VAT in Italy: Rates, Compliance and Intra-EU Distance Sales

In this guide we explain how VAT in Italy works: the applicable rates, the main compliance obligations, and the rules governing intra-EU distance sales to consumers and businesses.

VAT rates in Italy

Italy applies three main VAT rates: the standard rate of 22%, and two reduced rates, 10% and 4%, reserved for specific goods and services identified by law (for example, certain basic food products fall under the 4% rate). Some transactions are also exempt or excluded from VAT, with specific rules depending on the sector.

VAT number and ordinary compliance obligations

Anyone who habitually carries out a business, art, or professional activity in Italy must register for a VAT number and comply with the related obligations: electronic invoicing, periodic VAT settlements, the annual VAT return, as well as any Intrastat obligations for transactions with other EU countries.

The threshold for intra-EU distance sales: what has changed

One point worth staying up to date on concerns distance sales of goods to private consumers in other EU countries (typical of e-commerce). Until 30 June 2021, differentiated national thresholds applied (in Italy, for example, €35,000), above which the operator had to register for VAT purposes in the country of destination.

Since 1 July 2021, this system has been replaced by a single EU threshold of €10,000 per year, cumulative for all intra-EU distance sales and for TBE services (telecommunications, broadcasting and electronic services) supplied to private consumers in other EU member states. Below this threshold, the transaction can generally continue to be subject to VAT in the country of origin; once the threshold is exceeded, VAT is due in the customer’s country of destination.

The OSS (One Stop Shop) regime

To simplify the obligations arising from exceeding the €10,000 threshold, the OSS (One Stop Shop) regime was introduced. It allows businesses to declare and pay the VAT due in the various EU countries of destination through a single registration and a single quarterly return, avoiding direct identification or the appointment of a fiscal representative in each member state where sales are made.

Joining the OSS regime is optional but, for those operating e-commerce activities toward multiple EU countries, it is in most cases the simplest solution for correctly managing cross-border VAT obligations.

Foreign operators selling in Italy

Non-resident operators carrying out supplies of goods or services relevant for VAT purposes in Italy generally must register for VAT in Italy: non-EU operators must appoint a fiscal representative, while EU operators can generally choose between appointing a fiscal representative and direct identification, the latter reserved for entities established in another member state.

Case law has repeatedly clarified that the VAT fiscal representative is jointly and severally liable with the represented foreign entity for obligations relating to taxable transactions carried out in Italy, within the limits of the mandate received: a liability profile that makes accurate and well-documented management of compliance obligations advisable, together with a clear contractual definition of the tasks entrusted to the representative. Another practical aspect that often concerns foreign operators relates to VAT refunds: in practice, the Italian Revenue Agency (Agenzia delle Entrate) requires a proper appointment of the fiscal representative (or direct identification, where permitted) as a condition for correctly handling requests for the refund of VAT paid in Italy by EU and non-EU entities.

Practical tips

• monitor the volume of distance sales to EU consumers to check whether the €10,000 annual threshold has been exceeded;
• consider joining the OSS regime if you operate e-commerce activities toward several European Union countries;
• check which VAT rate applies to your goods or services, since reduced rates apply only to specific categories;
• for foreign operators selling in Italy, assess with a professional advisor whether fiscal representation or direct identification is the most suitable solution;
• stay up to date, since VAT legislation, especially regarding cross-border trade, is subject to frequent changes.

Our firm assists Italian and foreign businesses in correctly managing VAT compliance obligations, including the assessment of the OSS regime for intra-EU distance sales.

VAT in Italy: key points to remember

VAT in Italy is applied at differentiated rates (4%, 5%, 10%, 22%) depending on the type of goods or services. Our firm assists businesses in the correct application of VAT in Italy and in managing filing obligations.

OSS, Fiscal Representative or Direct Identification: How to Choose

A question we are often asked by e-commerce operators is which of the tools described above actually applies to them when dealing with VAT in Italy. The answer depends on where the business is established and on what it sells. A business established in another EU country that sells goods to Italian private consumers and exceeds the single EU threshold can normally use the OSS regime: a single registration in its own country, a single quarterly return, and no need to open an Italian VAT position at all.

The picture changes when the operator carries out transactions that are relevant for VAT in Italy beyond distance sales to consumers, for example holding stock in Italy or selling to Italian businesses. In that case an Italian VAT registration is required: an EU operator can choose between direct identification and a fiscal representative, while a non-EU operator must appoint a fiscal representative. Mapping these scenarios before the first sale is the most effective way to keep VAT in Italy under control and to avoid discovering an unregistered position during an audit.

Frequently asked questions about VAT in Italy

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