Effective as of 1 January 2019, Italy will introduce mandatory electronic invoicing (e-invoicing) for private businesses.
The obligation applies to all transactions performed between subjects resident or established in Italy, with the sole exceptions of those eligible for a special scheme for small enterprises.
In particular, art. 218 and 232 state that invoices can be issued in paper or electronic format and, subject to acceptance of the recipient, can be sent or made available by electronic means. Regarding this latter condition, Italy specifically asked for a derogation to apply a generalised e-invoicing system, on the grounds it would help combat fraud and tax evasion, thanks to the traceability of all transactions for all taxpayers.
The EU Council granted the authorisation, limited to the period 1 July 2018-31 December 2021, to evaluate its effectiveness in achieving its stated aims.
In Italy, mandatory e-invoicing for suppliers to Public Administrations and their various bodies has been in place since March 2015. This was implemented to execute the requirements of Directive 2014/55/EU on e-invoicing in public procurement, which has to be adopted by all EU Members before the end of November 2018.
Companies have also had the option to use e-invoicing for private business transactions since January 2017.
Mandatory e-invoicing will apply to all suppliers of goods and services made by subjects resident or established in Italy towards subjects resident or established in Italy, irrespective of whether the customer is a taxable subject (B2B), or a private consumer (B2C).
The obligation does not affect transactions involving subjects not resident or established in Italy, even if these subjects are registered for solely for VAT purposes, and when an invoice is not issued, as in the retail or online trade, unless the customer requests it. In such cases, e-invoicing becomes mandatory.
The obligation also applies to invoices to private individuals who are entitled to receive paper invoices, unless they specifically renounce this right.
Rules for issuing e-invoices
Mandatory e-invoicing affects the way in which the invoice is formed, delivered to the recipient and stored, but does not introduce a new VAT regime, retaining rules established by VAT laws applicable for its issuance requirement and timing.
E-invoices must be issued in a prescribed format xml (eXtensive Markup Language), digitally signed to guarantee authenticity of origin and the integrity of the content and be sent to the Exchange System (SDI) by the taxpayer directly or through designated intermediaries.
All taxpayers must be in possession of a registered e-mail box to which invoices can be sent by SDI, or alternatively, a code attributed when registering on the Italian Tax Agency website (recipient code). This reference must be shared with suppliers for use on their e-invoices for that company.
SDI is an electronic system managed by the Tax Agency, which receives invoices, delivers them to recipients and, under certain conditions, takes care of the electronic storage of e-invoicing for a 10-year period.
Thanks to this provision, SDI, and hence the Tax Agency, acquire real time data and information concerning all transactions effected by each taxpayer, which may be used for cross-checks and audit purposes.
Once an invoice is received by SDI, and before it is sent to the recipient, an initial formal check is made, to monitor the validity of the invoice format and content, as well as its compatibility with data already in the hands of tax administration.
Should the invoice contain any errors or invalid data, or if delivery to the recipient proves to be impossible, SDI refuses the document. The supplier then has five calendar days to correct mistakes and resend the invoice, which otherwise is considered omitted and sanctioned.
Implications for Italian businesses
What clearly emerges from the above is that the introduction of mandatory and generalised e-invoicing, which will simplify business transactions and reduce compliance when settled, will have a significant impact on the day-to-day running and organisation of companies.
Beyond having the necessary technological tools and navigating other constraints to using existing information and management systems, companies should be aware of the need to review their incumbent administrative and controlling activities connected to invoicing. Establishing their capabilities and what, if any, changes need to be made should help prevent any major disruption from the move to e-invoicing.
For example, companies should think about their customer databases and make sure that the business is in possession of all the correct and updated information necessary to issue electronic invoices in a way that they are not refused by SDI.
It may also be sensible to revise the architecture of information systems to ensure these are compatible and do not interfere with electronic invoicing.
From an accounts payable perspective, it might be that paper documents are used to get approval on expenses or other validated documents by different company functions, but e-invoices necessarily require a more efficient paperless tool.
Depending on the size of the company as well as the availability of human and financial resources, the implementation of e-invoicing may be more or less time consuming, and more or less accurate.
What is certain is that this legal change in business practice needs to be addressed by individual companies to avoid their invoicing systems becoming out of step with their peers and with Italian tax law and liable to incur penalties after 1 January 2019.
 To send e-invoices, the taxpayer can alternatively use an electronic registered mail, an application made available by the Tax Administration or download documents from the relevant section of the Tax Agency website.
 VAT code, company name and address.
 Such as an incorrect or expired VAT ID number of the sender or the recipient; lack of VAT charge when no exemption details are cited; or computation mistakes.
 When the recipient's registered email box is full.