales invoices, report regularly, and pay taxes.

Furthermore, if an e-commerce business’s total sales in Italy exceed a certain threshold, registration and taxation in Italy are also required.

VAT Registration in Italy

Your business must register for VAT if it meets the following conditions:

Non-Italian businesses must register for VAT.
Businesses with a fixed establishment in Italy: If a business has actual operating locations in Italy, such as offices, factories, or retail stores, it needs to register for Italian VAT.
Cross-border sales: For goods or services sold from outside Italy to inside Italy, if the sales exceed a certain threshold, VAT registration in Italy is required.
E-commerce businesses: According to EU VAT regulations, for goods and services sold within the EU, if an e-commerce business’s sales exceed specific thresholds, VAT registration in Italy is necessary.
Remote sales within the EU: Refers to the sale of goods or services from one EU member state to another. If sales exceed specific thresholds within the EU, VAT registration in the target country is required.

If you are unsure whether you need to register for VAT and the registration thresholds, please consult our team.

VAT Rates in Italy

Standard rate – 22%: Applies to most goods and services.
Reduced rate – 10%: Some food, water; transport industry; construction industry; hotel accommodation; restaurants; and wastewater treatment, etc.
Reduced rate – 5%: Some specified food items; social services, etc.
Reduced rate – 4%: Some specified food items; specific books; social housing; construction work, etc.
Exempt – 0%: Tax-exempt imported goods; international transportation.

What’s Next?

Once you confirm your business needs to register for VAT, you need to determine whether your business requires a fiscal representative.

Generally, non-EU businesses selling in Italy require the assistance of a fiscal representative for registration and declaration.

Once your business obtains a VAT number, strict compliance with tax regulations is necessary.

Additionally, you need to retain all sales data and file declarations within specified timeframes.

If you are running a business and planning to expand into France, there are some tax considerations to keep in mind.
On one hand, you need to address VAT issues to ensure compliance with French tax regulations.
On the other hand, France plans to officially implement electronic invoicing and undergo a comprehensive reform starting next year.

French VAT

For businesses outside of France, once you start trading locally, you will need to register for VAT.

EU businesses making remote sales to French consumers must be aware of the VAT registration threshold.

According to current regulations, the VAT registration threshold is €35,000 per year.

The standard VAT rate in France is 20%, applicable to most goods and services.

Do You Need a Local Fiscal Representative?

Our clients often find this question puzzling; the answer depends on where your company is registered.

If your business is based in an EU member state, you do not need a local fiscal representative or agent in France.

However, if you are a non-EU business, you will require a fiscal representative who bears joint liability.

Once your business confirms VAT registration, the fiscal representative will need to assist with the registration and filings.

Compliance with French VAT

When a business obtains a VAT number, it must take on and adhere to the corresponding responsibilities.

Stay updated on the progress of France’s electronic invoicing reform to comply with VAT electronic invoicing standards.
Maintain financial records for at least 10 years, with as much detail as possible.
Use approved foreign currency exchange rates.
Submit VAT returns on time (the frequency varies depending on the circumstances).

What can we do for you?

As a tax partner for Amazon, we provide VAT services across multiple countries.

Our tax experts hail from five major language areas, so you need not worry about communication barriers.

Our free consultancy service can tailor solutions to your specific situation.

Our tax team will help you minimise penalties and avoid complications.

Contact our experts to support your global business expansion journey.

Budget 2024 Insights

Major Highlights from the 2024 Autumn Budget

This week, on 30th October, the Labour Party unveiled its first budget since coming into power.

Chancellor Rachel Reeves introduced a budget in the Autumn Statement covering a wide array of topics, including taxation, spending, wages, and pensions.

Many of the budget’s elements are likely to have a direct impact on you and your finances.

Minimum Wage Raised to £12.21

The Chancellor confirmed that the minimum wage for those aged 21 and above will increase by 6.7% starting in April 2025.

Rising from £11.44 to £12.21, this equates to an annual salary of £22,222 for an employee working 35 hours per week.

The Treasury stated that the minimum wage increase for those under 21 is the largest on record. This also marks the first step towards establishing a unified minimum wage standard for all adults.

Employer National Insurance Contribution to Rise by 1.2%

The Chancellor announced an increase in the amount of National Insurance Contributions paid by employers.

From April 2025, this rate will rise to 15%.

Additionally, the threshold for employer contributions will lower from £9,100 per year to £5,000.

This measure is projected to generate £25 billion annually for the government.

Increase in Capital Gains Tax

The Treasury announced that both the lower and higher rates of Capital Gains Tax will be increased.

The lower rate will go from 10% to 18%, and the higher rate will increase from 20% to 24%.

The current rates will remain until April 2025.

This is expected to raise £2.5 billion for the Labour government.

Personal Income Tax Threshold Freeze to End

Since 2022, the personal income tax threshold has been frozen at £12,570.

This means that income over this threshold is subject to various levels of income tax.

The freeze on the income tax threshold implies that, as wages rise, individuals will end up paying more income tax.

To address this, the Treasury plans to adjust the personal income tax threshold in line with inflation starting from the 2028–2029 tax year.

Bus Fares to Rise in Multiple Regions

The Chancellor confirmed that single bus fares across multiple regions will increase from December 2025.

Currently capped at £2 per journey, the price will rise to £3.

It is reported that the fare increase will generate £650 million for transport departments across the country to improve connectivity in urban areas.

November 2024 - J&P Accountants

VAT Compliance in Italy