Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision (EU) 2018/593 as regards the duration and scope of the derogation from Articles 218 and 232 of Directive 2006/112/EC
Date: 2021-11-05
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Italy, VAT, derogation from EU law, e-invoicing, establishment, small business, tax exemption, taxpayer

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   EUROPEAN COMMISSION  Brussels, 5.11.2021  COM(2021) 681 final 2021/0357 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision (EU) 2018/593 as regards the duration and scope of the derogation from Articles 218 and 232 of Directive 2006/112/EC  
 
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 31 March 2021, the Italian Republic requested 
authorisation to continue to derogate from Articles 218 and 232 of the VAT Directive to be 
able to continue imposing mandatory electronic invoicing. The present derogation expires on 
31 December 2021. Further, the request asked for an extension of the scope of the derogating 
measure  in  force,  granted  by  Council  Implementing  Decision  (EU)  2018/5932,  to  include 
taxable persons who benefit from the exemption for small enterprises referred to in Article 
282  of  the  VAT  Directive.  In  accordance  with  Article  395(2)  of  the  VAT  Directive,  the 
Commission  informed  the  other  Member  States  by  letter  dated  10  September  2021  of  the 
request  made  by  the  Italian  Republic.  By  letter  dated  13  September  2021  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 

Following  Implementing  Decision  (EU)  2018/593,  the  Italian  Republic  introduced  a 
generalised system of mandatory electronic invoicing, Sistema di Interscambio (SdI), also in 
accordance with the Council Recommendation of 11 July 2017 on the 2017 National Reform 
Programme  of  Italy  and  delivering  a  Council  opinion  on  the  2017  Stability  Programme  of 
Italy3. 

Italy  submits  that  the  measure,  aimed  to  combat  tax  fraud  and  evasion,  to  simplify  tax 
compliance,  to  make  tax  collection  more  efficient  and  to  modernise  Italian  production, 
thereby reducing administrative costs for businesses, has fully achieved its objectives. 

Regarding the fight against VAT fraud and evasion, the measure has enhanced the capabilities 
of the tax administration, reducing the time necessary to detect and react against  VAT fraud 
and evasion and improving the possibilities for risk analysis. Further, the measure has proved 
effective  as  a  preventive  measure,  as  it  has  deterred  evasive  and  fraudulent  taxpayer 
behaviours.  

Even though it is not possible to quantify exactly how much recovery is directly attributable 
to  the  implementation  of  mandatory  e-invoicing,  Italy  has  provided  some  estimates. 
According  to  those  estimates,  around  EUR 2 billion  could  be  directly  attributed  to  the 
improvement in VAT compliance following the introduction of the measure in question, while 
around  EUR 580 million  of  additional  revenue  in  the  collection  of  direct  taxes  could 
indirectly  be  attributed  to  the  measure.  Regarding  control  and  enforcement,  the  action  to 
identify  and  stop  false  VAT  credits  allowed  the  recovery  of  EUR 945 million  in  2019. 
Furthermore, the use of electronic invoicing data for the whole of 2019 has also been essential 
in  identifying  taxable  persons  not  meeting  the  requirements  for  the  status  of  ‘esportatore 
abituale’  (over  EUR 1.3 billion  in  false  ceilings  declared).  Other  processes  are  currently 
ongoing based on the cross-checking of electronic invoicing data with cross-border anti-fraud 
information  sources  (including  the  European  anti-fraud  network  EUROFISC).  It  has  also 

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3 

OJ L 347, 11.12.2006, p. 1. 
OJ L 99, 19.4.2018, p. 14. 
OJ C 261, 9.8.2017, p. 46. 

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made possible to identify companies involved in intra-Community fraud mechanisms carried 
out  between  the  last  months  of  2019  and  2020,  based  on  invoicing  flows  for  non-existent 
transactions amounting to around EUR 1 billion. 

