Reverse-charge mechanism extended to labour-intensive logistics services

The new measure applies to labour-intensive procurement, sub-procurement, and similar contracts where services, provided to companies engaged in logistics activities, are performed at the principal’s premises using assets owned by or attributable to the latter.

As a transitional measure, an exception to the standard VAT rules is introduced, allowing the principal to opt for VAT payment on behalf of the supplier on a voluntary basis, by submitting a notification to the Italian Tax Authority.

Once filed, the option takes immediate effect and remains valid for three years. In such cases, the principal is responsible for remitting the VAT in the name and on behalf of the supplier, while the supplier remains jointly liable for the VAT due.

However, the final implementation of this provision and its mandatory application will depend on approval from the EU Council. Under EU law, Member States can introduce the reverse-charge mechanism only for transactions explicitly listed in Article 199 of VAT Directive. Any deviations from this rule must be authorised, which allows for exceptions solely to simplify tax collection or prevent tax evasion and avoidance.

However, a similar request by the Italian government in 2020 was already rejected by the EU Council, casting doubt on the likelihood of its long-term implementation.

Key takeaway

Pending EU Council approval, logistics and freight transport businesses should evaluate the cost-benefit implications of this new VAT provisions and whether opting for principal-side VAT could help reduce the risk of potential involvement in fraudulent activities in a sector under increased scrutiny from the Italian Tax Authorities.

Reference

Law No. 207 of 30 December 2024 (Italian 2025 Budget law) Gazzetta Ufficiale