Edited by Luca Lavazza, Alessia Lippi, Paola Bramato
With the Budget Law for the year 2025 (Law December 30, 2024, no. 207), through article 1, paragraphs 57 and following, the regulation referred to in letter a-quinquies) of article 17, paragraph 6, of Presidential Decree no. 633/72 has been reformulated.
The previous version of the regulation referred to in the letter a-quinquies) – not authorized by Communication COM (2020) 243 of June 22, 2020, and therefore not in force – stipulated that the VAT was to be paid by the client according to the reverse charge mechanism “to the provision of services, […], carried out through contracts of procurement, subcontracting, assignment to consortium members or any other negotiated agreements characterized by the predominant use of labor at the premises of the client, using equipment owned by or attributable to the latter in any form. The provision of the previous period does not apply to operations conducted with public administrations and other entities and companies mentioned in article 11-ter and employment agencies regulated by Chapter I of Title II of Legislative Decree 10 September 2003, no. 276”.
In particular, the recent reform includes the extension of the reverse charge to service provisions carried out through contracts of procurement, subcontracting, assignment to consortium members, or other negotiated arrangements, regardless of their designation, characterized by a predominant use of labor and equipment owned by the client, provided to companies engaged in transport and freight handling activities and logistics services. Services rendered to public administration or public entities and employment agencies are excluded from this regulation.
The effectiveness of this provision is expressly conditional on the granting by the Council of the European Union of an authorisation for a derogating measure within the meaning of Article 395 of Directive 2006/112/EC of the Council, dated November 28, 2006.
The new regulation, although in line with the general formulation of the previous version, has a significantly reduced scope of application, as it is limited exclusively to services characterized by the predominant use of labor provided to companies operating in logistics, transport, and cargo handling activities.
The restriction of the scope of application became necessary following the aforementioned negative opinion expressed by the European Commission in the document COM (2020). The negative opinion was, in fact, motivated by the circumstance that the transactions for which Italy requested the application of the reverse-charge mechanism were not confined to a specific sector and that, furthermore, Italy had obtained more than one exemption to to cope with VAT evasion (e.g., split payment; mandatory electronic invoicing).
In limiting the scope of the anti-tax evasion legislation, the legislation has focused on the logistics sector, which has recently been subject to significant tax audits leading to disputes over undue VAT deductions based on reclassification of service contracts as alleged illegal provision of labor. The typically contested fraudulent scheme arises from the fact that so-called “labor reservoir” companies failed to pay taxes in order to benefit from tax savings, allowing them to operate in the market with highly competitive rates, thereby also indirectly benefiting their clients.
The reverse charge mechanism introduced by the 2025 Budget Law, should it receive approval from the European Council, is expected to significantly mitigate this issue.
Pending the full implementation of the regulation, a transitional regime has been introduced with paragraph 59 of Article 1 of the Budget Law for 2025. Specifically, the provider and the client may opt for the VAT on the services provided to be paid by the client on behalf of the provider, while the provider remains jointly responsible for the payment of the relevant VAT.
The option will be communicated by the client to the Italian tax authorities through a specific form, which must be approved by the director of the Italian tax authorities, and will last for three years (starting from the date of the application).
According to this option, the invoice is issued by the provider, in accordance with Article 21 of Presidential Decree No. 633/72, and the VAT is paid by the client, without the possibility of offsetting. On this matter, if the VAT is found to be not due, the right to a refund belongs to the client, provided that it has been proven that the VAT was actually paid.
Regarding penalties, the client is also subject to the application of Article 6, paragraph 9-bis (which provides for a penalty between 500 euros and 10,000 euros) and paragraph 9-bis1 (which provides for a penalty between 250 euros and 10,000 euros) of Legislative Decree No. 471 of 1997. The provider is jointly liable for the payment of the penalty.
This provision does not apply, and the client is punished with the penalty referred to in paragraph 1 of the mentioned article 6 (equal to 70% of the VAT related to the taxable amount not correctly documented or recorded) when the application of the VAT in the ordinary way (instead of through reverse charge mechanism) was determined by an intent of evasion or fraud of which it is proven that the client was aware.
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