Regarding the simplification of tax compliance, the implementation of mandatory e-invoicing 
has  allowed  the  tax  authority  to  make  available  for  taxpayers  pre-filled  purchase  and  sales 
records,  the  scheduling  of  the  periodic  VAT  settlement,  pre-filled  annual  VAT  returns  and 
pre-filled payment forms including the taxes to be paid, offset or claimed for refund (where 
priority is given to those using e-invoicing). E-invoicing has allowed to eliminate a number of 
obligations,  such  as  the  reporting  of  invoice  data  on  domestic  transactions,  the  filing  of 
Intrastat declarations on purchases, the obligation to provide details of contracts entered into 
by  leasing,  rental  and  hire  companies  and  the  obligation  to  report  transactions  involving 
supplies of goods from the Republic of San Marino to Italy. 

According to Italy, the implementation of mandatory e-invoicing has provided other benefits, 
as it has simplified the invoicing process, both for issuers and recipients, and has allowed the 
development of related services which make possible to monitor business performance in real 
time, including, for example, cash flow management. Further, in the context of the COVID-19 
pandemic,  the  data  from  mandatory  electronic  invoicing  has  proved  to  be  of  great  help  in 
analysing  the  changes  in  the  economy  associated  with  the  health  crisis  and  in  putting  into 
place the most appropriate support measures. 

The Implementing Decision (EU) 2018/593 applies until 31 December 2021, and this is why 
Italy has requested to continue to derogate from Articles 218 and 232 of the VAT Directive to 
be able to continue imposing mandatory electronic invoicing. 

Moreover,  the  request  also  asks  for  the  extension  of  the  scope  of  the  measure  for  taxable 
persons who benefit from the exemption for small enterprises referred to in Article 282 of the 
VAT Directive.  Italy considers that this extension will enhance the fight against VAT fraud 
and evasion, as it will provide the tax authorities with a complete picture of the transactions 
carried out by all taxpayers. Further, tax authorities will be able to monitor that the turnover 
of  the  taxable  persons  benefitting  from  the  abovementioned  exemption  remains  under  the 
threshold, allowing them to  combat evasion connected to the access and permanence in this 
regime  of  taxpayers  who  violate,  in  substantial  terms,  the  conditions  and  requirements 
established by law. 

According  to  Italy,  the  required  extension  of  the  scope  of  the  measure  should  not  entail  a 
significant administrative burden for these taxable persons. More than 10% of the taxpayers 
benefiting  from  the  exemption  for  small  enterprises  referred  to  in  Article  282  of  the  VAT 
Directive are already issuing their invoices through the SdI. Furthermore, the Italian Revenue 
Agency has made available to all VAT operators, free of charge, various solutions to prepare 
and transfer electronic invoices. These include a software package that can be installed on a 
computer, which can be used to prepare the electronic invoicing files even in the absence of 
an internet connection and to transfer such files by simply uploading them, and an application 
which  can  be  installed  on  any  mobile  device  to  prepare  and  transfer  electronic  invoices. 
Moreover,  the  Italian  Revenue  Agency  has  also  made  available,  free  of  charge,  a  digital 
storage  service,  which  makes  it  possible  to  archive  the  invoicing  files  while  ensuring 
compliance with the requirements of authenticity, integrity and readability of the files for 15 
years. 

SMEs would benefit from the elimination of the costs of printing and archiving invoices, the 
reduction of the risk of making mistakes in preparing invoices, and the access to a number of 
online services, provided by the Italian Revenue Agency, which allow taxpayers to exploit the 
invoicing data for the purposes of analysing the performance of their business. 

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Given the broad scope of the derogation and its extension to taxable persons benefitting from 
the  exemption  for  small  enterprises  referred  to  in  Article  282  of  the  VAT  Directive,  it  is 
important  to  ensure  the  necessary  follow-up  of  this  measure  and  in  particular  its  impact  on 
combatting VAT fraud and evasion  and on taxable persons, with special attention to  SMEs. 
Should  Italy  wish  to  prolong  the  derogating  measure,  a  report  on  the  functioning  of  the 
measure  should  be  provided  together  with  the  prolongation  request.  This  report  should 
provide the assessment of the measure concerning 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,  in  particular  SMEs,  explaining  in  detail  what  concerns  the 
increase of their administrative burdens and compliance costs.  

It is proposed to prolong the authorisation until 31 December 2024. 

• 

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 
implemented by Italy indeed derogates 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. Given that, based on the elements provided by  Italy, the derogating measure has 
contributed to  both  fight tax fraud and evasion  as  well as to  simplify the tax collection, the 
derogation is consistent with the existing policy provisions.  

