Italy VAT Rates and Compliance (2025)

Rates and Thresholds

Tax Rate

22%

Non-Resident Threshold

First sale

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Taxable Transactions

B2B Sales

Reverse charge

B2C Sales

Yes

Digital Goods

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As the third-largest economy in the Eurozone, and the eighth-largest economy in the world, Italy represents a significant opportunity for businesses looking to expand in the global market. But before selling to Italian customers, businesses must first understand the country’s complex value-added Tax (VAT) system. By understanding Italy’s unique rates, rules, and reporting requirements, companies can maintain compliance, avoid penalties, and prevent disruptions to their operations. 

What is VAT, and how does it work in the EU?

VAT, is a consumption tax levied on goods and services at each stage of the supply chain where value is added, from initial production to final sale. Unlike sales tax, which is paid only once, VAT is collected and remitted at multiple points. The end consumer ultimately bears the cost of the VAT, but the mechanism requires businesses to act as tax collectors on behalf of the government at each stage of production.

In the EU, the VAT process can be broken down into four steps:

1. A manufacturer produces a product and sells it to a wholesaler. The manufacturer charges VAT on this sale and remits it to the tax authorities.
2. The wholesaler, having paid VAT to the manufacturer, can typically reclaim that amount. When the wholesaler sells the product to a retailer, they charge VAT on their selling price.
3. The retailer pays VAT to the wholesaler (and can then also reclaim it). The retailer charges VAT to the final consumer.
4. The consumer pays the final price, including VAT. Since they are at the end of the supply chain, they cannot reclaim the VAT paid.

This system is standard across all 27 member states of the European Union (EU), and is governed by the EU VAT Directive. While the directive provides a unified framework, it allows individual member states to set their own standard and reduced VAT rates. This means that the core principles are the same in each country, but specific rates and rules on what is taxed can vary significantly.

What VAT means for companies selling to customers in Italy 

Whether your company is in the EU or not, selling to customers in Italy will often require you to register for, collect, and remit Italian VAT. This obligation can arise the moment you begin selling goods to consumers in Italy or if you establish a physical presence in the country, for instance, by using a local warehouse for order fulfillment. 

Failure to comply can lead to significant penalties, time-consuming audits, and potential legal action from the Italian tax authority, the Agenzia delle Entrate (Revenue Agency). To avoid these consequences, your company will need to know which VAT rate applies to your products. 

Italian VAT Rates

Italy employs a multi-tiered VAT system with several different rates for various categories of goods and services.

Standard VAT Rate: 22% 

The standard VAT rate in Italy is 22%. This is the default rate applied to the vast majority of goods and services that do not qualify for one of the reduced rates. If a product or service is not explicitly listed under a reduced rate category, you should assume that the 22% rate applies. This includes a wide range of products and professional services, including software and digital goods.

Reduced VAT Rates: 10%, 5%, and 4%

A reduced rate of 10% is applied to some goods and services considered important but not essential staples. In many countries, this rate is applied to sectors that the government wishes to support, such as tourism. Examples of goods and services that are subject to Italy’s 10% rate include:

• Hotel accommodations and restaurant services
• Certain food products
• Pharmaceutical products not covered by lower rates
• Admission to cultural sites and entertainment events (such as theaters, concerts, and museums)
• Renovation and repair work on residential properties

A reduced rate of 5% is applied to a select group of goods and services, including some that benefit society and some that benefit individual health, such as:

• Certain very specific categories of food staples, such as food for infants
• Social and health services provided by cooperatives
• Some public transportation services

A super-reduced rate of 4% is reserved for essential goods and basic necessities. The goal of this rate is to make everyday items more affordable for the general population. This category includes:

• Basic foodstuffs like bread, milk, pasta, butter, and olive oil
• Books, newspapers, and certain periodicals
• Medical aids for the disabled
• Fertilizers for agriculture
• Specific types of residential housing (for example, first home benefits)

Zero rating and exemptions 

There are several key distinctions between zero-rated products and exempt products. Although the end consumer pays no VAT in either case, the implications for businesses are very different.

