VAT in practice: rates, periodic settlements and deduction
Imposta sul Valore Aggiunto (IVA), the Italian value added tax, is the indirect tax that accompanies almost every economic transaction of businesses and professionals. Understanding how it works means avoiding invoicing mistakes, paying the right amount and not losing the right to deduct input VAT. This guide, updated to the legislation in force in 2026, sets out in practical terms the fundamental mechanisms of the tax, the applicable rates, the deduction rules, the deadlines for periodic settlements and the filing obligations.
What VAT is and how it works
VAT is governed by D.P.R. 633/1972 and, for cross-border transactions, by D.L. 331/1993. It is a multi-stage, non-cumulative tax: it applies at every step of the production chain, but only on the value added generated at that step. The actual burden falls on the final consumer, while for businesses it is in principle neutral.
The mechanism rests on two complementary rules:
Rivalsa (charging on) (art. 18): whoever carries out the transaction charges VAT to the customer on the invoice, collects it and pays it over to the State.
Deduction (art. 19): the taxable person recovers the VAT paid on purchases connected with its business.
The difference between output VAT and input VAT determines the tax to be paid or the credit to be carried forward.
The conditions for VAT to apply
A transaction falls within the scope of VAT only if three conditions are met at the same time; if one is missing, the transaction is outside the scope of VAT.
Objective: a supply of goods (art. 2) or a supply of services (art. 3) for consideration.
Subjective: the transaction is carried out in the course of a business (art. 4) or of an art or profession (art. 5).
Territorial: the transaction takes place in the territory of the State (art. 7 et seq.; for general B2B services the place of the customer is what counts, art. 7-ter).
Transactions outside the scope must be distinguished from those that are zero-rated (exports, art. 8), exempt (medical, financial and insurance services, art. 10) or taxable: the distinction affects the right to deduct and the pro-rata calculation.
Italian VAT rates
Rate
Type
Examples
22%
Standard
General rule: all transactions without a reduced rate or an exemption (consumer goods, professional services, electronics, clothing, fuel)
10%
Reduced
Hotel and catering services; electricity and natural gas for domestic use up to 480 cubic metres a year; many medicines; ordinary and extraordinary maintenance on residential property, subject to the significant-goods cap; passenger transport, excluding exempt supplies
5%
Reduced
Certain social, health, care and educational services provided by social cooperatives; urban passenger transport by water
4%
Super-reduced
Basic foodstuffs (bread, pasta, milk); books and periodicals; aids for people with disabilities; first-home purchases, excluding land registry categories A/1, A/8 and A/9
To be confirmed for 2026: the classification of individual goods changes with each annual budget law. Before applying a reduced rate, check the latest version of Tabella A.
Deduction and non-deductible VAT
The right to deduct arises if the purchase is connected with the business and if the downstream transaction carries a right to deduct. It must be exercised at the latest in the return for the year in which the right arose.
The pro-rata
A taxable person carrying out both transactions with a right to deduct and exempt transactions deducts proportionally: percentage = transactions with a right to deduct / total output transactions × 100.
Objectively non-deductible VAT (art. 19-bis1)
Motor vehicles: 40% deduction for mixed use; 100% where the vehicle is used exclusively in the business (sales agents, car hire, taxis). The same rule applies to fuel, maintenance and leasing.
Entertainment expenses: VAT is not deductible, except for items costing no more than 50 euro each.
Hotels and restaurants: deductible if connected with the business and evidenced by an invoice; not deductible with a simple till receipt.
Periodic settlements and payments
Monthly settlement (the default regime): payment by the 16th of the following month.
Quarterly by election: available where the previous year’s turnover does not exceed 500.000 euro (services) or 800.000 euro (other activities). Payment by the 16th of the second month after the quarter, with a 1% surcharge. The fourth quarter flows into the annual balancing payment.
