The new electronic invoicing regulation in Italy will be a challenge that every organization will need to be prepared to manage. With the new year approaching, you’ll want to know the essentials to avoid starting the year with any unwelcome surprises. What is the latest news on electronic invoicing solutions? In this post, we’ll cover new developments such as the grace period, exemptions, simplification for VAT deductions, and everything you need to know to be ready on January 1, 2019.
The mandatory electronic invoicing solutions
The end of 2018 is approaching. It has been a turbulent year from many points of view, and it has ushered in many innovations in different fields. In Italy, this includes the new mandatory electronic invoicing solutions, which will officially come into force on January 1, 2019.
Although the official news was announced earlier this year, the introduction of the new regulation, now mandatory for B2B and B2C transactions, is a big change for companies doing business in Italy. Understandably, many are apprehensive of the requirements and how those may impact their business. But they don’t have to be worried.
Electronic invoicing solutions can provide a considerable savings opportunity for all companies, and it can simplify some existing procedures, saving time, money, and increasing productivity.
To avoid penalties and unnecessary expenses, you’ll need to prepare. We’re here to help.
As other elements of the law become finalized, it will be equally important to stay up to date with the latest news and information.
Electronic invoicing solutions: Latest news
We need to clarify something (the first of a long series).
First of all, the possibility of extending the application of electronic invoicing solutions between individuals until 2020 was recently denied by Antonino Maggiore, Director of the Agenzia delle Entrate, during a hearing of the chamber Finance Committee.
This is even more so since the text of the 2019 tax decree linked to the budget law was published in the Official Gazette.
Who is exempt from issuing an electronic invoice?
The omnibus amendment only slightly changed the tax decree published in October in the Official Gazette. In order to resolve certain issues raised by the Privacy Guarantor, the list of those exempt from the obligation of electronic invoicing has been extended. As a result, those who have to deal with private and sensitive data (for example, health-related information), such as, doctors and pharmacies will not be required to issue invoices in electronic format.
Those professionals are required to send the data to the TS System (Health Card) for the purpose of fine-tuning the pre-compiled Model 730 by the Agenzia delle Entrate.
However, this exemption does not concern the passive invoicing cycle.
In any case, doctors and pharmacies will still be required to receive digital invoices and must be compliant with digital invoice methods from 2020.
In the amendments to Fiscal Decree no. 119/2019, the same exemption was also extended to amateur sports associations with up to €65,000 in revenue.
In light of the amendments approved to the 2019 legislation, those who are not affected by the electronic invoicing obligation, in addition to the above, are:
- Companies and associations who had revenues of €65,000 and below in the previous year
- Taxpayers who apply the advantage regime, pursuant to article 27, paragraphs 1 and 2 of Decree-Law n.98 / 2011
- Taxpayers who apply the so-called lump-sum regime pursuant to Article 1, paragraphs 54-89 of Law no. 190/2014)
- All companies for transactions relating to the sale of goods and services that are carried out or received by non-residents or for companies not established in Italy (in other words, the tax representative in Italy of a foreign company is not required to issue an invoice)
- Agricultural producers under special arrangements, as per article 34, paragraph 6 of Presidential Decree 633/72, as indicated in the Provision of the Revenue Agency n.89757 / 2018
Penalties for electronic invoicing solutions
To support companies in making the transition, the Agenzia delle Entrate has confirmed that a grace period will be in place for the first part of 2019, in which penalties will not be applied or will be reduced.
According to the Agenzia delle Entrate, Circular n. 13/E of 2 July 2018, the electronic invoice should be transmitted within 24 hours of the day it is issued. To support companies in getting used to the new process, penalties will be waived in the first half of the next year’s tax period for invoices issued outside the 24 hour period, although they must be issued within the relevant tax period.
If, on the other hand, the digital invoice is issued in the following month or quarter, the penalties will be reduced to 20 %.
The reduced penalties as described above also apply to the assignee/buyer who has concluded a transaction to purchase goods and services without issuing an invoice or who has issued a late invoice.
