Italy: Council of Ministers Gives Preliminary Approval on August 4, 2026 to the Legislative Decree Transposing Article 2 of the VAT in the Digital Age Directive, Applying from January 1, 2027

Country Update — Italy  |  11 August 2026  |  Topic: ViDA / VAT Legislation

On August 4, 2026, the Italian Council of Ministers approved, at first reading, a legislative decree implementing Article 2 of Council Directive (EU) 2025/516 of March 11, 2025 amending Directive 2006/112/EC as regards value added tax rules for the digital age.

The decree was one of six legislative decrees on European Union implementation approved at that meeting, four of them at first reading, on the proposal of the Minister for European Affairs, the National Recovery and Resilience Plan and Cohesion Policies, Tommaso Foti, and the other competent ministers. Its provisions apply from January 1, 2027.

This is the same instrument that the Ministry of Economy and Finance put out for public consultation in the summer, now one procedural stage further forward.

Background

Council Directive (EU) 2025/516 of March 11, 2025, the value added tax in the digital age directive, is structured so that its obligations arrive in tranches. Article 1 carries the electronic invoicing and digital reporting provisions. Article 2 carries the platform economy and single value added tax registration provisions, with a January 1, 2027, application date.

Member states are transposing the two articles through separate instruments and on separate timetables, and it is important to keep them apart when reading national developments, because a country can be well advanced on one and silent on the other.

Italy is unusual among member states in having had mandatory electronic invoicing since 2019 through the Sistema di Interscambio, which means that the Article 1 obligations present a much smaller change for Italy than for most of the European Union. Article 2, by contrast, requires substantive amendment of Italian law on distance sales, platform liability, and the special value added tax regimes.

The Department of Finance of the Ministry of Economy and Finance published the draft legislative decree transposing the provisions of the directive applying from January 1, 2027 for public consultation, which opened on June 22, 2026. KGT reported on that consultation, and noted that the Ministry would evaluate the feedback and finalize the decree. The August 4, 2026 approval is the next step in that process, and it concerns the same instrument.

Two points of attribution should be recorded, because both have been reported incorrectly.

First, the meeting number: the string identifying this as Council of Ministers meeting number 185 appears in indexed page titles but could not be confirmed in a rendered official text, and should be treated as unverified.

Second, the proposing ministers: the official communication names Tommaso Foti and refers otherwise to the other competent ministers. It does not name the Minister of Economy and Finance, and the widely reported co-attribution to Giancarlo Giorgetti could not be confirmed on any official source.

The Legislative Change

This is a legislative change, and specifically a legislative change at an intermediate stage. The Council of Ministers approved the decree in esame preliminare — at first reading — not definitively. Under the Italian delegation framework, a legislative decree approved at first reading is transmitted for the opinions of the competent parliamentary committees and, depending on subject matter, other bodies, and then returns to the Council of Ministers for a second and final reading before publication in the Gazzetta Ufficiale.

The official record of the same August 4 meeting makes that mechanism explicit in relation to two other decrees approved definitively at that meeting, noting that following the opinions of the competent parliamentary committees, the unified conference and the data protection authority, the text had been amended relative to the version approved at first reading. Businesses should therefore expect the Italian text to change between now and final adoption.

The official heading of the item reads, in translation, value added tax rules for the digital age: implementation of Article 2 of Council Directive (EU) 2025/516 of March 11, 2025 amending Directive 2006/112/EC as regards value added tax rules for the digital age, at first reading.

On substance, the official communication states that the measure transposes part of the package, with a revision of the European Union value added tax system intended to adapt it to the needs of the digital economy, to improve the efficiency of tax collection and to strengthen the instruments for combating fraud. It states that the provisions apply from January 1, 2027 and that they are predominantly clarificatory in character, updating rules already introduced in the field of electronic commerce.

Four specific areas are identified in the official text. First, the rules applicable to sales made through platforms, portals and electronic marketplaces are clarified. Second, the calculation of the 10,000 euro threshold applicable to certain distance sales and to some digital services is clarified. Third, the decree addresses coordination between the special value added tax regimes and the special regime for small enterprises. Fourth, it addresses procedures for refund of the tax.

It is worth being precise about what the official text does not say, because commentary has added material to it. The official communication does not mention the one-stop shop, the import one-stop shop, or single value added tax registration by name, and it does not characterize the decree as introducing a new platform economy pillar; it characterizes it as predominantly clarificatory and as updating existing electronic commerce rules. It does not address call-off stock or the transfer of own goods.

Readers should not attribute those elements to the Italian decree on the strength of the official communication alone.

Reporting has also paired this approval with an omnibus corrective legislative decree to the tax reform, said to have been approved definitively at the same meeting and to restore the value added tax deduction window to the return for the second year following the year in which the right arose, removing the one-year limit introduced in 2017. That item could not be confirmed on any official source and is reported here only as unverified. If confirmed, it would be a significant and welcome relaxation, and KGT will report on it separately.

