The Italian Tax Revenue Agency issued a circular regarding new procedures for VAT deduction and for the registration of purchase invoices. Here we present a brief summary of the circular and some clarification made in an article published on IlSole24Ore.

The Tax Revenue Agency circular 17.1.2018 n.1 clarifies both the procedures for the exercise of the right to deduct VAT and for the registration of purchase invoices.

  1. Double condition for the exercise of the VAT deduction

According to the Community case-law, in order to exercise the right to deduct, the following two conditions must be verified:

  • one of a substantial nature, which is the fact that the tax has become chargeable;
  • one of a formal nature, consisting in the possession of the invoice by the transferee or client.

It follows that the day from which the deadline for the exercise of the deduction starts must be identified when the two conditions are verified.

  1. Procedures for invoices recording

Furthermore, the aforementioned circular provides clarifications of an operational nature with regard to the rules for the purchase invoices registration, in application of the new terms for the exercise of VAT deduction.

In particular, it is clarified that, in the case of a purchase made in 2017 with an invoice received by 31.12.2017, the registration can take place, at the latest, by 30.4.2018. From the operational point of view:

  • if the registration is made in 2017, the ordinary rules of noting on the register of purchases are applied;
  • if the registration is made the first 4 months of 2018 (i.e. between 1.1.2018 and 30.4.2018), a special section must be created in the VAT register of purchases, related to the invoices received in 2017 for which VAT cannot be deducted in the context of periodic liquidation, but that contributes to determining the 2017 VAT balance.

In both cases the deduction for VAT purposes takes place in 2017: in the first case in the periodic liquidations, in the second one in the declaration.

The accounting of the invoice for VAT purposes through the separate annotation method determines, for tax payers who adopt the “Registration = collections/payments” regime, the deductibility of the cost in 2018 because the registration takes place in that year. Therefore, in this way a deferment of the costs’ deduction for Irpef purposes to 2018 occurs, preserving the VAT deduction in 2017 with the consequence of generating a higher income in the next declaration.

In the event that a purchase is made in December 2017 but the invoice is received in 2018, the registration can take place, at the latest, by 30.4.2019 (deadline for submitting the declaration regarding the year of receipt of the invoice). Consistently with what has been said for the invoices received in 2017, the registration of the document received in 2018 must be carried out in a specific section of the register of purchases only if the annotation takes place in the first 4 months of 2019.

Conclusions and operational suggestions

It is necessary to underline that the receipt of the purchase invoice by the transferee or client, if not resulting from Electronic Certified Mail or other systems attesting receipt of the document, must emerge from the correct keeping of the accounts (eg. progressive numering of the received documents, indication on the invoice of the date of reception by affixing a stamp).

For example, an invoice received the 2nd March but dated 28th February will contribute to the liquidation of March and on the invoice must be specified the date of reception.