New extension for Split Payment, which was set to expire on June 30th, 2023. The authorization from the EU for Italy comes just before the deadline and extends the expiration date to June 30th, 2026.The decision was made considering the fact that in Italy, without the split payment mechanism, it could be difficult, if not impossible, to recover the amounts due from fraudsters or generated from tax evasions identified through cross-checking derived from mandatory electronic invoicing.
From the very beginning, Split Payment has been considered an effective tool, especially in synergy with other implemented measures, particularly the mandatory electronic invoicing requirement. The extension is therefore almost obligatory to avoid regressing from the efforts made up to now.
Italy will still be required to submit a dual report to the European Commission by September 30th, 2024. The report will cover both the general situation regarding VAT refunds resulting from the implementation of Split Payment and an assessment of the effectiveness of this measure and other measures in reducing tax evasion.
Let’s briefly recall, at this point, the history of Split Payment along with its objectives.
This particular mechanism was authorized through the implementing decision 2017/784 issued by the EU Council and later amended with the implementing decision 2020/1105 of the same EU Council. Split Payment applies to transactions carried out with Public Administrations, Public Economic Entities, foundations, and controlled companies that are subject to a specific VAT regime.
This regime follows these two simple directives:
- The invoice issuer (supplier/service provider to the Public Administration) shows, but does not charge, the tax by indicating “split payment” on the invoice;
- The invoice recipient (assignee/contracting party) makes the payment of VAT into a dedicated account of the tax administration.
To fulfill the commitment of gradually phasing out this special measure, Italy has modified its request to exclude, starting from July 1st, 2025, the supply of goods and provision of services made to companies listed on the “Financial Times Stock Exchange Milano Indice di Borsa” (“FTSE MIB”) index from the scope of application of this measure.