VAT between the UK and Italy

As Italy and the UK are fellow states of the EC, there are complicated VAT rules affecting business carried out between the 2 countries. This post outlines the main issues as they apply to a small UK business.

‘Italy’ in this context includes Sardinia and Sicily, but excludes San Marino, Livigno, Campione d’Italia and the Italian Waters of Lake Lugano.

Italian VAT is called ‘Imposta sul valore Aggiunto’, or ‘IVA’.

Exporting goods to Italy

A VAT-registered UK business does not need to charge VAT on goods exported to Italy, provided it obtains the Italian customer’s IVA registration number (including the IT prefix) and shows it on the invoice. It must also keep documentary proof of export.

The UK business is still able to reclaim any UK VAT on the goods which it is exporting, subject to the normal rules about reclaiming input VAT.

If the Italian customer is not registered for IVA, and the UK business is not registered for IVA, then UK VAT must be charged. No VAT is chargeable on goods which would normally be zero-rated or exempt when supplied in the UK (for example, books, children’s clothing and some food items).

Every year the UK business should check whether its level of sales to unregistered customers in Italy requires it to register for IVA under the distance selling rules. Broadly, these require a UK business to register for IVA, and then charge IVA instead of UK VAT, if its sales of goods to customers in Italy who are not registered for IVA are over €27,889 in a calendar year. Such a registration is also optional at lower levels of sales, but as rates of Italian IVA are typically higher than the UK VAT equivalent, this is unlikely to be favourable.

Importing goods from Italy

A UK business importing goods from Italy should give the Italian supplier its UK VAT registration number so that Italian IVA does not get charged. If IVA is charged, the UK business cannot reclaim it on their UK VAT return or by a direct claim to the Italian tax authorities.

When a UK VAT-registered business imports goods from Italy from an Italian IVA-registered business, the UK business should pay UK VAT on the import by including VAT in box 2 of its regular UK VAT return, at the appropriate UK VAT rate. It may then reclaim that same amount by including it as input VAT in box 4 of the same VAT return, subject to the normal rules about recovering input VAT. The reason for this apparently circular exercise is to avoid VAT distortions between buying goods in the UK and importing them from Italy.

Special VAT rules for the movement of goods

Different rules may apply in certain less-common situations:

Transfers of own goods between the UK and Italy within the same legal entity;
Temporary movement of goods;
Installed or assembled goods;
Movements of goods for process, repair etc;
Triangular business transactions;
Supplies to privileged persons in other EC states;
Call-off stocks;
Consignment stocks;
Excise goods;
Goods supplied on sale or return;
Samples;
Goods sent for testing;
Mobile phones and computer chips.

Details can be found in VAT Notice 725.

VAT on services

UK VAT may need to be charged on services performed in Italy to clients based in Italy, depending on the type of service supplied. This is a complex area, but broadly, assuming the supplier belongs in the UK and the customer belongs in Italy, UK VAT will need to be charged on most services unless one of the following exceptions applies.

UK VAT does not need to be charged on services relating to land or property situated in Italy. This includes estate agency, conveyancing, architects, surveying, construction, property maintenance and repair work, hotel accommodation (unless a tour operator), defined exhibition stands, and property management services.

Italian sporting event UK VAT does not need to be charged on most services related to a live event or physical activity carried out in Italy. This includes cultural, artistic, sporting, scientific, educational, training, entertainment, exhibition, conference and valuation services. It also includes actors, singers and interpreters.

UK VAT does not need to be charged on passenger transport carried out in Italy.

UK VAT does not need to be charged on most ‘intangible’ or ‘intellectual’ services received for business purposes by a customer who belongs in Italy. This includes copyright, royalties, licences, other intellectual rights, advertising, consultants, engineers, lawyers, accountants, data processing, written translation, computer programming, software maintenance, web design, sound engineers and technicians, the supply of staff, banking and insurance. If the service relates to land or property situated in the UK, VAT still needs to be charged. If the service is not being received for business purposes by the customer, UK VAT has to be charged. The customer does not need to be registered for VAT for the service to qualify as being for business purposes, but some evidence of the business purpose should be obtained.