• Zero-rated supplies: When a product is zero-rated, VAT is charged at a rate of 0%. These items are sometimes called “genuine exemptions.” This means the business does not collect VAT from the customer. However, because it is still a "taxable supply," the business retains the right to deduct the input VAT it paid on its purchases related to making those zero-rated sales.  ‍
• Exemptions: An exempt product is outside the scope of VAT. These items are sometimes called “non-genuine exemptions.” No VAT is charged on the sale, and the business cannot deduct the input VAT paid on its related costs. Exemptions are often applied for public policy reasons. Examples in Italy include financial and insurance services, healthcare, transport, and educational services.

Registering for VAT in Italy

Before a business can start collecting and remitting VAT in Italy, it must first register with the Italian tax authorities. This registration process formally recognizes the business within the Italian tax system and provides it with a unique VAT identification number. Failing to register when required is a serious compliance breach that can lead to immediate penalties.

The specific steps and requirements for registration primarily depend on whether your business has a physical presence in Italy.

Resident vs. nonresident businesses

The registration process and requirements differ, depending on where the business is legally established.

• Resident businesses: A company that is incorporated or has a permanent establishment (such as a physical office, factory, or branch) in Italy is considered a resident business. These companies must register for VAT before they begin their taxable activities.
• Nonresident businesses: A business without a physical presence in Italy is considered a nonresident business. These businesses may still have an obligation to register for Italian VAT if they sell goods or services to customers in Italy. This is common for e-commerce companies, digital service providers, and businesses involved in distance selling. Nonresident businesses can register either directly (if they are based in the EU) or through a fiscal representative.

Who needs to register for VAT?

A business must register for Italian VAT in several scenarios:

• Exceeding distance selling thresholds: Previously, e-commerce businesses based in other EU countries had to meet country-specific thresholds. But since July 1, 2021, this system has been replaced. Now, a single, EU-wide threshold of €10,000 applies to the total B2C sales of goods and digital services across all EU countries. If your total cross-border sales to EU consumers exceed this amount annually, you must collect VAT at the rate of the customer's country (in this case, Italy) and remit it.
• Storing goods in Italy: If a nonresident business stores goods in a warehouse or fulfillment center in Italy (for instance, by using Amazon FBA), it must register for Italian VAT from the moment the goods are moved into the country. There is no threshold in this case.
• Certain B2B supplies: A business must register for Italian VAT if it sells certain business-to-business (B2B) goods or services where the reverse charge mechanism cannot be used. In these cases, the supplier is responsible for charging and remitting Italian VAT. 
• Organizing events: If a company organizes live events, conferences, or exhibitions in Italy where attendees are charged admission, VAT registration is required.
• Voluntary registration: A business can also choose to register for VAT voluntarily if it anticipates making taxable sales in Italy, even before crossing a threshold that makes doing so mandatory.

How to register for VAT in Italy

The registration process involves submitting a specific form to the Agenzia delle Entrate. For corporations, this form will be the Modello AA7/10; for sole proprietors and individuals, it will be the Modello AA9/12.

Resident businesses typically register via the Comunicazione Unica d'Impresa (Single Business Communication), which handles registration with multiple bodies simultaneously. For nonresident businesses, the process is as follows:

1. Obtain a fiscal code (codice fiscale): Before registering for VAT, a nonresident business or its legal representative must first obtain an Italian fiscal code.
2. Complete the registration form: The relevant form (either the AA7/10  or AA9/12) is filled out with detailed information about the business, its activities, and its legal representatives.
3. Submit the form: The completed form, along with supporting documentation (such as a certificate of incorporation from the home country), is submitted to the relevant tax office.
4. Receive a VAT number: Once the application is processed and approved, the Agenzia delle Entrate will issue a unique Italian VAT number (Partita IVA). This number will have 11 digits and the country prefix "IT" (for example, IT12345678910).