Tax code
Reference
Usual deadline
6001 – 6012
Monthly settlements (January-December)
16th of the following month
6031
1st quarter
16 May
6032
2nd quarter
20 August
6033
3rd quarter
16 November
6013 / 6035
VAT payment on account
27 December
6099
Annual VAT balancing payment
16 March (may be paid in instalments)
VAT payment on account: by 27 December, calculated using the historical method (88% of the reference payment: for monthly filers, that of December of the previous year; for quarterly filers, the amount due with the annual return), the forecast method or the analytical method. Annual balancing payment: by 16 March, payable in instalments or deferrable with a 0,40% monthly surcharge.
Settlement examples
Example 1 – VAT payable. Invoices issued for 20.000 euro + 22% VAT (output VAT 4.400) and purchases of 12.000 euro + 22% VAT (input VAT 2.640). Settlement: 4.400 – 2.640 = 1.760 euro to be paid.
Example 2 – VAT credit. Professional fees of 10.000 euro + VAT (output VAT 2.200) and a purchase of equipment for 15.000 euro + VAT (input VAT 3.300). The result is a credit of 1.100 euro, carried forward to the next period or claimed as a refund.
LIPE and the annual return
The Comunicazione delle liquidazioni periodiche (LIPE, the quarterly VAT settlement report) transmits the summary figures for each quarter:
1st quarter: 31 May
2nd quarter: 30 September
3rd quarter: 30 November
4th quarter: by the last day of February (it may be omitted if the figures are included in an annual return filed by the end of February)
The annual VAT return is filed electronically between 1 February and 30 April.
Reverse charge and split payment
Reverse charge
The supplier issues the invoice without charging VAT; it is the customer who integrates it, recording it both among purchases and among sales. It applies to construction subcontracting; cleaning, demolition and installation of building systems; scrap and recovered materials; gold and silver; mobile phones, microprocessors, games consoles, tablets and laptops (B2B); gas and electricity supplied to resellers.
Split payment
Provided for by art. 17-ter for supplies to public authorities and publicly controlled companies: the supplier charges VAT but does not collect it, because the customer pays it directly to the Treasury. To be confirmed for 2026: whether the regime is extended, since the EU authorisation runs for a defined period.
Cross-border transactions
Intra-EU transactions
B2B supplies to EU taxable persons: zero-rated (art. 41 D.L. 331/1993), provided the supplier is registered in VIES.
B2B acquisitions from EU suppliers: subject to VAT in Italy under the reverse charge.
INTRASTAT returns are required above the relevant thresholds.
B2C distance sales: above the threshold of 10.000 euro a year, VAT is due in the consumer’s country and can be accounted for under the OSS scheme.
Non-EU countries
Exports: zero-rated (art. 8).
Imports: VAT assessed and paid at customs.
General B2B services: taxable in the customer’s country, with the reverse charge applying to the Italian customer.
Esportatori abituali (habitual exporters) may purchase without VAT within the limits of their plafond, by submitting a declaration of intent. Cross-border transactions are reported through the SdI (the Italian exchange system for electronic invoices).
VAT credits and refunds
Carry-forward to the following period (the ordinary solution).
Offsetting on the F24 form: using an annual credit above 5.000 euro requires a visto di conformità (compliance certification).
Refund where the conditions of art. 30 are met (average rate on purchases higher than that on sales, zero-rated transactions above 25% of the total, purchase of depreciable assets, cessation of business). A quarterly credit is claimed on the modello IVA TR.
Refunds up to 30.000 euro require no guarantee; above that, either the compliance certification with a substitute declaration or a bank guarantee is needed.
Common mistakes to avoid
Deducting VAT on expenses that are not business-related or whose deduction is restricted (cars, entertainment, catering without an invoice).
Applying a reduced rate without checking Tabella A.
Failing to integrate invoices under the reverse charge or on intra-EU acquisitions.
Forgetting the VAT payment on account due on 27 December.
Not filing the LIPE, or filing figures inconsistent with the payments made.
Exceeding the plafond available to habitual exporters.
Exercising the right to deduct after the permitted deadline.
Confusing exempt, zero-rated and out of scope transactions, with knock-on effects on the pro-rata.
Where a payment has been omitted or made late, the position can be regularised through ravvedimento operoso (voluntary settlement). This guide is for information only: Studio Antolini is available to examine your specific case.