What will happen after July 1, 2019?
After July 1, 2019, the sanctions will be generally applied. However, we should clarify two points.
- An amendment has been put forward in the Assembly to postpone the grace period to the third quarter, i.e. September 30, 2019.
- After July 1, 2019, although the penalties should be applied as required by law, there will be the possibility to issue an invoice within 10 days from the execution of the operations and not within the next 24 hours.
This innovation is particularly relevant, first of all, because it has a generalized application; therefore it applies to both electronic invoices and analog invoices.
Secondly, this simplification does not entail any change or delay in deducting VAT.
Furthermore, it must be kept in mind that anyone wishing to benefit from issuing the mandatory digital invoice on a date other than the one in which the transaction was carried out will have to report it within the document itself.
This obligation obviously does not apply to those who issue the invoice on the same day in which they carry out the transaction.
With this change, it will be possible to insert a different date, and the electronic invoice that will arrive at the Interchange System within 10 days will still be considered issued.
What about the deferred compulsory electronic invoice?
This topic has already raised some questions. Despite the obligation that requires companies to implement electronic invoicing solutions, it is still possible to issue a deferred invoice, i.e. an invoice that is issued on the 15th day of the month following the sale of goods or provision of services.
Nevertheless, some obligations regarding the registration of these invoices remain with the taxpayer.
The law, provides that all invoices issued (whether immediate, deferred, summarized, or addressed to subjects within the European Union and received and/or issued by parties outside the European Union) must be indicated within an appropriate register according to the numbering order by the 15th day of the month following the day in which the operations were carried out and with reference to the same month as the operations are carried out.
How will this impact VAT deductions?
This is also a subject of considerable importance.
Regarding the legislation previously in force concerning the periodic payment of VAT with the relative deductions, the new regulation as it currently stands requires that deductions may be made relative to the purchase documents received and noted by the 15th of the month following the month in which the operation was carried out.
To be able to benefit from these deductions, however, two conditions must be satisfied: the operation must be carried out (substantial requirement) and there must be a valid purchase invoice (formal assumption).
The second requirement is problematic. In fact, the invoice could have been delivered to the transferee/customer after the period in which the tax becomes payable and, therefore, the deduction could no longer be used.
Corrective action has been implemented to avoid this. The VAT invoice may be calculated according to the period in which the operation has been carried out, provided that the invoice is delivered and duly recorded in terms of liquidation, i.e. on the 16th of the following month.
Finally, it should be noted that the application of this point does not extend to operations carried out in the previous year.
Impact on record keeping
According to the Agenzia delle Entrate, the parties involved on both sides of the electronic invoicing obligation will have to keep the digital invoices issued and received for 10 years. This could be through in-house registers or by relying on an outsourced service provided providers such as Doxee who preserve and store all the obligations related to the billing and conservation processes.
However, those operating within the minimum regime or within the flat-rate scheme have two alternatives for preserving documentation.
If the taxpayer subject to one of these two schemes communicates the PEC address or the recipient code to receive the electronic invoices through the Exchange System (SDI), then he will have the obligation to keep the same in digital format. Otherwise, the taxpayer will not be required to retain digital records (in other words, they will only be required to keep hard copies of the documentation).
With these changes electronic invoicing easier?
As always, it is difficult to comment before seeing the concrete application of any legislation.
What is certain, at least for now, is that the changes have been introduced in response to concerns by businesses and individual taxpayers.
In any case, companies will not want to wait for the grace period to start complying with the regulation. Given the inherent complexities and the maze of exceptions, exemptions, and various grace periods, organizations will want a trusted partner who can help them successfully navigate the changes.
In addition to the current regulation, additional regulations may be on the horizon. The European Commission is increasingly pushing for the creation of a Digital Single Market, which would also require mandatory digital invoicing. This is an added incentive for organizations to make the necessary changes to their systems.
For this reasons, it becomes even more important to rely on partners like Doxee who have a long history of providing digital invoicing and conservation services.