How to comply with Italy's electronic invoicing requirement

5 December 2018

Starting in January 2019, all VAT-registered businesses in Italy must start issuing invoices electronically using the country’s online exchange system, Sistema di Interscambio (SdI). Invoices must be formatted in accordance with Italian Revenue Agency (Agenzia Entrate) rules.

Italy introduced the measure as part of its new budget law in an effort to combat tax evasion and VAT fraud. The law applies to all types of sales, including those to businesses (B2B) and consumers (B2C). Public agencies are also subject to the new requirements.

For Italy’s Revenue Agency, the standardized online system will make it easier to spot problems with VAT filings. Businesses will benefit from faster VAT refunds — which should be processed within three months — and a reduction in paperwork. They will no longer need to submit Spesometro invoice listings or Intrastat VAT declarations. Another change allows tax authorities to go back only four years — down from five — when auditing VAT records.

Worldwide trend

The move to electronic documents is part of a global trend towards increased efficiency and transparency. The European Union believes that e-invoicing will result in faster payments, lower printing and postage costs, and cheaper document storage costs. B2B electronic invoicing alone could save 40 billion euros a year across Europe, a European Commission website estimates.

After years of development, the commission issued an electronic invoicing standard for public procurement, which went into effect in November. (In Italy, e-invoicing has been required for all public procurement since 2015.)

Though EU member countries must follow the European standard for e-invoicing, many, like Italy, have already developed electronic document formats of their own. So far, national standards continue to be acceptable in the EU as long as they incorporate the EU standard. However, the multiplicity of formats increases complexity and costs, the commission says, and it is currently encouraging members to join a forum with the aim of creating a universal electronic document format.

Compliance and exemptions

Italy’s new law means that companies will need to convert invoices for private transactions into a government-defined XML format and send them through the SdI exchange. The law goes into effect January 1, 2019. Penalties will not apply for the first six months, but after that, they could range from 90 to 180 percent of any VAT that is not correctly documented.

Multinationals should note that export sales are exempted from the new rule, and will continue to be invoiced as normal. There is also a new requirement to report exports on a monthly return called an “esterometro.”

Within Italy, all B2B transactions must conform to the new law, but B2C transactions aren’t required to do so unless the customer asks for a receipt.

Electronic invoices that are not acceptable

Businesses should be aware that only the government-specified format for e-invoices will be accepted. If invoices arrive in a different form, they will be rejected and penalties may apply. Simply using any electronic document format will not work. The EU lists several common file formats that it says do not constitute a proper electronic invoice, including:

  • PDFs or Word documents containing unstructured data (data that wouldn’t fit on a spreadsheet)
  • Invoice images, such as a .jpg or .tiff file
  • Unstructured .html invoices on a web page or in an email
  • Scanned paper invoices
  • Paper invoices transmitted by a fax machine

In addition to following the government-mandated format, e-invoices must be transferrable from the seller’s system to the buyer’s system.

Preparing your technology

With the deadline fast approaching, businesses should review their current invoicing technology and implement any necessary changes as soon as possible. Visit the SdI site to make sure your accounts receivable and accounts payable systems can incorporate the XML format and include the correct tax codes for all parties.

Companies that don’t wish to change their accounting systems to fit the new forms, or that can’t make changes in time, may use an accredited service provider to submit the forms for them.