On March 28th, 2025, the Model Communication was approved, which allows small businesses established in a member state of the European Union to make, under specific conditions, supplies of goods and services in other member states without charging VAT and without the right to deduct tax.
Exemption Scheme for EU Companies in Italy: who can access it?
As of January 1st, 2025, taxable individuals established in another EU member state will also be able to apply the VAT-free regime in the Italian territory, provided that specific requirements are met.
Which Firms Can Benefit from the Scheme?
To benefit from the exemption scheme in Italy, the taxable person natural person established in another Member State must meet the following conditions:
- EU turnover: In the previous year, the total annual turnover in the European Union, i.e., the total value of supplies of goods and services excluding VAT, must not have exceeded €100,000.
- Turnover in Italy: In the previous year, the annual turnover achieved in the Italian territory must not have exceeded €85,000 or, if lower, the threshold of €65,000 stipulated in Article 1, paragraph 54, of Law 190/2014.
- Notification to the State of establishment: The taxable person must have previously notified their State of establishment of their intention to join the exemption scheme. In addition, during the year, preceding the date of communication, the total turnover must not have exceeded €100,000.
- Tax Identification: The taxable person must be identified with an EX identification number, provided by the Member State of establishment and used exclusively for the application of the exemption scheme in the State of exemption, i.e., the State where the taxable person intends to apply the new exemption scheme.
Who is Excluded from the Exemption Scheme?
Taxable persons who fall into one of the following cases are not eligible for the exemption scheme:
- Supply of specific goods: Exclusively or predominantly dispose of buildings or portions thereof, building land or new means of transport.
- Corporate holdings: They participate in partnerships, associations or family businesses or control, directly or indirectly, limited liability companies or joint ventures that engage in economic activities that can be traced back to those carried out by the taxable person.
- Expenses for employees and contractors: In the previous year, they incurred gross expenses of more than €20,000 for employees and contractors, including amounts paid in the form of profits or for other services not attributable to self-employment contracts.
- Transactions with former employers: They execute primarily transactions with employers with whom there are current employment relationships or with whom such relationships have ceased within the last two tax periods. This limit does not apply to individuals who have started a new business after a period of compulsory practice for the practice of arts and professions.
- Income from employment: In the previous year, they received income from employment or assimilated employment exceeding €30,000. If the employment relationship has ended, this threshold is not relevant for eligibility for the exemption scheme.
Causes of Termination of the Scheme
The exemption regime ceases in the following cases:
- Renunciation of the scheme: The taxable person notifies their State of establishment that they no longer wish to use the exemption scheme on Italian territory.
- Loss of eligibility requirements: If the previously listed eligibility requirements are lost, termination of the scheme takes place from the year following the year in which the loss of eligibility occurred.
- Exceeding the turnover in Italy: If the turnover in Italy exceeds €100,000, termination of the scheme occurs in the current year in which the threshold is exceeded. In this case:
- VAT becomes due from the transaction that caused the limit to be exceeded.
- From then on, the taxable person is obliged to identify themself for VAT purposes in Italy and comply with all the required tax obligations.
- Deactivation of the EX identification number: If the EX identification number is deactivated, the exemption scheme ceases from the moment that identification ceases.
Application of the Exemption Scheme in EU Member States for Enterprises Established in Italy
Taxable persons established in Italy may apply the VAT-free regime in other EU member states, provided those countries have adopted the same regime and certain requirements are met.
Conditions for Admission to the Scheme in EU Countries
To access the exemption scheme in another Member State, the taxable person established in Italy must meet the following conditions:
- EU turnover in the previous year: The total annual turnover in the EU, i.e., the total value of supplies of goods and services excluding VAT, must not have exceeded €100,000 in the year preceding the reporting.
- EU turnover in the current year: In the current year period prior to reporting, the annual turnover in the European Union must not have exceeded €100,000.
- Turnover in the State of Exemption: The annual turnover achieved in the territory of the State of Exemption (i.e., the country where the exemption scheme is intended to be applied) must not exceed the limit set by that State for the application of the relief.
- Prior Notice: The taxable person must have notified the Internal Revenue Agency in advance of the intention to use the exemption scheme in the territory of other Member States.
- Tax identification: The taxable person must be identified with an EX identification number exclusively in the territory of the state of establishment, i.e. Italy.
Causes of termination of the Scheme
Termination from the exemption scheme can occur under different circumstances:
- Voluntary withdrawal: if the taxpayer communicates the desire to no longer use the scheme, the exclusion takes effect from the first day of the calendar quarter following the receipt of the communication by the Internal Revenue Service. If the notice is sent in the last month of the quarter, the exclusion takes effect from the first day of the second month of the following quarter.
- Exceeding the national threshold: if the annual turnover exceeds the limit set by the state of exemption or if the state itself revokes the application of the exemption, the scheme ceases as of the date of exclusion communicated by the competent authorities.
- Exceeding the EU threshold: if during the year the total turnover in the European Union exceeds the stipulated limit, the taxable person loses the exemption regime in all exemption states at the exact moment the threshold is exceeded.
Exemption Scheme: Effective Date of Application
The effective date of application of the exemption scheme depends on the state of exemption and the state of establishment of the economic activity.
- EU states with exemption in Italy: for taxable persons established in another member state that identify Italy as an exempt state, the application of the regime starts from the date on which the communication of the EX identification number is received from the state of establishment. If the person already holds an Italian VAT number, it is ceased for the period during which they operate under the exempt regime.
- Activities based in Italy and exemption in other EU states: if the enterprise has Italy as its state of establishment and avails itself of the exemption regime in one or more EU member states, the application of the regime starts from the time when the Internal Revenue Service has communicated the allocation of the EX suffix.
Exemption Scheme: Requirement of Prior Notification to the Internal Revenue Agency
With Provision No. 460166 of December 30th, 2024, the Internal Revenue Service defined the implementation modalities of the new exemption regime, introducing the obligation of prior notification for persons established in the Italian territory.
The report can also be submitted through a tax intermediary as of January 1st, 2025.
Prior Notification Requirement
Taxable persons who intend to make use of the scheme must send a prior notification to the Internal Revenue Agency to obtain an EX identification number. This number will consist of the established person’s VAT number followed by the suffix EX.
The notice should contain the following information:
- Fiscal code
- Denomination, or surname and name
- Legal status
- Tax domicile
- Main activity
- Other activities
- Contact information and website of the business (if any)
- Declaration of non-registration to the scheme under the SME-SS directive in another State of establishment
- List of exemption States, i.e., the member states in which the person intends to make use of the exemption scheme
- Any other VAT identifiers issued by an exemption State.
- Turnover achieved in Italy and other EU States in the previous two calendar years, in addition to the current year period before prior reporting
Approved the communication model on March 28th, 2025
The Internal Revenue Agency, through a Provision dated March 28th, 2025, approved the quarterly reporting template for the cross-border duty-free regime. Instructions and technical specifications for data transmission were also issued.
- Method of sending the communication model: online
- Submission deadline: by the last day of the month following each quarter.
In the event of a delay of more than 30 days or in the event of at least 2 late reports, the Internal Revenue Agency notifies the member States, which may suspend the VAT simplifications granted.
The report must be sent even if there are no transactions in the reporting quarter.