In all cases, it is important to look at the precise nature of the underlying service being provided. A business cannot turn one type of service into another by simply changing the description on the invoice.

Other types of services

Different rules may apply to certain less-common services:

Tour operators;
Letting on hire of a means of transport;
Letting on hire of goods;
Valuation or other work carried out on another person’s goods for export from the EC;
Intermediary services (generally agencies or brokers working for a commission);
Training services supplied to overseas governments;
Freight transport;
Telecommunications services;
Radio and television broadcasting services;
Electronically supplied services.

Details can be found in VAT Notice 741.

Additional services rules

The UK business is still able to reclaim any UK VAT on expenses which it incurs in providing a service which is deemed to be outside the UK, providing that the service would be taxable if it was made in the UK, and subject to the normal rules about reclaiming input VAT.

If a VAT-registered UK business receives a service from a Italian supplier, and the place of the service according to the above rules is in the UK, the UK business may need to ‘reverse charge’ that service (see section 16, VAT Notice 741). If the UK business is not registered for VAT, and the service is ‘intangible’ or ‘intellectual’, the value of that service will be included in the turnover of that business in determining whether it needs to register for UK VAT.

Any service which is not subject to UK VAT under the above rules may be within the scope of Italian IVA. A UK business providing a service within the scope of IVA should consider whether it needs to register for IVA, and then charge and account for it, according to Italian tax law. This is beyond the scope of this post, but more detailed information can be found here.

Reclaiming Italian IVA

Italian pizza A VAT-registered UK business which buys goods (which are not for export) or services in Italy may be able to reclaim any Italian IVA paid, by using a special refund scheme. This is available to a UK business which is not registered in Italy for IVA, which has no physical presence in Italy and does not make any supplies there. The claim is made in Italian using the specified form, and sent to the appropriate tax office in Italy together with original supporting invoices and a UK VAT66 certificate.

The main contact office for information about Italian IVA is:

Agenzia delle Entrate
Via C. Colombo, 426 C/D
00145 ROMA 00187 ROMA
Italia

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Posted on 17 November 2008. To see related posts, try these links...
Categories: Overseas, VAT
Tags: Italy, VAT

16 Comments (oldest first)

1. Laura Treacher says:

Hello,

I am not registered for VAT as my business turnover is not high enough. I currently buy stock from Italy and pay the Italian rate of 20%.

Is there anything I can do about this?
29 January 2009
2. admin says:

Your only option is to register for UK VAT, which you are allowed to do regardless of your level of business turnover. This would mean that you would not get charged any Italian VAT, but you would have to charge UK VAT on all your UK sales. Your customers would only be able to reclaim this if they were themselves VAT registered. You would also be able to reclaim the UK VAT on all your expenses, subject to the usual rules.
1 February 2009
3. jane johnson says:

Hi
I am based in UK
I am about to be charged for services in Italy which have occured in Italy and are not exported outside Italy. I have been told these services - mainly translation are subject to Italian VAT at 20%. How can I find out what services are Vatable in Italy and how long it will take for me to claim them back from the Italian VAT office?
thanks
Jane
2 February 2009
4. admin says:

If the services are intellectual or intangible in nature (translation usually qualifies), and you are based in the UK, then you should not be charged Italian VAT as the service is outside its scope.

If you are charged Italian VAT, you can only claim it back if you are registered for VAT in the UK. If you are, you should contact the Italian VAT office that deals with VAT reclaims, which is at:

Agenzia delle Entrate
Centro Operativo di Pescara
Team rimborsi IVA ai non residenti
Via Rio Sparto No 21
65100 Pescara

Tel: +3985 577 2359/2318/2380
Fax: +3985 577 2325
Email: centrooperativo.pescara.ivanonresidenti@agenziaentrate.it

Be warned that all paperwork will usually only be in Italian, and it can take many months before a payment is issued. You can use a local agency to handle the claim for you, such as http://www.italiantaxrefund.com/societa_eng.asp.
7 February 2009
5. John says:

Hi,
I am about to be based in Italy and am buying stock from the UK (paying UK VAT) to sell in Italy. Is it imperative to register for IVA or is there a turnover threshold in Italy, the same as in the UK, before having to register?
Thanks
16 February 2009
6. admin says:

