VAT refund procedure in Italy for non-resident entities

In order to recover the VAT paid in Italy, a non-resident company does not have to be identified or established in Italy for VAT purposes. The company may apply for a VAT refund procedure pursuant to Article 38-bis2 of the VAT Decree, when certain conditions are met.

As a rule, according to Article 17 para. 3 of the VAT Decree, in case of a B2B transaction taxable in Italy that occurred between two non-resident entities, the non-resident seller must assess Italian VAT. In this case, the non-resident seller must register for VAT in Italy and issue an invoice with VAT.

In the present case, a Swedish company made VAT taxable purchases in Italy (i.e. supplies of goods located in Italy) from a Finnish company.

The Italian Tax Authority ruled that:

• output VAT had to be paid by the non-resident supplier (i.e. Finnish company) through its Italian VAT registration;
• input VAT accrued by the non-resident buyer, not identified or established in Italy for VAT purposes (i.e. the Swedish company), could be recovered under Article 38-bis2 of the VAT Decree via the electronic portal set up by its Member State of establishment, to the extent it only makes supplies subject to reverse charge in Italy.

In accordance with EU Directive 2008/9/EC, the VAT refund procedure cannot be activated:

• for goods or services for which input VAT cannot be recovered under Italian law;
• where the taxpayer makes output transactions for which it must account for Italian VAT;
• in case of a FE in Italy of the non-resident taxpayer.

However, a direct VAT identification or the appointment of a fiscal representative in Italy does not prevent the purchaser from submitting a VAT refund claim, under certain conditions (see, Italian Tax Authority Ruling n. 359/2021).

Key takeaway

The refund procedure under Article 38-bis2 of the VAT Decree can only be requested via electronic portal under certain conditions. The non-resident entity can apply for quarterly or annually VAT refund and, in either case, until 30 September of the year following the year in which the VAT credit accrued.