E-invoicing in Italy: Overview and analysis

The Italian e-invoicing system (fatturazione elettronica) plays a crucial role in the digitization of the country’s tax administration and economy. Introduced in 2014 and later extended to all economic sectors, mandatory e-invoicing has become a fundamental tool in combating tax fraud and simplifying administrative and fiscal processes.

Legal framework of e-invoicing in Italy

The legal foundations for e-invoicing in Italy were established by Legislative Decree No. 148 of December 27, 2018, and Decree No. 55 of April 3, 2013. These regulations cover both the public and private sectors. Initially, the e-invoicing obligation applied only to central administration (based on Directive 2014/55/EU). Since 2014, e-invoicing has gradually become mandatory for all public entities in Italy. In 2019, Italy became the first European Union country to require e-invoicing for B2B (business-to-business) and B2C (business-to-consumer) transactions.

E-invoicing process

The Italian e-invoicing system is based on a continuous transaction controls (CTC) model, where invoices are generated in a specific XML format called FatturaPA and sent to the national invoice exchange system, known as Sistema di Interscambio (SDI). For B2G (business-to-government) transactions, a qualified electronic signature, which can be executed by the company or an authorized service provider, is also required. An additional component of the system, particularly in the public healthcare sector, is NSO (Nucleo di Supporto Operativo), a system responsible for the exchange of electronic orders, operating similarly to SDI.

Electronic invoice format

The accepted format within the Italian e-invoicing system is FatturaXML. Invoices must be digitally signed to ensure their authenticity and integrity and then sent to the SDI system, which serves as the central hub for invoice exchange between taxpayers and public administration. Alternatively, the European PEPPOL standard can also be used for transmitting invoices.

Sistema di Interscambio (SDI)

The Sistema di Interscambio (SDI) is the central online hub used for sending and receiving electronic invoices in Italy. All invoices must be transmitted to SDI, which then forwards them to recipients, identifying them through a unique IPA code. This system acts as a “invoice approval portal,” where each transaction is verified in real-time by the Italian tax authorities.

Maintaining invoice integrity and authenticity

To ensure the integrity and authenticity of e-invoices, the Italian Digitalization Agency (AGID) requires that each company has an appropriate timestamp and electronic signature. Additionally, invoices must include mandatory metadata in the XML structure, allowing them to be read in PDF format as well. All invoices must be stored in accordance with archiving documentation (Manuale della Conservazione), which outlines the responsibilities related to the archiving process.

Penalties for non-compliance

The Italian government is very strict about e-invoicing, imposing severe penalties for non-compliance. For delayed submission of invoices to SDI, without affecting tax settlement, penalties range from 250 to 2000 euros per document. Invoices must be sent to SDI within 12 days from the date of the transaction for immediate invoices, or within 15 days after the end of the month for deferred invoices. Additionally, all Italian companies are required to report cross-border invoices, and incorrect reporting carries fines ranging from 2 to 400 euros per invoice.

Benefits of e-invoicing implementation

The implementation of e-invoicing in Italy has brought numerous benefits, including significant operational cost savings and a reduction in administrative burdens. The system has allowed for the automation of processes, shortening payment times and reducing the risk of errors. Furthermore, mandatory e-invoicing has become a key tool in the fight against tax fraud, bringing Italy significant financial benefits through the reduction of the VAT gap.

Challenges and areas for improvement

Despite its many advantages, the Italian e-invoicing system also faces challenges. One of these is the inability to correct an incorrectly issued invoice directly in the SDI system—in such cases, a credit note and a new invoice must be issued. Another challenge is the short, twelve-day deadline for submitting invoices to SDI, which can be difficult to meet in some cases, especially during holiday periods.

The future of e-invoicing in Italy

The e-invoicing system in Italy continues to evolve. As of January 2024, thresholds excluding certain entities from the e-invoicing obligation have been removed, meaning that the obligation now covers all companies regardless of their turnover. Additionally, the development of technology and further automation of processes related to e-invoicing will be key to maintaining the competitiveness of the Italian market and the efficiency of tax administration.

Summary

The Italian e-invoicing system is one of the most advanced in Europe and serves as a model for other countries. Mandatory e-invoicing has brought significant financial and administrative benefits to Italy while also presenting new challenges for businesses. In the future, further automation and the extension of the e-invoicing obligation to all economic entities may further streamline Italy’s tax system, making it more transparent and efficient.