The procedure for splitting VAT payments, known as “split payment” or “scissione dei pagamenti” in Italian, is a particular form of VAT settlement. It was introduced by the 2015 Stability Law to combat tax evasion, particularly in the public administration sector.
Definition and functioning
In split payment, the VAT due on a transaction is not paid to the supplier, but directly by the purchaser to the tax authority, provided that the latter is a public body or a specific company.
The supplier therefore only receives the net amount of the invoice.
The legal basis is Article 17-ter of Presidential Decree (DPR) No. 633/72.
Scope of application: who is affected?
The procedure applies to the supply of goods and services to a number of specific public and private entities:
- Public Administration (PA): includes state bodies, schools, regions, provinces, municipalities, Chambers of Commerce, universities and local health authorities (ASL).
- Subsidiaries: companies directly or indirectly controlled by the State, ministries and, in general, the Public Administration.
The Ministry of Economy and Finance (MEF) publishes the official lists of affected companies on its website every year. Companies should check these lists regularly.
Obligations for the supplier
If you provide a service to a customer subject to the split payment procedure, you must bear in mind the following:
- Issuing the invoice: the invoice is issued as normal with VAT indicated.
- Mandatory annotation: the invoice must bear the words “Split payment pursuant to Article 17-ter of Presidential Decree 633/72”.
- Accounting treatment: the invoice is recorded like any other, but the VAT indicated is not included in the periodic VAT liability, as it is not collected from the customer.
Exceptions to split payment
Not all invoices are subject to this procedure.
In particular, invoices relating to the following are excluded:
- Reverse charge procedure: if the recipient of the service is already liable for tax (e.g. for certain construction works or intra-Community purchases), the reverse charge procedure applies.
- Freelancers: services provided by self-employed persons whose fees are subject to withholding tax are excluded from split payment.
- Special schemes: turnover subject to special VAT regulations (e.g. flat-rate agricultural regulations or travel agency regulations).
- Small amounts: supplies or services documented exclusively by simple receipts or tax receipts.
Effects on liquidity and VAT refunds
As suppliers do not collect VAT but continue to pay input tax on their incoming services, VAT credits often arise.
To mitigate this disadvantage in terms of liquidity, the law provides for preferential (priority) refunds of such credits, provided that the legal requirements are met.
Frequently asked questions (FAQ)
1. How can I check whether my customer is subject to the split payment procedure?
You can consult the official lists on the Department of Finance website and check whether the customer is registered using their tax code.
Upon request, the customer is also required to confirm their membership of the system. Link: Minstery of Economy and Finance
2. Who is responsible in the event of errors?
The Revenue Agency has clarified in its response 604/2020 that the responsibility for classifying the transaction as split payment always lies with the issuer of the invoice. This applies regardless of the information provided by the customer/client.
3. Does split payment also apply to freelancers?
No. The tax authorities have clarified that fees subject to withholding tax are excluded from the split payment procedure.