Extending the Lifespan of Italy’s e-Invoicing Mandate: EU Council’s Proposal
In the face of increasing efforts to combat tax fraud and streamline tax compliance across Europe, the European Union is considering a proposal to extend Italy’s authorization for mandatory electronic invoicing (e-Invoicing). This extension is part of a broader plan to maintain the effectiveness of Italy’s current VAT collection system, which has proven instrumental in reducing tax fraud and easing administrative burdens for businesses.
Background and Impact of Italy’s e-Invoicing System
Italy introduced mandatory e-Invoicing back in 2018, under the Sistema di Interscambio (SdI), as a part of a special derogation from Articles 218 and 232 of the VAT Directive (Directive 2006/112/EC). This system allows businesses to send invoices through a centralized digital platform, ensuring that the tax authorities receive accurate and real-time data. Since its implementation, the e-Invoicing system has had a profound impact on both tax compliance and fraud reduction.
Between 2019 and 2022, VAT revenue saw a remarkable increase of €1.7 to €2 billion. Fraud detection also surged from €1 billion in 2019 to a staggering €9 billion in 2022, demonstrating the effectiveness of this system in curbing tax evasion. Moreover, e-Invoicing has helped businesses by reducing administrative costs and improving the efficiency of tax compliance.
The Proposal to Extend the Derogation
In April 2024, Italy submitted a request to the European Commission, seeking continued authorization to enforce mandatory e-Invoicing. The proposal published on 10 October 2024 suggests that this derogation should be extended until 31 December 2025, or until a new EU-wide VAT directive for digital services, known as the VAT in the Digital Age (ViDA) proposal, is enacted.
The ViDA proposal aims to modernize the VAT system by mandating e-Invoicing across all Member States, potentially eliminating the need for individual derogations. However, until this directive is formalized, Italy’s successful e-Invoicing system requires continued support.
Benefits of the Extension
The extension of the derogation would enable Italy to maintain the progress achieved in VAT collection and fraud prevention. It will also provide businesses with a streamlined process for managing invoices and reduce their administrative workload. Additionally, this system enables real-time performance monitoring, which proved invaluable during the COVID-19 pandemic when economic data needed to be analyzed swiftly.
Aligning with EU’s Broader Policies
The EU Council’s decision to support the extension aligns with the broader EU strategy to modernize tax collection systems and combat fraud. Other Member States have also been granted similar authorizations, reflecting the widespread recognition of e-Invoicing’s effectiveness. The extension until 2025 ensures continuity while the EU works on implementing its new VAT rules for the digital age.
