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Vat – Value added tax – or Iva – Imposta sul Valore Aggiunto, in Italian language, is a consumption tax that applies to the supply of goods and services provided by entrepreneurs, professionals, or artists and on importations carried out by anyone. In some cases, also Intra-Community acquisitions are subject to Vat.

In Italy the standard Vat rate is 22% and reduced rates are provided for several supplies of goods and services, such as 4% for listed food, drinks and agricultural products or 10% for electric power supplies for listed uses and listed drugs. Specific supplies of goods and services expressly listed in Presidential Decree n. 633/72 are exempt from Vat, for example education, insurance services, specific financial services, supply, leasing of particular immovable property.

VAT registration is mandatory in Italy for persons engaging in the following activities:

• business or agricultural activity
• or an artistic or professional activity on a regular basis.

Registration involves the acquisition of a VAT number; this is an 11-digit code that must be displayed on every invoice or other commercial document issued or received in the course of business.

Non-resident persons intending to start a business, art or profession must discharge their VAT obligations in Italy if they also perform activities for final consumers or non-commercial entities that are not VAT-registered. At the same time, they will be able to exercise the rights arising from the tax, such as the right to deduct VAT on purchases and to claim refunds.

Foreign operators are not required to register for VAT in Italy if their customers in Italy are exclusively other VAT entities established in Italy. For example, registration is not necessary if an entity not established in Italy sells goods to other traders only and not to final consumers. In this case, all VAT obligations will be borne by the Italian operator.

How to register for VAT

Non-resident entities that need to register for VAT in Italy can choose one of the following options:

• appoint a tax representative established in Italy and with Italian VAT number
• register directly for VAT in Italy, i.e. obtain an Italian VAT number.

This second option is only available to entities residing in other EU countries or in a third country with which reciprocal agreements are in place.

In either case, the foreign operator remains a non-resident entity for VAT purposes.

Lastly, any non-resident entity may set up a fixed establishment in Italy. The fixed establishment must register for VAT as a resident entity.