Scope

The decree, when finally adopted, will apply from January 1, 2027. Its scope follows Article 2 of the directive and, on the official description, concentrates on four areas.

The first is sales made through platforms, portals, and electronic marketplaces. Any business selling into or within Italy through a marketplace, and any business operating such a marketplace with Italian exposure, is within scope.

The directive’s platform provisions generally operate by treating the platform as a deemed supplier in defined circumstances, which shifts the value added tax obligation from the underlying seller to the platform. The Italian text will determine the precise Italian implementation, and it is not yet final.

The second is the calculation of the 10,000 euro threshold applicable to certain distance sales and to some digital services. This is the intra-Community threshold below which a supplier may continue to apply its own member state’s rules rather than the destination member state’s.

A clarification of how it is calculated is of direct practical importance to businesses operating close to the threshold, which in practice means many smaller cross-border sellers.

The third is coordination between the special value added tax regimes and the special regime for small enterprises. This is a technical interaction that has caused difficulty since the small enterprise regime was reformed, and it is relevant to any small business using a special regime while also making cross-border supplies.

The fourth is procedures for refund of the tax. The official text gives no further detail, and organizations should not assume a particular direction until the text is available.

The decree is a transposition of Article 2 only. It does not concern the electronic invoicing and digital reporting provisions of Article 1, and businesses should not expect it to change the operation of the Sistema di Interscambio.

Timeline

• March 11, 2025 — Council Directive (EU) 2025/516 adopted, amending Directive 2006/112/EC as regards value added tax rules for the digital age.
• June 22, 2026 — the Department of Finance of the Ministry of Economy and Finance opens public consultation on the draft legislative decree transposing the directive provisions applying from January 1, 2027.
• Early July 2026 — the consultation closes and the Ministry proceeds to evaluate feedback and finalize the decree.
• August 4, 2026 — the Council of Ministers approves the legislative decree at first reading, as one of six European Union implementation decrees, four of them at first reading, on the proposal of Minister Tommaso Foti and the other competent ministers.
• Following first reading — transmission for the opinions of the competent parliamentary committees, then a second and final reading by the Council of Ministers, then publication in the Gazzetta Ufficiale. No dates for these steps have been published.
• January 1, 2027 — the provisions of the decree apply.
• Note — as at the date of this update, nothing relating to this decree has been published in the Gazzetta Ufficiale, and the register of transposition of European Union acts contains no entry for Directive (EU) 2025/516. That is consistent with a decree at first reading, but it was not independently verified on the Gazzetta Ufficiale itself.

Businesses Affected

Marketplace operators with Italian exposure are the most directly affected. Where the Italian implementation treats a platform as a deemed supplier, the platform assumes value added tax obligations on transactions it facilitates but does not itself make, which affects pricing, invoicing, reporting, and reserves.

Because the text is not final, platforms should be tracking the parliamentary committee stage rather than planning against the first-reading text.

Businesses selling into Italy through marketplaces are affected as the mirror image of the above. Where the platform becomes the deemed supplier, the underlying seller’s obligations change, and in some configurations reduce. That is a favorable change in principle but requires systems and contractual alignment with the platform.

Cross-border distance sellers operating near the 10,000 euro threshold are affected by the clarification of how that threshold is calculated. For businesses that have taken a position on threshold calculation, the clarification may confirm or contradict it, and the January 1, 2027, date gives limited time to change registration and reporting arrangements if it contradicts.

Small businesses using a special value added tax regime while making cross-border supplies are affected by the coordination provisions.

Businesses claiming Italian value added tax refunds are affected by the refund procedure provisions, though the official description gives no indication of direction.

Businesses whose principal Italian concern is electronic invoicing are not affected by this decree. Italy’s electronic invoicing obligations derive from its existing domestic regime and from Article 1 of the directive, and neither is addressed here.

Required Actions

• Recognize that this decree is at first reading and that the text will very likely change. Do not build to the first-reading text. Build the analysis, and hold the implementation until the final text is published in the Gazzetta Ufficiale.
• Where your organization operates or sells through a marketplace with Italian exposure, map the transactions that would be affected by a deemed supplier rule and quantify the value added tax and cash flow consequences on the first-reading description. That analysis is robust to textual change in a way that a system build is not.
• If you responded to the June 2026 consultation, compare the first-reading outcome against your submission and consider whether a further submission to the parliamentary committee stage is worthwhile. That stage is where the text has demonstrably been changed in comparable decrees.
• Review your current position on calculation of the 10,000 euro intra-Community threshold and identify whether a clarification could move you across it in either direction. Businesses within, say, twenty per cent of the threshold should treat this as a live risk.
• Where a small enterprise regime is used alongside cross-border supplies, obtain advice on the interaction and monitor the coordination provisions specifically.
• Do not assume that this decree affects the Sistema di Interscambio or Italian electronic invoicing. It transposes Article 2 of the directive, not Article 1.
• Treat as unconfirmed, for now, the reported omnibus corrective decree restoring the value added tax deduction window to the second year following the year in which the right arose. If your organization has deduction positions that would benefit, monitor for the official text rather than acting on secondary reporting.
• Track the Gazzetta Ufficiale and the register of transposition of European Union acts for the final decree, and diarize January 1, 2027, as the application date.