VAT in practice: rates, periodic settlements and deduction
Imposta sul Valore Aggiunto (IVA), the Italian value added tax, is the indirect tax that accompanies almost every economic transaction of businesses and professionals. Understanding how it works means avoiding invoicing mistakes, paying the right amount and not losing the right to deduct input VAT. This guide, updated to the legislation in force in 2026, sets out in practical terms the fundamental mechanisms of the tax, the applicable rates, the deduction rules, the deadlines for periodic settlements and the filing obligations.
What VAT is and how it works
VAT is governed by D.P.R. 633/1972 and, for cross-border transactions, by D.L. 331/1993. It is a multi-stage, non-cumulative tax: it applies at every step of the production chain, but only on the value added generated at that step. The actual burden falls on the final consumer, while for businesses it is in principle neutral.
The mechanism rests on two complementary rules:
Rivalsa (charging on) (art. 18): whoever carries out the transaction charges VAT to the customer on the invoice, collects it and pays it over to the State.
Deduction (art. 19): the taxable person recovers the VAT paid on purchases connected with its business.
The difference between output VAT and input VAT determines the tax to be paid or the credit to be carried forward.
The conditions for VAT to apply
A transaction falls within the scope of VAT only if three conditions are met at the same time; if one is missing, the transaction is outside the scope of VAT.
Objective: a supply of goods (art. 2) or a supply of services (art. 3) for consideration.
Subjective: the transaction is carried out in the course of a business (art. 4) or of an art or profession (art. 5).
Territorial: the transaction takes place in the territory of the State (art. 7 et seq.; for general B2B services the place of the customer is what counts, art. 7-ter).
Transactions outside the scope must be distinguished from those that are zero-rated (exports, art. 8), exempt (medical, financial and insurance services, art. 10) or taxable: the distinction affects the right to deduct and the pro-rata calculation.
Italian VAT rates
Rate
Type
Examples
22%
Standard
General rule: all transactions without a reduced rate or an exemption (consumer goods, professional services, electronics, clothing, fuel)
10%
Reduced
Hotel and catering services; electricity and natural gas for domestic use up to 480 cubic metres a year; many medicines; ordinary and extraordinary maintenance on residential property, subject to the significant-goods cap; passenger transport, excluding exempt supplies
5%
Reduced
Certain social, health, care and educational services provided by social cooperatives; urban passenger transport by water
4%
Super-reduced
Basic foodstuffs (bread, pasta, milk); books and periodicals; aids for people with disabilities; first-home purchases, excluding land registry categories A/1, A/8 and A/9
To be confirmed for 2026: the classification of individual goods changes with each annual budget law. Before applying a reduced rate, check the latest version of Tabella A.
Deduction and non-deductible VAT
The right to deduct arises if the purchase is connected with the business and if the downstream transaction carries a right to deduct. It must be exercised at the latest in the return for the year in which the right arose.
The pro-rata
A taxable person carrying out both transactions with a right to deduct and exempt transactions deducts proportionally: percentage = transactions with a right to deduct / total output transactions × 100.
Objectively non-deductible VAT (art. 19-bis1)
Motor vehicles: 40% deduction for mixed use; 100% where the vehicle is used exclusively in the business (sales agents, car hire, taxis). The same rule applies to fuel, maintenance and leasing.
Entertainment expenses: VAT is not deductible, except for items costing no more than 50 euro each.
Hotels and restaurants: deductible if connected with the business and evidenced by an invoice; not deductible with a simple till receipt.
Periodic settlements and payments
Monthly settlement (the default regime): payment by the 16th of the following month.
Quarterly by election: available where the previous year’s turnover does not exceed 500.000 euro (services) or 800.000 euro (other activities). Payment by the 16th of the second month after the quarter, with a 1% surcharge. The fourth quarter flows into the annual balancing payment.
