Considerations on COM(2023)342 - Amendment of Implementing Decision (EU) 2017/784 as regards the period of authorisation for, and the scope of, the special measure derogating from Articles 206 and 226 of the VAT Directive taken by Italy

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dossier COM(2023)342 - Amendment of Implementing Decision (EU) 2017/784 as regards the period of authorisation for, and the scope of, the special ...
document COM(2023)342 EN
date July 25, 2023
 
(1)By Council Implementing Decision (EU) 2015/1401 11 , Italy was authorised until 31 December 2017 to require that value added tax (VAT) due on supplies to public authorities was to be paid by those authorities to a separate and blocked bank account of the tax authorities (‘the special measure’). The special measure constituted a derogation from Articles 206 and 226 of Directive 2006/112/EC in relation to VAT payment and invoicing rules. 

(2)By Council Implementing Decision (EU) 2017/784 12 , Italy was authorised to apply the special measure until 30 June 2020, and its scope was broadened to include supplies to certain companies controlled by public authorities and to companies listed on the stock exchange that are included in the Financial Times Stock Exchange Milano Indice di Borsa (‘FTSE MIB’) index. That authorisation was subsequently extended until 30 June 2023 by Council Implementing Decision (EU) 2020/1105 13 .

(3)By letter registered with the Commission on 26 September 2022, Italy requested that that authorisation be prolonged until 31 December 2026. By letter registered with the Commission on 8 May 2023, Italy requested that the scope of the special measure be restricted, from 1 July 2025, to supplies of goods and services to public authorities and to certain companies controlled by public authorities.

(4)By letter dated 11 May 2023, the Commission informed the other Member States of the request made by Italy. By letter dated 12 May 2023, the Commission notified Italy that it had all the information necessary to consider the request.

(5)The special measure is part of a package of measures introduced by Italy in order to counter tax fraud and evasion. That package of measures, including an electronic invoicing obligation as authorised by Council Implementing Decision (EU) 2018/593 14 , has replaced other control measures and allows the Italian tax authorities to cross-check the different operations declared by the operators and to monitor their VAT payments.

(6)Italy considers that, in the context of the package of measures implemented, mandatory electronic invoicing reduces the time needed by the tax administration to become aware of the existence of a potential case of tax fraud or evasion. However, Italy also considers that, in the absence of the split payment mechanism introduced by the special measure, recovery from the tax fraudsters or evaders once the cross-check has been carried out could be impossible if they are insolvent. Thus, the split payment mechanism, as an ex ante measure, has proved to be highly effective and complementary to mandatory electronic invoicing, which is an ex post measure.

(7)Italy repeatedly committed itself to not seeking the renewal of the special measure allowing the application of the split payment mechanism once the package of measures Italy intended to apply was fully implemented. However, Italy considers that, given the effectiveness of the special measure and its synergies with other applied measures, in particular the electronic invoicing obligation, the special measure should be extended to avoid a setback in the efforts made to reduce the Italian VAT gap. Nevertheless, in order to honour its commitment to gradually phase out the special measure Italy modified its request to exclude from the scope of the special measure, from 1 July 2025, supplies of goods and services to companies listed on the stock exchange that are included in the Financial Times Stock Exchange Milano Indice di Borsa (‘FTSE MIB’) index. That timeframe will allow taxable persons affected by the restriction of the scope of the special measure to make the appropriate operational adjustments and the Italian tax authorities to monitor the effectiveness of the special measure and adequately evaluate possible alternative measures.

(8)One of the effects of the special measure is that suppliers, being taxable persons, are not able to offset the VAT paid on their input with the VAT received on their supplies. Such suppliers may constantly be in a credit position and may need to ask for an effective refund of this VAT paid on their input from the tax administration. According to the information provided by Italy, taxable persons carrying out transactions subject to the split payment scheme are entitled to receive the payment of the relevant VAT credits as a priority, within the limit of the credit deriving from such transactions. That practice implies that refund requests related to the split payment mechanism are processed with priority both during preliminary investigation and during the payment of sums due from non-priority refunds.

(9)The requested derogation should be limited in time to allow an assessment as to whether the special measure is appropriate and effective. The authorisation should therefore be prolonged until 30 June 2026, which would leave sufficient time to assess the effectiveness of the measures implemented by Italy with the aim of reducing tax evasion in the sectors concerned.

(10)To guarantee the necessary follow-up within the framework of the requested derogation and in particular to assess the impact on VAT refunds to taxable persons covered by that derogation, Italy should be required to submit a report to the Commission by September 2024 on the overall situation of, and in particular the average time needed for, VAT refunds to taxable persons, and on the effectiveness of the special measure and any other measures implemented by Italy with the aim of reducing tax evasion in the sectors concerned. That report should include a list of the different measures implemented, together with their date of entry into force.

(11)The special measure is proportionate to the objectives pursued since it is limited in time and restricted to sectors which pose considerable problems as regards tax evasion. In addition, the special measure does not create a risk that tax evasion would shift to other sectors or other Member States.

(12)The special measure will not negatively affect the overall amount of tax revenue collected at the stage of final consumption and will have no adverse impact on the Union’s own resources accruing from VAT.

(13)Implementing Decision (EU) 2017/784 should therefore be amended accordingly.