The EU Council is considering extending Italy’s mandatory e-invoicing authorization until December 31, 2025, or until the new EU-wide ViDA directive takes effect, to continue reducing VAT fraud and improving tax compliance. Since its 2018 implementation, Italy’s e-invoicing system has significantly increased VAT revenue and detected tax fraud, underscoring the system’s effectiveness.
EU Council proposes extension for Italy’s mandatory e-invoicing
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Italy
Author: Nikolina Basić
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Fiscal subject related
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Content accuracy validation date:
01.11.2024
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08:00h
In a bid to further combat tax fraud and streamline tax compliance across Europe, the European Union is considering a proposal to extend Italy’s authorization for mandatory electronic invoicing. This extension aims to sustain the effectiveness of Italy’s VAT collection system, which has significantly reduced tax fraud and eased administrative burdens for businesses.
Italy introduced mandatory e-invoicing in 2018 under the Sistema di Interscambio (SdI), as part of a special derogation from Articles 218 and 232 of the VAT Directive (Directive 2006/112/EC). This system allows businesses to send invoices through a centralized digital platform, ensuring accurate and real-time data for tax authorities. Since its implementation, the e-invoicing system has profoundly impacted tax compliance and fraud reduction. If we look into the statistics, between 2019 and 2022, VAT revenue increased by €1.7 to €2 billion. Fraud detection surged from €1 billion in 2019 to €9 billion in 2022, showcasing the system's effectiveness in curbing tax evasion. Additionally, e-invoicing has helped businesses by reducing administrative costs and improving tax compliance efficiency.
In April 2024, Italy requested the European Commission to continue enforcing mandatory e-invoicing. The proposal, published on October 10, 2024, suggests extending this derogation until December 31, 2025, or until a new EU-wide VAT directive for digital services, known as the VAT in the Digital Age (ViDA) proposal, is enacted. The ViDA proposal aims to modernize the VAT system by mandating e-invoicing across all Member States, potentially eliminating the need for individual derogations. Until this directive is formalized, Italy’s successful e-invoicing system requires continued support.
To summarize, as the authorization granted to Italy for the application of mandatory electronic invoicing approaches its expiry date of 31 December 2024, the proposal for implementing decision COM (2024) 447 is being approved, with which the European Commission authorizes Italy to further extend the electronic invoicing obligation until 31 December 2025, or, if earlier, until the date from which the national implementing provisions of the ViDA package will apply.
Extending the derogation would allow Italy to maintain progress in VAT collection and fraud prevention. It would also provide businesses with a streamlined invoicing process, reducing their administrative workload. Additionally, this system enables real-time performance monitoring, which proved invaluable during the COVID-19 pandemic when swift economic data analysis was crucial.
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