Working with a tax representative in EU countries

For businesses outside the EU, direct VAT registration in Italy is not possible. Non-EU companies are legally required to appoint a fiscal representative in Italy.

A fiscal representative is an Italian-based individual or company that is jointly and severally liable for the nonresident company's VAT obligations. This means they are legally responsible for ensuring that all VAT returns are filed correctly, that payments are made on time, and that all local regulations are met. If the nonresident company fails to pay its VAT debt, the Italian authorities can pursue the fiscal representative for the outstanding amount.

EU-based companies are not required to appoint a fiscal representative and can register directly. However, many still choose to work with a local tax agent or advisor to help them overcome language barriers and any administrative challenges.

When to charge VAT

Knowing when to charge VAT on sales to Italian customers is just as important as knowing the correct rate, and the rules depend on the transaction type (B2B or B2C), the customer location, and the nature of the product or service being sold. It’s important to note that VAT rules are country-specific within the EU, especially rates and product classifications, so businesses must be vigilant about checking and applying the correct rules for each individual country.

Reverse charges

The reverse charge mechanism is a key concept in B2B transactions within the EU. It is designed to simplify VAT accounting for cross-border supplies. With reverse charges, the responsibility for remitting the VAT shifts from the supplier to the customer.

Here's how it works:

1. An Italian VAT-registered business buys a service from a company in another EU country. For this example, we’ll say it’s Germany.
2. The German supplier does not charge German VAT on its invoice. Instead, the invoice will state "Subject to Reverse Charge."
3. The Italian business customer then "self-accounts" for the Italian VAT. They calculate the VAT due at the appropriate Italian rate and report it on their own VAT return as both an output tax (payable) and an input tax (deductible). The two entries typically cancel each other out, resulting in no cash flow impact for the customer, but the transaction is still properly reported.

The reverse charge applies to most cross-border B2B services within the EU and also to a limited number of  B2B products within Italy (such as construction services, scrap metal, and certain energy products).

B2B vs. B2C transactions

The rules for charging VAT differ significantly depending on whether you are selling to another business (B2B) or directly to a private consumer (B2C).

B2C: When selling to a private individual in Italy, you must charge Italian VAT at the correct rate. This is true whether you are an Italian company or a nonresident business registered for VAT in Italy (or using One-Stop Shop).

B2B: When selling to a VAT-registered business in Italy:

• If you are an Italian company, you charge Italian VAT.
• If you are based in another EU country, the reverse charge mechanism typically applies. You do not charge VAT.
• If you are a non-EU company, the rules can be more complicated, but often the reverse charge will apply if the service is deemed to be supplied where the customer is located.

Marketplace facilitators 

The rise of online marketplaces like Amazon, eBay, and Etsy has led to new VAT rules. Since July 2021, these marketplaces have been considered "deemed suppliers." This means that for certain transactions, the marketplace itself (not the underlying seller) is responsible for collecting and remitting the VAT.

This rule generally applies to:

1. B2C sales of goods imported from outside the EU with a consignment value of up to €150.
2. Sales of goods within the EU by a non-EU seller using the marketplace's platform.

In these cases, the marketplace charges the customer the appropriate Italian VAT and remits it to the tax authorities. 

VAT deductions

The VAT system allows registered businesses to deduct the input VAT they pay on their business expenses from the output VAT they collect on their sales. This ensures that tax is levied only on the "value added" at each stage.

In Italy, a business can generally deduct VAT incurred on purchases that are directly related to its taxable business activities. However, there are some restrictions. For example, VAT on expenses for cars, entertainment, food, and drink is often only partially deductible or not deductible at all.

Statute of limitations

The statute of limitations dictates the period during which the Italian tax authorities can assess and collect unpaid VAT. Generally, the Agenzia delle Entrate can audit VAT records for up to five years after the end of the tax year in which the VAT return was filed. In cases of failure to file a return, this period can be extended to seven years.

