Italy has introduced important changes to the VAT deduction framework through Article 12 of the Omnibus Amending Decree (Legislative Decree of 7 August 2026, No. 148). The measures, published in the Official Gazette No. 185 of 11 August 2026 and effective as from the following day, extend the time available to deduct input VAT and align invoice-recording deadlines with the expanded deduction period.
For businesses, the practical effect is a longer window to deduct input VAT, together with corresponding extensions to invoice-recording deadlines. The additional flexibility makes invoice management, VAT reporting and recordkeeping controls even more important, because taxpayers still must be able to support the timing and validity of their deduction positions.
The decree introduces three changes relevant to businesses claiming input VAT deductions: a longer period for exercising the right to deduct, aligned deadlines for recording purchase invoices and customs declarations and clearer treatment of invoices received after the year in which the underlying transaction occurred.
The period for exercising the right to deduct input VAT has been significantly extended. Taxable persons now may deduct VAT up to the deadline for filing the annual VAT return for the second year after the year in which the right to deduct arose. Previously, the deduction had to be exercised within the year in which that right arose.
This amendment aligns domestic rules with the principles of VAT neutrality, proportionality and effectiveness and reflects the 11 February 2026 decision of the Court of Justice of the European Union (CJEU) in Case T689/24. In that decision, the CJEU clarified that a taxpayer may deduct input VAT in the return for the period in which the right to deduct arose, even if the related invoice is received later, provided the invoice is obtained before that annual VAT return is filed.
The two core conditions for deduction remain unchanged:
Invoice recording deadlines have been aligned with the new deduction timeline. Purchase invoices and customs declarations must now be recorded before the periodic VAT settlement in which the deduction is claimed and, in any event, no later than the deadline for filing the annual VAT return for the second year after the year in which the invoice is received.
The deletion of the phrase “with reference to the same year” resolves long-standing issues involving year-end transactions where the invoice is received in the following year. If a transaction occurs in one year, but the related invoice is received in the following year before the annual return filing deadline, the taxpayer may deduct the VAT in the return for the year in which the right arose. For example, assume a transaction is carried out in 2026 and the invoice is received in 2027 before the 2026 VAT return deadline. In that case, VAT may be deducted in the 2026 VAT return. The invoice must first be recorded in a dedicated section of the VAT input register for invoices received in a year (2027) for which the right to deduct arose in the previous year (2026).
Neither the decree nor the explanatory memorandum provides transitional rules for moving from the former annual limit to the new two-year deduction window. Businesses should monitor for official guidance or a clarifying circular from the tax authorities before applying the new rules to transitional cases.
The extension of Italy's VAT deduction period represents a taxpayer-favourable development that reduces the risk of losing input VAT recovery solely because of timing issues. By allowing deductions to be claimed over a longer period and aligning invoice-recording deadlines with that extended timeframe, the new rules give businesses greater flexibility in managing late-received invoices and complex accounting processes.
However, the additional flexibility should not be viewed as a relaxation of compliance requirements. Taxpayers must still be able to demonstrate that the underlying transaction occurred and that a valid invoice was held before a deduction was claimed. Robust controls over invoice receipt, recording, retention and VAT reporting therefore remain essential.
Businesses should consider reviewing ERP configurations, invoice-processing workflows and year-end VAT procedures to confirm they can identify and track invoices received after the relevant tax period while maintaining a clear audit trail. Organisations with centralised finance functions or high transaction volumes may particularly benefit from reassessing existing controls and reconciliation processes.
Given the absence of transitional guidance, taxpayers should proceed cautiously when evaluating invoices that fall between the old and new regimes and should monitor future guidance from the Italian tax authorities. Until further clarification is issued, documenting the basis for deduction positions and maintaining consistent evidence of invoice receipt and recording dates will be especially important.
Francesco Grandolfo
Maria Paola Merlicco
BDO in Italy
For businesses, the practical effect is a longer window to deduct input VAT, together with corresponding extensions to invoice-recording deadlines. The additional flexibility makes invoice management, VAT reporting and recordkeeping controls even more important, because taxpayers still must be able to support the timing and validity of their deduction positions.
The decree introduces three changes relevant to businesses claiming input VAT deductions: a longer period for exercising the right to deduct, aligned deadlines for recording purchase invoices and customs declarations and clearer treatment of invoices received after the year in which the underlying transaction occurred.
Extended Time Limit for Claiming VAT Deductions
The period for exercising the right to deduct input VAT has been significantly extended. Taxable persons now may deduct VAT up to the deadline for filing the annual VAT return for the second year after the year in which the right to deduct arose. Previously, the deduction had to be exercised within the year in which that right arose.This amendment aligns domestic rules with the principles of VAT neutrality, proportionality and effectiveness and reflects the 11 February 2026 decision of the Court of Justice of the European Union (CJEU) in Case T689/24. In that decision, the CJEU clarified that a taxpayer may deduct input VAT in the return for the period in which the right to deduct arose, even if the related invoice is received later, provided the invoice is obtained before that annual VAT return is filed.
The two core conditions for deduction remain unchanged:
- The underlying transaction must have been carried out (substantive requirement); and
- A valid purchase invoice must be held (formal requirement).
Extended Time Limits for Recording Purchase Invoices
Invoice recording deadlines have been aligned with the new deduction timeline. Purchase invoices and customs declarations must now be recorded before the periodic VAT settlement in which the deduction is claimed and, in any event, no later than the deadline for filing the annual VAT return for the second year after the year in which the invoice is received.
Clarified Treatment of Invoices Spanning Two Financial Years
The deletion of the phrase “with reference to the same year” resolves long-standing issues involving year-end transactions where the invoice is received in the following year. If a transaction occurs in one year, but the related invoice is received in the following year before the annual return filing deadline, the taxpayer may deduct the VAT in the return for the year in which the right arose. For example, assume a transaction is carried out in 2026 and the invoice is received in 2027 before the 2026 VAT return deadline. In that case, VAT may be deducted in the 2026 VAT return. The invoice must first be recorded in a dedicated section of the VAT input register for invoices received in a year (2027) for which the right to deduct arose in the previous year (2026).
Transitional Arrangements
Neither the decree nor the explanatory memorandum provides transitional rules for moving from the former annual limit to the new two-year deduction window. Businesses should monitor for official guidance or a clarifying circular from the tax authorities before applying the new rules to transitional cases.
BDO Perspective
The extension of Italy's VAT deduction period represents a taxpayer-favourable development that reduces the risk of losing input VAT recovery solely because of timing issues. By allowing deductions to be claimed over a longer period and aligning invoice-recording deadlines with that extended timeframe, the new rules give businesses greater flexibility in managing late-received invoices and complex accounting processes.However, the additional flexibility should not be viewed as a relaxation of compliance requirements. Taxpayers must still be able to demonstrate that the underlying transaction occurred and that a valid invoice was held before a deduction was claimed. Robust controls over invoice receipt, recording, retention and VAT reporting therefore remain essential.
Businesses should consider reviewing ERP configurations, invoice-processing workflows and year-end VAT procedures to confirm they can identify and track invoices received after the relevant tax period while maintaining a clear audit trail. Organisations with centralised finance functions or high transaction volumes may particularly benefit from reassessing existing controls and reconciliation processes.
Given the absence of transitional guidance, taxpayers should proceed cautiously when evaluating invoices that fall between the old and new regimes and should monitor future guidance from the Italian tax authorities. Until further clarification is issued, documenting the basis for deduction positions and maintaining consistent evidence of invoice receipt and recording dates will be especially important.
Francesco Grandolfo
Maria Paola Merlicco
BDO in Italy