The  derogation  for  mandatory  electronic  invoicing  is  also  in  line  with  the  Council 
Recommendation4 on the 2017 National Reform Programme of Italy recommending that 'Italy 
take  action  in  2017  and  2018  to,  inter  alia,  broaden  the  compulsory  use  of  electronic 
invoicing and payments'. 

Finally,  the  Commission  adopted  in  2020  the  “Communication  from  the  Commission  to  the 
European Parliament and the Council: an Action Plan for fair and simple taxation supporting 
the recovery strategy”5. One of the actions envisaged in this action plan is the presentation by 
the  Commission  of  a  legislative  proposal  for  modernising  VAT  reporting  obligations.  The 
need to further expand e-invoicing will be examined in this context. Therefore, the derogating 
measure is aligned with the objectives pursued by the Commission’s action plan. One of the 
aims  of  the  future  Commission’s  proposal  will  be  to  streamline  the  existing  and  future 
reporting  mechanisms  for  domestic  transactions,  including  the  one  authorised  by  this 
derogating measure. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 395 of the VAT Directive. 

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OJ C 261, 9.8.2017, p. 46. 
https://ec.europa.eu/taxation_customs/system/files/2020-07/2020_tax_package_tax_action_plan_en.pdf  

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

The  implementation  of  mandatory  electronic  invoicing  has  taken  place  smoothly,  without 
raising  any  particular  problems.  According  to  the  information  submitted  by  Italy,  it  has 
contributed  to  achieve  the  objectives  pursued  regarding  the  fight  against  VAT  fraud  and 
evasion, while simplifying tax collection.  

The  request  submitted  by  Italy  asks  for  the  extension  of  the  scope  to  taxable  persons 
benefitting from the exemption for SMEs. Italy has put in place several measures to help the 
adaptation  of  these  taxable  persons  to  mandatory  e-invoicing.  The  Italian  Revenue  Agency 
has  made  available,  free  of  charge,  different  solutions,  such  as  a  software  package  for 
installation  on  computers  or  an  application  for  mobile  devices,  which  allow  taxpayers  to 
easily prepare and transfer electronic invoices. These measures will alleviate these companies 
from their current costs of issuing and processing invoices, such as printing or archiving costs, 
while reducing the possibilities of mistakes.  

Furthermore, the mandatory electronic invoicing has allowed the Italian Revenue Agency to 
offer  different  online  services  to  taxpayers.  It  should  be  noted  that  more  than  10%  of  the 
taxable  persons  benefitting  from  the  exemption  for  SMEs  have  already  opted  for  issuing  e-
invoices voluntarily. In addition, several reporting obligations could be eliminated due to the 
implementation of mandatory electronic invoicing. 

Further, the requested extension of the scope of the measure would enhance the fight against 
VAT  fraud  and  evasion,  as  the  Italian  tax  authorities  would  have  a  complete  picture  of  the 
invoices issued by all taxable persons. It will also allow them to detect taxpayers who violate, 
in  substantial  terms,  the  conditions  and  requirements  required  by  law  to  apply  the  said 
exemption for SMEs. 

The derogation is also limited in time and a report on the functioning and the effectiveness of 
the measure, in particular on the impact on SMEs, is to be submitted with the request in case 
Italy wishes to prolong the derogating measure.  

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. 

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3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Impact assessment 

Italy  requested  an  authorisation  to  continue  applying  obligatory  electronic  invoicing  for  all 
invoices issued to other operators or to final consumers by taxable persons established on the 
Italian  territory,  extending  the  scope  of  the  measure  to  taxable  persons  benefiting  from  the 
exemption for small enterprises. Also simplified invoices, documents issued based on Article 
219 of the VAT Directive 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  have  already  adapted  their  systems  to  comply  with  the  requirements  of 
mandatory electronic invoicing. The non-extension of the authorisation would imply that the 
costs incurred for such adaptation would be sunk costs for taxable persons, while they would 
probably have to incur additional costs related to the adaptation to a new reporting system that 
could be implemented to replace mandatory e-invoicing. 

