Proposal for a COUNCIL IMPLEMENTING DECISION authorising the Italian Republic to introduce a special measure derogating from Articles 218 and 232 of Directive 2006/112/EC on the common system of value added tax
Date: 2018-02-05
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Internet, Italy, VAT, derogation from EU law, establishment, information system, invoicing, taxpayer

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   EUROPEAN COMMISSION  Brussels, 5.2.2018  COM(2018) 55 final 2018/0021 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION authorising the Italian Republic to introduce a special measure derogating from Articles 218 and 232 of Directive 2006/112/EC on the common system of value added tax  
 
 
EXPLANATORY MEMORANDUM 

Pursuant to Article 395(1) of Directive 2006/112/EC of 28 November 2006 on the common 
system of value added tax1 (hereafter 'the VAT Directive'), the Council, acting unanimously 
on  a  proposal  from  the  Commission,  may  authorise  any  Member  State  to  apply  special 
measures  for  derogation  from  the  provisions  of  that  Directive  in  order  to  simplify  the 
procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance. 

By  letter  registered  with  the  Commission  on  27  September  2017,  the  Italian  Republic 
requested authorisation to derogate from Articles 218 and 232 of the VAT Directive to be able 
to  impose  mandatory  electronic  invoicing.  In  accordance  with  Article  395(2)  of  the  VAT 
Directive,  the  Commission  informed  the  other  Member  States  by  letter  dated  3  November 
2017  and  Portugal  by  letter  dated  6  November  2017  of  the  request  made  by  the  Italian 
Republic. By letter dated 7 November 2017, the Commission notified the Italian Republic that 
it had all the information necessary to consider the request. 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Italy  submitted  a  request  for  derogation  based  on  Article  395  of  the  VAT  Directive  to  be 
authorised to apply a mandatory electronic invoicing to all taxable persons established in the 
territory  of Italy  except taxable persons benefiting from the exemption for small  enterprises 
and  to  channel  the  invoices  through  the  system  Sistema  de  interscambio  (hereafter  'SdI'–) 
managed by the Italian Revenue Agency.  

Italy submits that the electronic invoicing obligation via the SdI allows the tax administration 
to  acquire  in  real  time  the  information  contained  in  the  invoices  issued  and  received  by 
traders.  As  a  result  tax  authorities  can  carry  out  timely  and  automatic  checks  of  the 
consistency between VAT declared and paid.  

Italy  thus  considers  that  the  introduction  of  a  generalized  electronic  invoicing  obligation 
would  provide  benefits  in  terms  of  combatting  fraud  and  evasion,  as  well  as  in  terms  of 
simplification  of  tax  collection.  According to  Italy,  there  would  be real  benefits  from  better 
tax compliance and from increased timeliness and effectiveness of anti-fraud and anti-evasion 
controls. It would also give a boost to digitization and administrative simplification.  

According to information submitted by Italy, the grounds for mandatory electronic invoicing 
are  prepared  by  the  existing  voluntary  system  and  the  mandatory  electronic  invoicing  for 
supplies  to  public  authorities  thus  ensuring  a  smooth  transition  to  the  obligatory  electronic 
invoicing and limiting the impact of the measure on taxable persons and consumers.  

Since 2014 taxable persons carrying out commercial transactions with the public authorities in 
Italy  (20%  of  taxable  persons)  are  under  mandatory  electronic  invoicing.  All  public 
administration  invoices  are  channelled  through  the  SdI  and  are  forwarded  to  the  general 
accounting office for expenditure control purposes and to public authorities. Also an optional 
system for the electronic transmission of data or for electronic B2B invoicing was introduced 
starting  from  2017.  The  scheme  gives  the  opportunity  to  opt  for  quarterly  electronic 
transmission  of  data  to  the  tax  authorities  on  all  invoices  issued  in  the  reference  quarter. 
Alternatively to this periodic data transmission, the suppliers can send and receive electronic 
invoices through the SdI. As from July 2016, the tax authorities have made available a free 
web application for generating, transmitting and storing electronic invoices. Consequently, a 
number of businesses are already under the obligation to issue electronic invoices while other 

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OJ L 347, 11.12.2006, p. 1. 

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businesses had or will have a chance to get acquainted with it before the introduction of the 
measure.  

Given  the  broad  scope  and  the  novelty  of  the  derogation,  it  is  important  to  ensure  the 
necessary follow-up within the framework of this derogation and in particular the impact of 
the measure on combatting VAT fraud and evasion and on taxable persons. Should Italy wish 
to prolong the derogating measure, it is requested to provide a report on the functioning of the 
measure together with the prolongation request. This report should provide the assessment of 
the  measure  what  concerns  its  effectiveness  in  fighting  VAT  fraud  and  evasion  and  in 
simplifying  tax  collection.  The  report  should  also  include  an  evaluation  of  the  measure  on 
taxable  persons  and  in  particular  what  concerns  the  increase  of  their  administrative  burdens 
and compliance costs.  