Italy has very recently introduced a turnover threshold of 30,000 Euros for businesses which are based in Italy.
18 February 2009
7. Chris says:

Hi, I am starting a business exporting clothes from UK to Italy. I am not VAT registered but my customers in Italy are IVA registered. I am putting their IVA number on the invoice. do i need to register for VAT or can i just start business as sole trader (self-employed)? I am going to use a business name (not just my own name) and put it on the invoices; do i need to mention also my name (i.e put my name and then say ‘trading as mycompanyname’? the company name is not registered. Thanks.
13 May 2009
8. Louis says:

Hi there,

we are a UK LTD selling products and services in Italy. I would like to know if we need to register for IVA and charge Italian VAT rate to our customers (at the moment our sales are less than €27,889 but they may soon increase above this figure).

For products we mean ebook, audio and video courses. These are downloadable from our website or shipped to an italian home address (if the customer doesn’t have broadband we send them a CD which containes the relevant product encrypted by password, they then send us their machine ID and we send them the password so in way it’s almost as though as we sell them the license to view our products)

For services we mean live events whereby our local italian instructor/life coaches teach our customers/students theoretical concepts as well as practical demos. We also have an consultation service done via email for which we charge a premium but revenues from this service are trivial.

Finally we use italian companies and contractors who charge us italian VAT on their services for us and at the moment we are not claiming these costs back as we are not registered for VAT in the UK either.

Thanks
23 July 2009
9. Keith says:

Hi,

Great website.

Interesting questions on this blog - looks like I’m struggling in a similar boat - in a UK business that provides IT consultancy (which I believe to be outside the scope of IVA) over €30k a year (inside the IVA scope), and hoping not have to pay accountants in both UK and Italy!

Any thought will be most appreciated.

Many thanks.
25 July 2009
10. Claire says:

I work for a marketing company in London, but we are managing some business in Italy which will require us to be billed by an Italian (IVA registered) company for a service which we will then charge on to our client (also Italian registered). The service is taking place in Italy - we are just managing the process in the UK.
Would the Italian company invoicing us have to charge IVA and therefore we would have to look into reclaiming it? Or would the service fall outside the scope (we are a UK VAT registered company)?
Thanks
Claire
2 October 2009
11. admin says:

Assuming that the service is advertising, and that there are no agency relationships in place:

The Italian supplier should not be charging you IVA;

You should account for UK VAT on the service received, under the reverse charge mechanism;

You do not need to charge UK VAT to your Italy-based customer.
6 October 2009
12. Arianna says:

Hello,

I live in England and have been asked to do a translation for an Italian company. The company wishes to be invoiced. I am not usually a translator and this would be a one-off service.

- Can I issue an invoice even if I am not VAT registered?
- What would I need to put in the invoice?
- Do I need to charge VAT to the Italian company?

Thank you in advance.
15 October 2009
13. David Emery says:

Hi,

I am not sure how much of this now applies? According to this site http://www.tmf-vat.com, the Italians now apply the ‘reverse charge’ on goods from 2010 - not just services. This is a bit like France.

Any thoughts,

David
3 January 2010
14. Vly says:

We are UK VAT registered. We pay an Italian VAT registered travel agent for hotel reservation commission. Their invoice include a 20% VAT charge. Can we reclaim VAT?

Thank you
Vly
10 February 2010
15. admin says:

As the VAT being charged is Italian VAT, it cannot be reclaimed on a UK VAT return.

The service is likely to be covered by the reverse charging system, which means your Italian agent should not be charging you VAT in the first place. In this case, they can issue you with a credit note for the VAT they have already charged you.
11 February 2010
16. Malcolm says:

Hi,
I am, not a company, and returning to the UK from Italy. I was trying to arrange for a UK company to move my furniture. My former employee (European Commission) will reimburse me or pay directly. The Commission is insisting that UK removal companies charge VAT (i.e. IVA) at 20% as “source of supply”. Does this essentially mean that, strictly legally, no UK removal company can do backloads without being VAT registered in the foreign country?!

Thanks, Malcolm
7 July 2010

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