Italy – VAT split payments extended
The European Commission has granted Italy approval to continue using anti VAT fraud split payments regime with state organisations, and to extend the measures to state-owned companies and stock market quoted companies.
VAT split payments
Under the split payment mechanism, the purchaser pays the VAT amount directly to the tax authorities rather than to the supplier. This anti-fraud measure reduces the risk of VAT losses by removing the VAT cash element from the supply chain.
When an EU Member State believes, there is substantial evidence of VAT fraud, it may apply to derogate from Articles 206 and 226 of the EU VAT Directive in respect to VAT payments and invoicing necessities made to public authorities.
There is evidence from Italy of extensive fraud on payments by suppliers to the Italian state. As a result, Italy was granted permission in 2015 to temporarily implement a split payment rule, initially until the end of 2017. Suppliers now require to pay the VAT element of invoices to the state directly to a specific tax bank account with the tax authorities.
Italy has reported higher than anticipated increase in VAT receipts since the implementation of this measure. Nevertheless, Italy has specified that is has not yet executed all useful methods to remove the measure without the risk of delays in collections.
Additionally, Italy has since recognised comparable VAT payment fraud to state controlled companies and over 40 recited companies. Therefore, the request for an extension of the current measure, and for it to be extended to companies controlled by public authorities and companies listed on the stock exchange.
This request was approved by the commission this month, with the implementation from 1st May, 2017. The European Council of Ministers must ratify the decision also.
Update (2026): Current Status of Italy’s VAT Split Payment Regime
Italy’s VAT split payment regime remains in force and continues to be one of the country’s key measures to combat VAT fraud and improve tax collection.
Following several extensions approved by the European Union, Italy is currently authorized to apply the split payment mechanism until 30 June 2026. Under this system, qualifying public bodies and certain public-sector entities pay the VAT amount directly to the Italian tax authorities rather than to the supplier.
The measure now operates alongside Italy’s mandatory electronic invoicing system, which enables the tax authorities to monitor transactions in real time and strengthen VAT compliance controls.
The scope of the regime has evolved over time. While public administrations and various entities controlled by public authorities remain within the split payment system, companies listed on the FTSE MIB index were removed from the regime from 1 July 2025 as part of Italy’s commitment to gradually reduce the scope of the derogation.
Businesses supplying Italian public-sector customers should verify whether their customers are included on the annual lists published by the Italian Ministry of Economy and Finance, as the application of split payment depends on the status of the customer receiving the goods or services.
Unless a further extension is approved by the European Union, Italy’s authorization to apply the split payment regime is scheduled to expire on 30 June 2026.
