Non-residents and VAT-relevant transactions in Italy: direct identification or fiscal representative?

Are you a non-resident operator wishing to carry out VAT-relevant transactions in Italy? You may need to appoint a fiscal representative or register for VAT purposes in this country, i.e. obtain an Italian VAT number.

When is it mandatory? 

The appointment of a fiscal representative or the opening of a so-called direct VAT identification (identificazione diretta ai fini IVA) allows non-resident companies/operators carrying out activities subject to VAT in Italy and not having a permanent establishment in the country to exercise their rights and fulfil their obligations in accordance with national VAT legislation.

Such appointment of a fiscal representative or such opening of a direct VAT identification is compulsory when (i) the foreign company/operator carries out VAT-liable transactions in this country and the relevant obligations are to be borne by the latter, (ii) the transaction is carried out vis-à-vis persons not required to apply the reverse charge mechanism (inversione contabile), or (iii) when the aforementioned appointment or opening is imposed by specific rules on intra-Community trade. 

Relevant examples are:

• sales of goods to private individuals in Italy (e.g. at trade fairs or local street markets);
• sales of goods located in Italian warehouses to foreign subjects (e.g. sale of a machine located in Italy to another foreign company);
• supply of territorially relevant real estate services to private individuals in Italy (e.g. painting work at a private residence);
• exceeding the sales value of Euro 10,000 for e-commerce activity (when this amount is exceeded, it is necessary to register in Italy);
• introduction of goods into special VAT “warehouses” (art. 50-bis DPR 633/72);
• distance sales of goods subject to excise duty in Italy; 
• specific cases of triangular or quadrangular transactions.

Appointment of a fiscal representative in Italy and subsequent fulfilments

In accordance with Article 17(3) of Presidential Decree 633/1972, non-resident entities must fulfil their obligations and exercise their rights by appointing a tax representative resident in Italy.

In order to appoint a tax representative – who may be a natural or legal person – the non-resident company is required to provide the following documents: 

• an original power of attorney, signed by the legal representative, appointing the tax representative, bearing a notarial apostille (the notary issuing the apostille must be a signatory to the Hague Convention);
• a current extract from the commercial register, not more than six months old, also bearing a notarial apostille (the notary issuing the apostille must be a signatory to the Hague Convention);
• identity documents of the legal representatives.

The appointment of the tax representative must take place before the date on which the first transaction relevant for VAT purposes is carried out in Italy, and must be notified to the other contracting party before the transaction is carried out. 
The person appointed as the tax representative must register the principal for VAT. Upon registration, the foreign company, through its tax representative, is subject to all the obligations and rights provided for under national VAT law. 
For example, the declaration of commencement of business activities (Form AA7 or AA9) must be submitted, a VAT number must be applied for, and the annual VAT return must be filed. The Italian VAT number must always be stated on invoices.

The procedure for direct VAT identification and subsequent fulfilment

If the foreign entity/operator is resident in a European Union Member State or based in a non-EU country with which mutual assistance agreements on indirect taxation are currently in force, direct VAT identification may be used, as introduced into Italian law by art. 35-ter of Presidential Decree 633/1972, in implementation of EU Directive No. 2000/65/EC.

Before carrying out a transaction relevant to a specific area in Italy, you must submit the following documentation when applying for VAT registration in Italy:

• the completed ANR/3 form;
• the original certificate of VAT registration in the Member State of establishment, together with the corresponding sworn translation into Italian, bearing the translator’s signature and a copy of their identity document;
• the original extract from the foreign commercial register issued by the Chamber of Commerce of the Member State of establishment, together with the corresponding sworn translation into Italian, meeting the same requirements as above;
• a signed self-declaration describing the planned activity in Italy and the reasons for the required direct registration in Italy within the meaning of Article 47 of Presidential Decree 445/2000;
• a copy of the signatory’s valid identity card.

The declaration for direct VAT identification, resulting in the attribution of a VAT number in Italy, must be submitted to the competent Revenue Agency (Pescara Operational Centre - via Rio Sparto n. 21 - 65100 Pescara) in the following manner: 

• directly to the office; 
• by postal service, by registered mail with acknowledgement of receipt.

The Revenue Agency shall proceed to the assignment of a VAT number to the applicant, which must then be indicated in all declarations and acts relevant for tax purposes.

Offsetting against other tax credits is not permitted, and the identified non-resident entity may exercise the right to deduct input VAT and is entitled to a refund of any VAT credit.

Periodic Obligations

Opening a VAT identification number in Italy entails various obligations and formalities, including:

• accounting management for VAT purposes;
• preparation of periodic VAT settlements and related reporting;
• payment of any VAT liability (monthly or quarterly);
• drafting of the annual VAT declaration.

In addition to these fulfilments, it should be considered that the obligation to issue invoices electronically has been recently introduced in Italy, and although foreign companies applying for VAT registration or appointing a fiscal representative are exempt from this obligation, they are nevertheless indirectly impacted by the same.

Fiscal representative, direct VAT identification and/or permanent establishment

These are three alternative positions. Therefore, the non-resident entity with a permanent establishment in Italy cannot also operate through a fiscal representative or direct VAT identification.

For the purposes of direct taxation, a permanent establishment refers to a permanent place of business through which an enterprise resident in one country carries on its activity, in whole or in part, in another country. Three requirements must be met, (i) the existence of a place of business, (ii) the spatial and temporal permanency of the latter and (iii) the conduct of the business activity in Italy in and by means of said fixed base. For VAT purposes, the presence of human and material resources is also necessary.

Particular attention must be paid, as the non-resident foreign entity can only avail itself of the simplifications provided by the system for fiscal representations and direct VAT identifications if does not already have a permanent establishment in the country.

These are but a few points to take into consideration. Should you be planning to carry out VAT-relevant transactions in Italy, it is important to familiarise yourself with the specific requirements and regulations.

Are you interested in learning more about the figure of the fiscal representative or the direct identification for VAT purposes in Italy? Contact us, we will be happy to provide our support.