Clarifications provided on VAT deductions and invoices
The Revenue Office provided clarifications on VAT deductions and recording of purchase invoices.
According to the principles expressed by the EU Court of Justice (Case C-152/01), VAT deductions are subject not only to substantial requirements, i.e. VAT chargeability, but also to formal ones, i.e. the receipt of the purchase invoice. This is the core of the clarification provided in Circular Letter n. 1 of 17 January 2018 in which the Revenue Office clarifies the various doubts concerning VAT deductions further to the news introduced with Law Decree 50/2017and provides detailed operating instructions.
Particularly interesting is the clarification concerning the coordination between the new norms on tax deduction (art. 19 of Presidential Decree 633/72) and the registration of purchase invoices (art. 25 of Presidential Decree 633/72).
The deduction can actually be operated:
- in the FY in which the taxpayer receives and records the invoice it in its accounting system, thus including it in the monthly or quarterly settlement of the reference period, or, at the latest,
- within the terms for filing the VAT return of the FY in which the invoice was received.
In other words, a purchase invoice received in 2018 relevant to the purchase of goods delivered in 2017, can be recorded either in 2018, thus being included in the periodic settlement of the month or quarter in which it was registered, or by 30 April 2019, at the latest.
Significant clarifications have also been provided on further aspects which were unclear.
Pursuant to the provisions included in art. 19 and 26 of Presidential Decree 633/72, credit notes diminishing the original amount should be issued at the latest within the term for filing the VAT return for the year in which the condition justifying the adjustment occurred. By the same date, it will also be possible to deduct the excess tax previously paid.
As regards the split payment, the Revenue Office confirmed that when public administrations and entities subject to this mechanism opt to charge VAT in advance upon receiving or recording the invoice (rather than upon paying it), their right to deduct VAT can be exercised – once their choice is adopted and provided that the relevant invoice has been received - when VAT becomes chargeable.