According to Italy, e-invoicing has brought effective results in the fight against tax fraud due 
to the greater comprehensiveness, timeliness and traceability of the information. The measure 
has  also  had  a  preventive  measure,  as  a  deterrent  to  evasive  and  fraudulent  taxpayer 
behaviour.  Dispatching  invoices  through  the  SdI  has  provided  the  Italian  Revenue  Agency 
with timely and automated access to any invoice information that is relevant for tax purposes. 
The  extension  of  the  measure  to  taxable  persons  benefitting  from  the  exemption  for  SMEs 
will  boost  this  possibility.  As  a  result,  tax  authorities  can  carry  out  timely  and  automatic 
checks on the consistency between the VAT declared and the VAT paid.  

According  to  the  estimates  provided  by  Italy,  the  implementation  of  mandatory  e-invoicing 
has improved VAT compliance in around EUR 2 billion. It has also allowed to obtain another 
EUR 580 million  indirectly  due  to  additional  revenue  obtained  from  the  collection  of  direct 
taxes.  Another  EUR 945 million  were  recovered  in  2019  due  to  actions  to  identify  and  stop 
false VAT credits. The use of electronic invoicing data for the whole of 2019 has also been 
essential  for  identifying  taxable  persons  not  meeting  the  requirements  for  the  status  of 
‘esportatore  abituale’  (over  EUR 1.3 billion  in  false  ceilings  declared).  Finally,  the 
information  obtained  has  allowed  the  identification  of  companies  involved  in  intra-
Community fraud mechanisms carried out between the last months of 2019 and 2020, based 
on invoicing flows for non-existent transactions amounting to around EUR 1 billion. 

The extension of the scope of the measure to taxable persons benefitting from the exemption 
for SMEs is accompanied by mitigating measures, such as the availability, free of charge, of 
different solutions to prepare and transfer electronic invoices, such as a software package for 
installation  on  computers  or  an  application  for  mobile  devices.  Furthermore, 
the 
implementation of e-invoicing is accompanied by the suppression of other requirements and 
the  provision  of  additional  services  to  taxable  persons.  As  previously  mentioned,  the 
extension of the scope of the measure to taxable persons benefitting from the exemption for 
SMEs  would  provide  the  Italian  Revenue  Agency  with  a  complete  picture  of  the  invoices 
issued by all taxable persons, helping them in the fight against VAT fraud and evasion.  

4. 

BUDGETARY IMPLICATIONS 

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

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2021/0357 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Implementing Decision (EU) 2018/593 as regards the duration and scope of 
the derogation from Articles 218 and 232 of Directive 2006/112/EC 

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 valued added tax1, and in particular Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

By Council Implementing Decision (EU) 2018/5932, Italy was authorised to introduce 
a  measure  derogating  from  Articles  218  and  232  of  Directive  2006/112/EC  (‘the 
special measure’) in order to implement mandatory electronic invoicing for all taxable 
persons established in the territory of Italy, except for taxable persons benefiting from 
the exemption for small enterprises referred to in Article 282 of that Directive.  

By  letter  registered  with  the  Commission  on  31 March  2021,  Italy  requested 
authorisation  to  continue  to  derogate  from  Articles  218  and  232  of  Directive 
invoicing. 
2006/112/EC 
Furthermore,  Italy  asked  in  the  request  for  permission  to  extend  the  scope  of  the 
special measure to cover also taxable persons benefiting from the exemption for small 
enterprises referred to in Article 282 of that Directive. 

to  continue  applying  mandatory  electronic 

in  order 

The Commission  informed the other Member States of the request  made by  Italy by 
letters dated 10 September 2021. By letter dated 13 September 2021, the Commission 
notified Italy that it had all the information necessary to consider the request. 

Italy  submits  that  the  implemented  mandatory  electronic  invoicing  system,  which  
channels all issued invoices through the ‘Sistema di Interscambio’ (‘the SdI’) managed 
by the Italian Revenue Agency, has fully achieved its objectives, namely to combat tax 
fraud  and  evasion,  to  simplify  tax  compliance  and  to  make  tax  collection  more 
efficient, thereby reducing administrative costs for businesses. 

