Fines provided for operations subject to reverse charge

The Italian Revenue Office (with circular letter no. 16/E dated 11 May 2017) provided some clarifications on fines provided in case of an incorrect application of the reverse charge method. This is the first clarification on the changes introduced to art. 6 of Legislative Decree no. 471 dated 18 December 1997, come into force on 1 January 2016, helping taxpayers having a better understanding of the matter and solving some problems related to its interpretation.

Recurring doubts concern the nature of the violations related to those operations to which the reverse charge method is not correctly applied – even if there is no damage to the inland revenue (nor a tax evasion intention).

Art. 15 of Legislative Decree dated 24 September 2015 no. 158 reformulated para. 9-bis of art. 6 of Legislative Decree dated 18 December 1997, no. 471, adding three new paragraphs, i.e. 9-bis.1, 9-bis.2, and 9-bis.3, in order to introduce more consistent provisions on the fines applicable to operations subject to reverse charge and to reduce fines for those operations which do not imply an actual non-payment of VAT.

Circular letter no. 16/E/2017 clarifies that, in order to resolve some interpretation uncertainties, introduced paragraphs 9-bis.1 and 9-bis.2 specify the notion of “irregular compliance” with VAT fulfilments, establishing a reduction in fines in those cases which do not imply a damage to the inland revenue.

For this purpose, the two abovementioned paragraphs explain two opposite specific cases, i.e.: the first one, in which the operation should be subject to the reverse charge method, but VAT is paid through ordinary method; the second one, in which the operation should be subject to ordinary VAT, but the reverse charge is applied. Circular letter no. 16/E/2017 also underlines that the current regulation meets the requirements related to the right for taxpayers to detract VAT; otherwise, this would have determined a breach of the tax neutrality principle.

For further information, you can contact Mario Spera.