VAT registration in Italy for non-established entities: Why opt for direct registration?

Appointing a tax representative in Italy requires the signing of a mandate agreement with a resident individual or company that can take charge of all the formalities and obligations required by Italian VAT legislation. The appointment of a tax representative can be expensive because the tax representative is subject to joint liability with the non-established entity for the obligations arising from VAT legislation. This entails additional costs which, to some extent, are passed on via the fees the non-resident entity is required to pay to the tax representative in Italy.

Recently non-established entities operating in Italy for VAT purposes (with a tax representative) but which do not belong to the European Union (EU) or the European Economic Area (EEA) were required to provide a guarantee of EUR 50,000 for 36 months to be included or to remain registered on the EU VAT Information Exchange System (EU VIES) database.

It is important to remember that all obligations and formalities are delegated to the tax representative, and therefore the relationship with the Italian Revenue Agency is managed entirely by the tax representative. 

Should the non-resident entity have difficulties dealing with the appointed tax representative and need to revoke the representative’s appointment, the entity will find itself having to establish direct relations with the Italian Revenue Agency without having full control over what has been done on its behalf by the tax representative.

This aspect is significant because, given the way in which the VAT activities of non-resident entities are regulated in Italy, a substantial VAT credit may arise, the refund of which then proves very difficult.

However, Italian VAT legislation does allow non-established entities to register directly with the Italian Revenue Agency in order to obtain an Italian VAT number. This option, which appears simpler and less burdensome, is, however, reserved for entities established in European Union countries or in countries that have a specific agreement with Italy for this purpose. 

The countries that currently have such an agreement with Italy are Norway and the UK. At the moment, entities established in other important economic partner countries (such as the US or Switzerland) cannot register directly with the Italian Revenue Agency, but must appoint a tax representative in Italy to fulfil their VAT obligations.

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Sergio Finulli specialises in tax and corporate law. He has built up considerable experience in assisting Italian and foreign clients with the setting up of a multidisciplinary approach to the management of their operations, for which purpose he works with lawyers and professionals specialising in other areas.