It is proposed to authorise the derogation as from 1 July 2018 until 31 December 2021.  

• 

Consistency with existing policy provisions in the policy area 

Article  218  of  the  VAT  Directive  puts  paper  and  electronic  invoices  on  equal  footing  by 
providing that Member States shall accept documents or  messages on paper or in electronic 
form as invoices. Following Article 232 of the VAT Directive the use of an electronic invoice 
shall  be  subject  to  acceptance  by  the  recipient.  The  obligatory  electronic  invoicing  as 
envisaged by Italy would indeed derogate from these two provisions.  

The  derogation  can  be  authorised  based  on  Article  395  of  the  VAT  Directive  in  order  to 
simplify  the  procedure  for  collecting  VAT  or  to  prevent  certain  forms  of  tax  evasion  or 
avoidance. Italy requested the derogating measure to fight tax fraud and evasion as well as to 
simplify  the  tax  collection.  Based  on  the  elements  provided  by  Italy,  the  derogation  is 
consistent with the existing policy provisions.  

The  derogation  for  mandatory  electronic  invoicing  would  be  in  line  with  the  Council 
Recommendation on the 2017 National Reform Programme of Italy2 recommending that 'Italy 
take  action  in  2017  and  2018  to,  inter  alia,  broaden  the  compulsory  use  of  electronic 
invoicing and payments'. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 395 of the VAT Directive.  

• 

Subsidiarity (for non-exclusive competence)  

Considering the provision of the VAT Directive on which the proposal is based, subsidiarity 
principle does not apply.  

• 

Proportionality 

The proposal complies with the proportionality principle for the following reasons.  

The Decision concerns an authorisation granted to a Member State upon its own request and 
does not constitute any obligation.  

The  mandatory  electronic  invoicing  will  entail  a  number  of  changes  for  taxable  persons. 
These changes are however anticipated by Italy and the ground for them is prepared. Taxable 
persons  benefiting  from  the  exemption  for  SMEs  are  excluded  from  the  measure.  The 

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https://ec.europa.eu/info/sites/info/files/2017-european-semester-country-specific-recommendations-
commission-recommendations-italy.pdf 

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derogation is also limited in time and a report on the functioning and the effectiveness of the 
measure is to be prepared eighteen months after its entry into force.  

Therefore, the special measure is proportionate to the aim pursued, i.e. to combat tax evasion 
and simplify tax collection.  

• 

Choice of the instrument 

Proposed instrument: Council Implementing Decision.  

Under  Article  395  of  the  VAT  Directive,  derogation  from  the  common  VAT  rules  is  only 
possible  upon  authorisation  of  the  Council  acting  unanimously  on  a  proposal  from  the 
Commission. A Council Implementing Decision is the most suitable instrument since it can be 
addressed to an individual Member State.  

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Impact assessment 

Italy  requested  an  authorisation  to  introduce  obligatory  electronic  invoicing  for  all  invoices 
issued to  other operators or to  final consumers by taxable persons established on the  Italian 
territory  not  benefiting  from  the  exemption  for  small  enterprises.  Also  simplified  invoices, 
documents  issued  based  on  Article  219  and  invoices  relating  to  exempt  transactions  should 
fall  under  the  mandatory  electronic  invoicing.  Non-established  taxable  persons  may  opt  for 
the transmission of their invoices through the SdI. Taxable persons excluded from mandatory 
electronic invoicing via SdI may also opt for it.  

The  mandatory  electronic  invoicing  will  entail  changes  for  taxable  persons.  The  taxable 
persons would incur additional costs related to the implementation of a new invoicing system 
and operating the new system.  However,  the impact of the measure on  taxable persons was 
anticipated by Italy since the system is already in place on an optional basis since beginning 
2017 and businesses had or will have the opportunity to get acquainted with it. According to 
Italy  e-invoicing  will  bring  effective  results  in  the  fight  against  tax  fraud  due  to  the  greater 
comprehensiveness,  timeliness  and  traceability  of  the  information.  Dispatching  invoices 
through the SdI will indeed provide the Italian Revenue Agency with timely and automated 
access to any invoice information that is relevant for tax purposes. As a result tax authorities 
could  carry  out  timely  and  automatic  checks  on  the  consistency  between  the  VAT  declared 
and the VAT paid. Concretely, Italy submits that currently it takes around 18 months for the 
tax  administration  to  become  aware  of  the  existence  of  a  missing  trader.  The  immediate 
availability  of  electronic  invoices  would  allow  this  interval  to  be  reduced  to  up  to  three 
months thus interrupting the fraudulent chain much quicker.  

4. 

BUDGETARY IMPLICATIONS 

The measure will have no adverse impact on the Union's own resources accruing from VAT. 

