Starting January 1, 2019, in Italy a mandatory electronic invoicing obligation will be in force for the supplies of goods or services. This e-invoicing obligation - similar to Spain and Hungary - is about detecting and combating VAT fraud/tax evasion, but also to stimulate company's to get ready for the digital age. Taxpayers will be forced to get their ERP systems to send and receive in XML format e-invoicing data via the Interchange System ('SDI').
E-invoicing will be mandatory gradually for residents, established or identified for VAT purposes in Italy:
- 1 July 2018 for petrol or diesel fuel for engines suppliers and subcontracts, under public service contracts
- 1 January 2019 for all B2B suppliers of goods and taxable services and B2C invoices if an electronic invoice is required
Exceptions to the above rule are the invoices issued or received by non-resident taxpayers who are neither VAT established nor VAT identified in Italy. Businesses will have to submit through 'Sistema di Interscambio' to 'Agenzia delle Entrate' (Italian Tax Authority) to reach the final Business Partner involved:
- Domestic and intercompany invoices
- Deposit and downpayment on an invoice or a fee
- Credit and debit notes
The Italian tax authorities will check the data submitted to verify:
- the name of the file transmitted and that it is not a duplicate;
- that the document is intact;
- the authenticity of the signature certificate;
- the conformity of the invoice format;
- the validity of the invoice content;
- that the invoice is unique;
- that the invoice is deliverable.
The taxpayer will face penalties when it fails to follow the mandatory requirements. The penalty range for failing to issue an invoice or failing to meet the XML requirements will be 90% to 180% of the VAT amount not correctly documented. The penalty range for not receiving the purchase invoice according to the format requirements through the use of SDI can be equal to 100% of the VAT amount not documented.
SAP VAT health check for e-invoicing data requests in Hungary, Italy, and Spain
E-invoicing will be mandatory gradually for residents, established or identified for VAT purposes in Italy.
The Key Group has recently delivered its Hungarian SAP health check pilot for one of its major clients, and the outcome was that quite some changes in SAP had to be made to avoid either future questions by the tax authorities or announcement of a tax audit when data is submitted mid-2018. The method used applies to Italy and Spain as well.
The tax authorities are aware that SAP setup itself is often not in order and that tools outside the ERP system are used to remediate and manipulate tax data outside of SAP with the purpose to improve tax reporting.
The full automated legal requirement is to force taxpayers to remediate the ERP VAT setup itself and realize that taxpayers do not use workarounds as Excel sheets or similar tools outside the ERP system as human intervention is not allowed.
An incorrect SAP setup could result in inaccurate and incomplete data during submission.
Developing or purchasing a solution for automated submission of sales invoice data to the tax authorities does not solve a wrong SAP setup.
The 'garbage in' and 'garbage out' principle applies: 'the real problem is that tax data in standard SAP needs remediation as that tax data is not meeting the local legal invoice requirements itself.'
Our assessment has identified several critical gaps and also areas for improvement in the current billing process. Based on this pilot we have designed an efficient and effective assessment process that will include not only an overview of gaps but as well our view on how to remediate these weaknesses in SAP itself.
The Key Group offers an SAP health check specifically on e-invoicing data requests such as Hungary, Italy, and Spain (SII) and our method is based on the legal tax requirements defined in XML format and local VAT law.
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Written by Richard Cornelisse
Richard advises multinational businesses in improving the efficiency and effectiveness of their Indirect Tax Function and Tax Control Framework.
He started his career as a manager at Arthur Andersen and then became a partner in EY where I led the indirect tax performance team for Netherlands and Belgium. Currently, he is a senior managing director of KEY Group.
Richard has over 20 years’ experience advising clients on international VAT issues. He is specialized in the tax aspects of financial transformations, shared service center migration, and post-merger integration work. Richard is also somewhat of a mentor, giving back to the profession. If you are interested in conversation and discussion, please feel free to contact him.