BDO Indirect Tax News

Italy - Rules on VAT representatives of nonresident taxpayers tightened

Changes to Italy’s VAT law that apply as from 22 February 2024 introduce more stringent requirements that must be met by VAT representatives in Italy, as well as new requirements regarding registration in the EU VIES (VAT Information Exchange System) by non-EU taxable persons. Presidential Decree No. 633/1972 affects articles 17 and 35 of the VAT Law. These changes have been deemed necessary by the government to combat tax avoidance and evasion. 

VAT representative in Italy 

Many EU member states—including Italy—require non-EU-established traders to appoint a VAT fiscal representative that will function as the trader’s local representative and carry out VAT compliance obligations on behalf of the nonresident. The Italian VAT representative is jointly and severally liable with the nonresident trader for the VAT due. The VAT representative can be an individual or a legal entity.  

It is possible to avoid the VAT fiscal representative requirement. Taxable persons established in another EU member state or a third country that has concluded an administrative cooperation agreement similar to agreements in force in the EU (e.g., with Norway and the UK) can fulfil the compliance obligations by registering for VAT under article 35-ter of the Italian law. This implies that, in practice, the appointment of a VAT representative is almost exclusively made by taxable persons outside Europe. 

Under the changes to Italy’s fiscal representative rules, an Italian person acting as a VAT representative must fulfil specific conditions to carry out its responsibilities. These include demonstrating that it is trustworthy, does not have any previous criminal convictions or be involved in criminal proceedings relating to financial crimes, etc. If the VAT fiscal representative is a legal person/company, the individual who is the legal representative must fulfil the conditions. 

In addition, in certain circumstances, a VAT representative can act only if an “appropriate financial guarantee” is provided, with the amount of the guarantee depending on how many taxable persons the VAT representative represents in Italy. The Ministry of Economy and Finance will be issuing guidance that sets out the conditions for providing a guarantee. 

Registration in the VIES 

The VIES is a search engine in the EU that enables companies to confirm the VAT numbers of their trading partners and enables EU tax administrations to monitor and control the flow of intra-Community trade. Taxable persons that wish to engage in trade within the EU are required to apply for a VAT code from national tax administrations and register the code, which is then made available through the VIES. Notably, registration is a prerequisite for the application of the B2B VAT exemption regime related to intra-EU transactions. 

Under the revised rules of article 35, paragraph 7-quater, registration in the VIES of the VAT representative of a taxable person that is not established in another EU member state (or in a third country that has an administrative cooperation agreement as described above) will require an appropriate guarantee.  

The VAT representative will be required to verify the completeness of the documentation produced by the nonresident taxable person (notably, the existence of the guarantee). Such verification will have to take place before VAT registration is submitted to the Italian tax authorities that contains the election to include the VAT number in the VIES. Infringements will result in a fine on the VAT representative ranging from EUR 3,000 to EUR 50,000. The relevant criteria and procedures for issuing the guarantee will be set out in the decree to be issued by the Ministry of Economy and Finance.  

The upcoming decree likely will determine the future contours of the VAT representative rules in Italy. Stay tuned! 

Francesco Grandolfo
Marco Bonfiglio
BDO in Italy

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