Tax code
Reference
Usual deadline
6001 – 6012
Monthly settlements (January-December)
16th of the following month
6031
1st quarter
16 May
6032
2nd quarter
20 August
6033
3rd quarter
16 November
6013 / 6035
VAT payment on account
27 December
6099
Annual VAT balancing payment
16 March (may be paid in instalments)
VAT payment on account: by 27 December, calculated using the historical method (88% of the reference payment: for monthly filers, that of December of the previous year; for quarterly filers, the amount due with the annual return), the forecast method or the analytical method. Annual balancing payment: by 16 March, payable in instalments or deferrable with a 0,40% monthly surcharge.
Settlement examples
Example 1 – VAT payable. Invoices issued for 20.000 euro + 22% VAT (output VAT 4.400) and purchases of 12.000 euro + 22% VAT (input VAT 2.640). Settlement: 4.400 – 2.640 = 1.760 euro to be paid.
Example 2 – VAT credit. Professional fees of 10.000 euro + VAT (output VAT 2.200) and a purchase of equipment for 15.000 euro + VAT (input VAT 3.300). The result is a credit of 1.100 euro, carried forward to the next period or claimed as a refund.
LIPE and the annual return
The Comunicazione delle liquidazioni periodiche (LIPE, the quarterly VAT settlement report) transmits the summary figures for each quarter:
1st quarter: 31 May
2nd quarter: 30 September
3rd quarter: 30 November
4th quarter: by the last day of February (it may be omitted if the figures are included in an annual return filed by the end of February)
The annual VAT return is filed electronically between 1 February and 30 April.
Reverse charge and split payment
Reverse charge
The supplier issues the invoice without charging VAT; it is the customer who integrates it, recording it both among purchases and among sales. It applies to construction subcontracting; cleaning, demolition and installation of building systems; scrap and recovered materials; gold and silver; mobile phones, microprocessors, games consoles, tablets and laptops (B2B); gas and electricity supplied to resellers.
Split payment
Provided for by art. 17-ter for supplies to public authorities and publicly controlled companies: the supplier charges VAT but does not collect it, because the customer pays it directly to the Treasury. To be confirmed for 2026: whether the regime is extended, since the EU authorisation runs for a defined period.
Cross-border transactions
Intra-EU transactions
B2B supplies to EU taxable persons: zero-rated (art. 41 D.L. 331/1993), provided the supplier is registered in VIES.
B2B acquisitions from EU suppliers: subject to VAT in Italy under the reverse charge.
INTRASTAT returns are required above the relevant thresholds.
B2C distance sales: above the threshold of 10.000 euro a year, VAT is due in the consumer’s country and can be accounted for under the OSS scheme.
Non-EU countries
Exports: zero-rated (art. 8).
Imports: VAT assessed and paid at customs.
General B2B services: taxable in the customer’s country, with the reverse charge applying to the Italian customer.
Esportatori abituali (habitual exporters) may purchase without VAT within the limits of their plafond, by submitting a declaration of intent. Cross-border transactions are reported through the SdI (the Italian exchange system for electronic invoices).
VAT credits and refunds
Carry-forward to the following period (the ordinary solution).
Offsetting on the F24 form: using an annual credit above 5.000 euro requires a visto di conformità (compliance certification).
Refund where the conditions of art. 30 are met (average rate on purchases higher than that on sales, zero-rated transactions above 25% of the total, purchase of depreciable assets, cessation of business). A quarterly credit is claimed on the modello IVA TR.
Refunds up to 30.000 euro require no guarantee; above that, either the compliance certification with a substitute declaration or a bank guarantee is needed.
Common mistakes to avoid
Deducting VAT on expenses that are not business-related or whose deduction is restricted (cars, entertainment, catering without an invoice).
Applying a reduced rate without checking Tabella A.
Failing to integrate invoices under the reverse charge or on intra-EU acquisitions.
Forgetting the VAT payment on account due on 27 December.
Not filing the LIPE, or filing figures inconsistent with the payments made.
Exceeding the plafond available to habitual exporters.
Exercising the right to deduct after the permitted deadline.
Confusing exempt, zero-rated and out of scope transactions, with knock-on effects on the pro-rata.
Where a payment has been omitted or made late, the position can be regularised through ravvedimento operoso (voluntary settlement). This guide is for information only: Studio Antolini is available to examine your specific case.
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