How to stay compliant with Italian VAT regulations

Staying compliant with Italian VAT regulations is a continuous cycle that involves issuing legally compliant invoices, filing your VAT returns in a timely manner, and keeping all your records for the required period.

The entire compliance process is built on proper invoicing. In the EU, the invoice is the primary legal document that fiscal authorities use to verify VAT transactions, both for the supplier’s obligation to account for output tax and the customer’s right to deduct input tax. Italy has stringent rules, including a mandatory electronic invoicing system.

Invoicing requirements 

All B2B and B2C invoices issued by Italian-established VAT-registered entities must be issued in XML format through the government's official platform, the Sistema di Interscambio (SdI). This e-invoicing mandate ensures that tax authorities have real-time access to transaction data.

A compliant Italian VAT invoice must include the following information:

• The date of issue
• A unique, sequential invoice number
• The supplier’s VAT number 
• The supplier’s full name and address
• The customer’s VAT number (if applicable)
• The customer’s full name and address
• A clear description of the goods or services supplied (quantity and nature)
• The VAT rate applied
• The date of the supply or payment (if different from the invoice date)
• The taxable amount (net value) for each different VAT rate
• The amount of VAT payable
• The gross, total amount payable
• A reference to any exemption or the reverse charge mechanism, if applicable 

Filing VAT returns and other required forms

Italian VAT returns are typically filed on a quarterly basis. However, businesses can opt for monthly filing.

• Quarterly filings (LIPE): Businesses must submit a quarterly communication of their VAT transactions, known as the Liquidazioni Periodiche IVA (LIPE). This report summarizes the total sales and purchases for the quarter and calculates the VAT due or refundable.
• Annual return (Dichiarazione IVA annuale): In addition to quarterly reports, all VAT-registered businesses must file a comprehensive annual VAT return. This return provides a complete overview of all VAT transactions for the previous calendar year and reconciles the amounts reported in the quarterly LIPE filings.

Besides the VAT returns, businesses may need to file an Intrastat declaration. This is required for businesses that trade goods with other companies within the EU, once the value of their arrivals or dispatches exceeds certain annual thresholds.

Filing deadlines

To avoid automatic penalties in Italy, businesses must track the distinct deadlines for both paying VAT and filing the quarterly electronic communication (LIPE). According to the Italian Ministry of Economy and Finance, payment and filing deadlines are as follows:

Periodic VAT payments (Versamento IVA):

• Monthly filers: Due by the 16th of the following month.
• Quarterly filers: Due by the 16th of the second month after each quarter. Note: These payments incur a 1% interest charge. The Q2 payment is deferred to August 20, and the Q4 payment is due with the annual balance on March 16 of the next year.

Quarterly communication (LIPE): This is a mandatory electronic summary of VAT calculations for all taxpayers.

• Q1: Due May 31
• Q2: Due September 30
• Q3: Due November 30
• Q4: Due by the last day of February of the next year.

Annual VAT return (Dichiarazione Annuale IVA):

• Filing deadline: Due April 30 of the following year.
• Final payment deadline: Due March 16 of the following year.

Recordkeeping requirements

Businesses are required to maintain all records related to their VAT obligations for a minimum of 10 years. These records include: 

• Copies of all invoices issued and received
• Proof of payments
• Annual returns
• Intrastat declarations
• Records of cross-border transactions
• VAT returns and communications (LIPE)

Risks of noncompliance

Noncompliance with VAT regulations in Italy can expose a business to significant financial and legal risks. These include:

Audits: The Agenzia delle Entrate can initiate a tax audit if it detects anomalies in filings. An audit is an invasive and time-consuming process that can disrupt business operations.

Penalties and fines: The penalty regime in Italy is severe.

• Late filing: Penalties for late filing of returns can range from 90% to 180% of the unpaid VAT, with minimum fines even if no VAT is due. In fraud cases, penalties can range from 120% to 240%.
• Late payment: Penalties for late payment start at around 30% of the unpaid tax, plus interest.
• Invoicing errors: Fines for incorrect or missing invoices can be substantial.

