Split Payment Extension in Italy Until June 30, 2026
A new extension has been granted for the Split Payment mechanism, which was originally set to expire on June 30, 2023. The authorization from the European Union for Italy arrived just before the deadline, extending the validity of the measure until June 30, 2026.
The decision was made in consideration of the fact that, in Italy, without the Split Payment mechanism, it could be difficult, if not impossible, to recover amounts due from fraudsters or amounts generated by tax evasion identified through cross-checking activities resulting from mandatory electronic invoicing.
From the very beginning, Split Payment has been considered an effective tool, especially when combined with other measures implemented to combat tax evasion, particularly mandatory electronic invoicing. The extension is therefore almost inevitable in order to avoid losing the progress achieved so far.
Italy’s Reporting Obligations to the European Commission
Italy will still be required to submit a dual report to the European Commission by September 30, 2024. The report will cover:
- The general situation regarding VAT refunds resulting from the implementation of Split Payment.
- An assessment of the effectiveness of Split Payment and other measures in reducing tax evasion.
Split Payment: Background and Objectives
At this point, it is useful to briefly recall the history of Split Payment and its objectives.
This specific mechanism was authorized through EU Council Implementing Decision 2017/784 and subsequently amended by EU Council Implementing Decision 2020/1105. Split Payment applies to transactions carried out with Public Administrations, Public Economic Entities, foundations, and controlled companies subject to a specific VAT regime.
The regime is based on two simple principles:
- The invoice issuer (supplier or service provider to the Public Administration) indicates VAT on the invoice but does not collect it, specifying “split payment” on the document.
- The invoice recipient (customer or contracting authority) pays the VAT directly into a dedicated account of the tax administration.
Exclusion of FTSE MIB Companies from July 1, 2025
To fulfil its commitment to gradually phase out this special measure, Italy has amended its request by excluding, from July 1, 2025, the supply of goods and the provision of services made to companies listed on the Financial Times Stock Exchange Milano Index (“FTSE MIB”) from the scope of application of the Split Payment mechanism.
This change represents a gradual step towards reducing the scope of the measure while maintaining its effectiveness in combating VAT fraud and tax evasion.
