Italy: Recovery of late-charged input VAT following self-disclosure
Italy: Recovery of late-charged input VAT
The Italian tax authorities on 21 August 2020 issued guidance (ruling no. 267) that confirms the right of the recipient to recover value added tax (VAT) recharged by the supplier, following a self-disclosure by the supplier to correct the VAT treatment of the original transaction.
The ruling provides an important clarification from the Italian tax authorities and for the first time confirms that customers have the right to recover VAT charged late by the supplier, following a self-disclosure, even when the ordinary deadline for the input VAT recovery has expired.
The supplier (a company established in the EU and registered for VAT purposes in Italy) supplied goods subject to Italian VAT to another company—one with no fixed establishment or VAT registration in Italy. The supplier had not declared VAT on these supplies, and to correct its Italian VAT position, made a subsequent self-disclosure, recharging the omitted VAT to its customer.
In a VAT ruling request, the Italian tax authorities were asked to confirm that the recipient was entitled to recover the additional VAT recharged by the supplier following the self-disclosure, even though the limitations period for the input VAT recovery (that is, the deadline for the submission of the VAT return for the year when the original supply was made) had already expired.
Ruling from the tax authorities
The Italian tax authorities confirmed that the customer was entitled to recover the Italian VAT recharged by the supplier.
As explained in the ruling, the right to recover VAT does not arise from the time when the original transaction took place, but from the date when the customer receives the debit note with the additional VAT. Thus, the right to recover VAT recharged via a debit note expires with the annual VAT return for the year when the debit note is received.
Furthermore, the ruling confirms that these principles apply even if the recipient was not registered for Italian VAT purposes, when the sale took place. In such instances, in order to recover the VAT recharged following the self-disclosure, the recipient must have a VAT registration or appoint a VAT representative prior to the payment of the VAT to the supplier.
Read an August 2020 report [PDF 146 KB] prepared by the KPMG member firm in Italy
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