- Regulatory Reform and Reverse Charge Mechanism: The 2025 Budget Law (Law No. 207) reformulates VAT regulations to extend the reverse charge mechanism to service provisions involving procurement, subcontracting, or labor-intensive contracts provided to companies in logistics, transport, and cargo handling sectors, while excluding public administrations and employment agencies.
- Limited Scope and European Council Authorization: The reform narrows the previous broader application of the reverse charge, responding to a negative opinion from the European Commission about Italy’s previous proposal. The new regulation awaits approval from the European Council for a derogating measure under Article 395 of Directive 2006/112/EC.
- Transitional Regime and Penalties: A transitional regime allows providers and clients to opt for VAT payment by the client on behalf of the provider, with joint responsibility for compliance. Penalties for non-compliance include fines for both clients and providers, especially if VAT evasion or fraud is proven, highlighting the need for careful documentation and reporting in the new framework.
Source PwC