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2018/0021 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising the Italian Republic to introduce a special measure derogating from Articles 
218 and 232 of Directive 2006/112/EC on the common system of value added tax 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having  regard  to  Council  Directive  2006/112/EC  of  28  November  2006  on  the  common 
system of value added tax1, and in particular Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

By  letter  registered  with  the  Commission  on  27  September  2017,  Italy  requested  an 
authorisation to derogate from Articles 218 and 232 of Directive 2006/112/EC and to 
introduce  mandatory  electronic  invoicing  to  all  taxable  persons  established  in  the 
territory  of  Italy  except  taxable  persons  benefiting  from  the  exemption  for  small 
enterprises as referred to in Article 282 of Directive 2006/112/EC and to channel the 
invoices through the system Sistema de interscambio (hereafter 'SdI'–) managed by the 
Italian Revenue Agency.  

In  accordance  with  Article  395(2)  of  Directive  2006/112/EC,  the  Commission 
informed  the  other  Member  States  of  the  request  made  by  Italy  by  letters  dated  3 
November  2017  and  6  November  2017.  By  letter  dated  7  November  2017,  the 
Commission  notified  Italy  that  it  had  all  the  information  necessary  to  consider  the 
request. 

Italy  submits  that  the  use  of  mandatory  electronic  invoicing  whereby  invoices  are 
submitted by means of the SdI allows the tax administration in Italy to acquire in real 
time  the  information  contained  in  the  invoices  issued  and  received  by  traders.  As  a 
result tax authorities could carry out timely and automatic consistency checks between 
the amounts of VAT declared and paid.  

Italy  considers  that  the  introduction  of  a  generalised  electronic  invoicing  obligation 
would be advantageous also in terms of combatting fraud and evasion, boosting efforts 
at digitalisation as well as in terms of simplifying tax collection.  

Italy  submits  that  the  groundwork  had  already  been  laid  for  the  introduction  of 
mandatory  electronic  invoicing  on  the  basis  of  the  optional  use  of  the  existing  Sdi 
system,  which  would  ensure  a  smooth  transition  to  electronic  invoicing  and  at  the 
same time limit the impact of the measure on taxable persons.  

Given the broad scope and the novelty of the derogation, it is important to evaluate the 
impact of the measure on combatting VAT fraud and evasion and on taxable persons. 
Therefore, where Italy considers that the prolongation of the measure is necessary, it 

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OJ L 347, 11.12.2006, p. 1. 

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(7) 

(8) 

(9) 

should  submit  to  the  Commission,  together  with  the  prolongation  request,  a  report 
including  the  assessment  of  the  measure  what  concerns  its  effectiveness  in  fighting 
VAT fraud and evasion and in simplifying tax collection. 

This derogation should not affect the right of the customer to receive paper invoices in 
case of intra-Community transactions.  

The derogation requested should be limited in time to allow an assessment of whether 
the special measure is appropriate and effective in light of its objectives. 

The derogating measure is therefore proportionate to the objectives pursued since it is 
limited in time and restricted in application as it does not apply to taxable persons who 
benefit from the exemption for small enterprises referred to in Article 282 of Directive 
2006/112/EC.  In  addition,  the  derogating  measure  does  not  give  rise  to  the  risk  that 
fraud would shift to other sectors or to other Member States. 

(10)  The derogation will not negatively affect the overall amount of tax revenue collected 
at the stage of final consumption and will have no adverse impact on the Union’s own 
resources accruing from VAT,  

HAS ADOPTED THIS DECISION:  

Article 1 

By way of derogation from Article 218 of Directive 2006/112/EC, Italy is authorised to accept 
documents  or  messages  only  in  electronic  format  as  invoices  if  they  are  issued  by  taxable 
persons established in the Italian territory other than those taxable persons who benefit from 
the exemption for small enterprises referred to in Article 282 of Directive 2006/112/EC.  

Article 2 

By  way  of  derogation  from  Article  232  of  Directive  2006/112/EC,  Italy  is  authorised  to 
provide that the use of electronic invoices issued by taxable persons established in the Italian 
territory shall not be subject to an acceptance by the recipient except where those invoices are 
issued by taxable persons who benefit from the exemptions for small enterprises referred to in 
Article 282 of Directive 2006/112/EC. 

Article 3 

Italy shall notify the national measures, referred to in Articles 1 and 2, to the Commission.  

Where Italy considers that the prolongation of the measure, referred to in Articles 1 and 2, is 
necessary,  Italy  shall  submit  to  the  Commission  a  report  assessing  the  effectiveness  of  the 
measure in fighting VAT fraud and evasion and in simplifying tax collection, together with a 
request for prolongation. The report shall also evaluate the impact of the measure on taxable 
persons  and  in  particular  whether  the  measure  increases  their  administrative  burdens  and 
costs. 

This Decision shall apply from 1 July 2018 until 31 December 2021. 

Article 4 

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This Decision is addressed to the Italian Republic. 

Done at Brussels, 

Article 5 

For the Council 
The President 

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