Indirect Tax News - March 2021

Clarifications of VAT registration of entities established in UK after Brexit

The Italian Tax Authority published an important clarification (Resolution 1 February 2021, no. 7/E) concerning VAT registration of UK companies after Brexit. Effective 1 January 2021 companies established in the UK that carry out activities subject to VAT in Italy may either directly register for VAT in Italy or they may appoint a VAT representative in Italy.

As a consequence, UK companies that were already VAT registered in Italy on 31 December 2020 are not required to appoint an Italian VAT representative. For UK companies that were not registered for VAT in Italy before Brexit, starting 1 January 2021 they can either appoint an Italian VAT representative or proceed with a direct VAT registration, as was possible before Brexit.

The allowance set out in the clarification is a result of the Italian Tax Authority’s conclusion that the Agreement signed between the UK and EU on 24 December 2020 contains a Protocol on mutual VAT and administrative cooperation. As a result, the Agreement is compliant with EU regulations on assistance between the tax authorities in the field of VAT. So, UK entities are allowed to carry out VAT transactions in Italy through a direct VAT identification as an alternative to the normal requirement of appointment of a VAT representative.

Indeed, the Italian Tax Authority reached the same conclusion regarding Norwegian companies on 28 July 2020 (Resolution no. 44/E) based on the Agreement between Norway and the EU. As well, Italy allows the same treatment to a non-EU-based entity making VAT supplies into Italy if the entity is from a non-EU country that has an agreement with EU that provides for mutual assistance between the tax authorities of the European Union and that non-EU country.

Francesco Grandolfo

Fabrizio Papotti