Other risks: Beyond financial penalties, persistent noncompliance can lead to reputational damage; the seizure of assets; and, in severe cases of fraud, criminal prosecution for the company's directors.

5 tips on staying compliant with Italian VAT regulations

Staying compliant with Italian VAT regulations is less about memorizing every rule and more about establishing a proactive and thorough process. While the system has many intricacies, a few foundational best practices can help you manage your obligations effectively. 

1. Determine your VAT liability early: Before you make your first sale, assess whether you have a VAT obligation in Italy.
2. Register on time: Do not wait until you have a large tax liability. Register as soon as you meet the requirements.
3. Appoint a fiscal representative (if required): Non-EU businesses must secure a reliable local representative.
4. Keep detailed records: From day one, maintain organized and complete records of all transactions.
5. Stay informed: VAT laws and rates can change. Regularly check for updates from the Italian tax authority or consult with a tax advisor.

Building these habits into your operations from the very beginning is the key to minimizing risk and ensuring smooth, lawful sales in the Italian market. Once these fundamentals are in place, you can explore ways to simplify this process further, including by utilizing the EU’s One-Stop Shop and automated software solutions. 

How to manage VAT with the One-Stop Shop

For many businesses, especially those in e-commerce, managing VAT in multiple EU countries can be an administrative nightmare. To simplify this, the EU has introduced the One-Stop Shop (OSS). The OSS is a portal that allows businesses to manage their VAT obligations for B2C sales across all 27 EU member states in one place. Instead of registering for VAT in every country where you have customers, you can register for OSS in a single EU country (usually your home country, or a country of your choice if you are non-EU). 

Through the OSS portal, you can file a single quarterly return and make one payment, declaring all the VAT collected from customers across the EU. The OSS authority then distributes the tax to the respective countries. This dramatically reduces the administrative burden for businesses that sell goods or digital services to customers in multiple EU countries.

Automating Italian VAT compliance with tax software solutions 

While the OSS is beneficial for filing returns, it’s important to understand its limitations. As a submission portal, the OSS cannot apply the correct, country-specific VAT rate, manage Italy’s confusing invoicing rules, or track sales. This is where tax compliance software comes in. 

Software solutions can help businesses manage the complexities of VAT by: 

• Calculating the correct VAT rate for every product in every EU country in real-time, eliminating the risk of error.
• Automatically generating and submitting compliant e-invoices directly to Italy's Sistema di Interscambio (SdI) system.
• Monitoring your sales against the €10,000 EU-wide threshold, alerting you when you need to register for VAT.
• Preparing and populating your VAT returns, including the specific data needed for your quarterly OSS filing.
• Integrating seamlessly with your existing e-commerce platforms, payment gateways, and accounting systems for a fully connected workflow.

By automating these tasks, tax compliance software reduces the risk of costly errors and frees up your team's time for work that actually grows your business.

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Takeaway 

VAT in Italy is a consumption tax applied to goods and services at each stage of the supply chain. The standard rate is 22%, and there are reduced rates of 10%, 5%, and 4% for certain goods and services.

To remain compliant, businesses must focus on several key areas:

• Registration: You are required to register for Italian VAT when your total EU-wide distance sales exceed €10,000 annually or immediately upon storing goods within the country.
• Fiscal representation: Non-EU companies must appoint an Italian-based fiscal representative who is jointly liable for the business's VAT obligations.
• Invoicing and reporting: Compliance is managed through Italy’s mandatory electronic invoicing system (SdI), quarterly communications (LIPE), and a comprehensive annual return.
• Deadlines: Failure to adhere to Italy's strict invoicing, filing, and payment deadlines results in significant penalties.

To streamline this process, businesses can use the EU's One-Stop Shop (OSS) portal for simplified multi-country filings, while dedicated tax compliance software provides an end-to-end solution for managing real-time calculations, invoicing, and reporting.