Italy  considers  that  the  extension  of  the  scope  of  the  special  measure  to  cover  also 
taxable  persons  benefiting  from  the  exemption  for  small  enterprises  referred  to  in 
Article  282  of  Directive  2006/112/EC,  would  enhance  the  possibilities  of  the  Italian 
Revenue  Agency  to  fight  value  added  tax  (VAT)  fraud  and  evasion,  by  providing  a 
complete picture of the invoices issued by all taxable persons. Furthermore, it would 
allow the Italian Revenue Agency to monitor that these taxable persons comply with 
the requirements and conditions for benefiting of the said exemption. 

1 
2 

OJ L 347, 11.12.2006, p. 1. 
OJ L 99, 19.4.2018, p. 14. 

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(6) 

(7) 

(8) 

Italy argues that the requested extension of the scope of the special measure will not 
imply  substantial  costs  to  taxable  persons  benefiting  from  the  exemption  for  small 
enterprises  referred  to  in  Article  282  of  Directive  2006/112/EC.  To  mitigate  these 
costs,  Italy  has  made  available,  free  of  charge,  different  solutions  to  prepare  and 
transfer electronic invoices, such as a software package for installation on  computers 
and an application for mobile devices. Furthermore, the implementation of electronic 
invoicing  is  accompanied  by  the  suppression  of  other  requirements,  such  as  the 
reporting of invoice data on domestic transactions, the filing of  Intrastat  declarations 
on purchases or the obligation to provide details of contracts entered into by leasing, 
rental and hire companies.  It  has  also  allowed the provision  of additional services to 
taxable  persons,  such  as  pre-filled  purchase  and  sales  records,  the  scheduling  of  the 
periodic VAT settlement, pre-filled annual VAT returns and pre-filled payment forms 
including the taxes to be paid, offset or claimed for refund, where priority is given to 
those  using  e-invoicing.  These  measures  should  assure  the  proportionality  of  the 
special measure. 

The  special  measure  should  be  limited  in  time  to  monitor  its  impact  on  combatting 
VAT fraud and evasion and on taxable persons, in particular on those benefiting from 
the  exemption  for  small  enterprises  referred  to  in  Article  282  of  Directive 
2006/112/EC. 

If  Italy  considers  that  the  extension  of  the  special  measure  is  necessary,  it  should 
submit to the Commission, together with the request for extension, a report including 
the  assessment  of  the  special  measure  concerning  its  effectiveness  in  fighting  VAT 
fraud and evasion and in simplifying tax collection. This report will also evaluate the 
impact  of  the  measure  on  taxable  persons,  in  particular  those  benefiting  from  the 
exemption for small enterprises referred to in Article 282 of Directive 2006/112/EC. 

(9) 

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

(10)  The  derogating  measure  will  have  no  adverse  impact  on  the  Union's  own  resources 

accruing from VAT. 

(11) 

Implementing Decision (EU) 2018/593 should therefore be amended accordingly, 

HAS ADOPTED THIS DECISION:  

Article 1 

Implementing Decision (EU) 2018/593 is amended as follows: 

(1) Article 1 is replaced by the following: 

'Article 1 

By way of derogation from Article 218 of Directive 2006/112/EC, Italy is authorised only 
to accept invoices in the form of documents or messages in electronic format if they are 
issued by taxable persons established in the Italian territory.’; 

(2) Article 2 is replaced by the following: 

'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.’; 

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(3) Article 4 is replaced by the following: 

This Decision shall apply until 31 December 2024. 

'Article 4 

Where Italy considers that the extension of the derogations referred to in Articles 1 and 2 
is necessary, Italy shall submit a request for extension to the Commission, together with a 
report  assessing  the  extent  to  which  the  national  measures  referred  to  in  Article  3  have 
been  effective  in  combatting  VAT  fraud  and  evasion  and  in  simplifying  tax  collection. 
That  report  shall  also  evaluate  the  impact  of  those  measures  on  taxable  persons,  in 
particular those who benefit from the exemption for small enterprises referred to in Article 
282  of  Directive  2006/112/EC,  and  in  particular  whether  those  measures  increases  their 
administrative burdens and costs.’ 

This Decision is addressed to the Italian Republic. 

Done at Brussels, 

Article 2 

For the Council 
The President 

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