Practical Implications

The most useful thing to take from this development is a sense of pace. Italy opened consultation on June 22, 2026, closed it in early July, and had a first-reading decree through the Council of Ministers by August 4, 2026. That is brisk by any standard, and it means the final text could plausibly emerge in the autumn, leaving a short runway to January 1, 2027.

Organizations that were waiting for Italian clarity before beginning analysis have less time than the January date suggests, because the useful preparation window closes when the final text arrives, not when it applies.

The characterization of the decree as predominantly clarificatory is worth taking seriously and also worth treating with some caution. Italy already has extensive electronic commerce and platform rules, so a clarificatory transposition is plausible. But clarifications of threshold calculation and of platform liability are precisely the kind of change that is minor in drafting and material in outcome for businesses positioned near a boundary. A clarification that resolves an ambiguity against a taxpayer’s existing position is, in practical terms, a change.

There is a broader point about how Article 2 of the directive is landing across the European Union. Because the electronic invoicing provisions of Article 1 dominate professional attention, the January 1, 2027, platform and registration provisions are receiving comparatively little planning effort, despite arriving first for most member states. Italy, Croatia, Luxembourg, and others are now legislating for Article 2 in parallel and largely unnoticed. Organizations with cross-border business-to-consumer or marketplace exposure should be running an Article 2 workstream distinct from their electronic invoicing workstream, and most are not.

Finally, this development is a good illustration of why attribution discipline matters. Reporting on the August 4 meeting has variously assigned it the wrong date, named a minister the official text does not name, given it a meeting number that cannot be verified, and bundled it with a domestic deduction measure that could not be confirmed.

Each of those errors is small; together they would produce a client briefing that is wrong in four particulars about a decree that is not yet final.

Expected Next Steps

The decree should be expected to be transmitted for the opinions of the competent parliamentary committees, and organizations should expect the text to be amended at that stage, as happened to comparable decrees approved definitively at the same August 4 meeting.

A second and final reading by the Council of Ministers should be expected, followed by publication in the Gazzetta Ufficiale. No dates have been published for either step.

Implementing guidance from the Agenzia delle Entrate should be expected after final adoption, particularly on the platform provisions and on threshold calculation, since both will require practical rules that a legislative decree will not supply.

Confirmation should be expected, one way or the other, on the reported omnibus corrective decree and the value added tax deduction window. KGT will report separately when an official text is available.

KGT will report on the final text of the Article 2 decree when it is published, on the parliamentary committee stage if the text is materially amended, and on any Agenzia delle Entrate guidance that follows.

How Can KGT Support You?

KGT is a specialist indirect tax technology firm. Our SAP-integrated e-invoicing and e-reporting add-ons generate, validate and transmit country-compliant structured documents directly from SAP ECC and SAP S/4HANA, keeping tax determination, document mapping, status handling and the audit trail inside the system of record rather than in a downstream converter. Because the add-ons validate against the current national schemas, schematrons and code lists before transmission, a change of specification version becomes a configuration and regression-test exercise rather than a redesign.

We also deliver SAP Document and Reporting Compliance (DRC) services end to end: fit-gap assessment against the national mandate, activation and configuration of the relevant country versions, eDocument and eStatement setup, interface and connectivity design, master and transactional data remediation, test strategy including negative testing against the authority’s own validation artifacts, and post-go-live monitoring of rejections and status reconciliation. If you would like a readiness review against the developments described above, or an impact assessment for your SAP landscape, we would be glad to help.

Official sources

• Presidency of the Council of Ministers, Department for European Affairs, Council of Ministers of August 4, 2026 (source: Palazzo Chigi): View source
• Presidency of the Council of Ministers, Department for European Affairs, news index: View source
• Presidency of the Council of Ministers, Department for European Affairs, register of transposition of European Union acts: View source
• Government of the Italian Republic, press release of the Council of Ministers: View source
• Ministry of Economy and Finance, Department of Finance, draft legislative decree transposing the directive provisions applying from January 1, 2027: View source
• EUR-Lex, Council Directive (EU) 2025/516 of 11 March 2025: View source
• Gazzetta Ufficiale della Repubblica Italiana: View source
• Agenzia delle Entrate: View source

This publication is provided for general informational purposes only and does not constitute tax, legal, or professional advice. Please consult your advisor before acting on any information contained in this update.