The European Union is driving the prevalence of electronic invoicing forward with its recent regulations. In Germany, many billers will be obliged to issue electronic invoices to the public sector by 2020 at the latest. Italians are even going one step further: from January 2019, electronic invoicing will not only be mandatory in exchange with the authorities, but also for all B2B transactions.
The law already applies to some sectors
Petroleum producers and subcontractors to the public sector must already comply with the new rules. For them, the new law came into force on 1 July 2018. For companies that are active in Italy or have subsidiaries there, it is now urgent time to take action. Invoices that are not sent via the specified platform after the deadline shall be deemed not to have been issued by the authorities. Companies face severe sanctions. We explain the most important changes and what you need to consider moving forward.
Many of the local Italian companies have already been using the Sistema di Interscambio (SdI) for some time. The interface has been mandatory for data exchange with the authorities since 2015. Starting last year, the SdI system has also been made available for the exchange of documents between private companies. However, with around 100,000 invoices in the first year, the acceptance rate across the country is rather restrained. Italy is thus a pioneer throughout Europe and hopes to use the system to curb tax fraud. For this reason, many countries outside the EU also rely on a comparable, so-called Clearance model. This is particularly well known in South America and Turkey. This way, the invoices can be compared with the VAT data at the authorities.
Italy sets its own standard
The electronic invoices must be transmitted in XML format. Italy relies on its own version of the European CEN standard called “FatturaPA xml”. In future, the standards officially defined by the EU should also be permitted, but at present there is little practical experience in this respect. Only after the deadline expires in the new year will it become clear which standards Italians accept.
The new law also requires legally compliant archiving of invoices for at least 10 years – similar to Germany, for example. However, all invoices must be digitally archived and submitted to the tax authorities no later than three months after completion. The demands on the technical standard are comparatively high. The archived invoices must first be grouped and then provided with a qualified electronic signature and a time stamp. In Italy, all archiving solutions must support the AgID certification required by the state. This certification is awarded to providers who meet all technical requirements for secure archiving. The documents must be digitally signed so that subsequent changes can be ruled out.
However, the recent change in the B2B area also brings some relief. On the one hand, companies generally benefit from the use of a digital invoice. Efficiency increases and companies can spend significantly less time on invoicing. In addition, companies in Italy will in future be able to complete the advance return for VAT automatically via the interface. Until now, all invoices relevant to VAT had to be sent to the Revenue Agency via the so-called Spesomentro. The Italian government also wanted to use this system to prevent tax evasion. However, according to many entrepreneurs, the government has created a bureaucratic monster in Spesomentro.
Web interface for small businesses
Small businesses have the option to send invoices via a free web platform. This again eliminates the biggest advantage of electronic invoices, which are increased efficiency and enormous time savings. Employees must upload the invoices themselves to the platform and make them available in an appropriate format. Larger companies benefit from a direct connection to the ERP system, so that all data can be processed automatically.
In April, the European Union granted Italy an exception until 2021 to make electronic invoicing mandatory in the B2B sector as well. The EU VAT Directive requires the recipient’s consent to receive electronic invoices, the law in Italy would be contrary to the EU Directive without this exception. The exception can be renewed after expiration.
Objective: Fight tax evasion
The aim of the mandatory electronic invoicing law in Italy is to reduce administrative expenses and further curb tax evasion. All invoices are made available and verifiable for the tax authorities within the shortest possible time. In contrast to paper invoices, the data from electronic invoices can be analysed and evaluated much better.
If you have any questions regarding the implementation or introduction of the mandatory Electronic Invoices in Italy, please contact our team directly.