UK-based companies claiming VAT refunds from Italy as a country of refund
On 31 December 2020 the United Kingdom left the European Union and became a third country for EU VAT purposes.
In terms of Foreign VAT Recovery there was a significant impact – businesses based in the United Kingdom who incur VAT on business use expenses in the European Union, should in general, comply with the requirements and procedure of the Thirteenth Directive (Council Directive 86/560/EEC of 17 November 1986) in order to recover that VAT.
Some of the EU member states allow 13th directive VAT refunds only to claimants from countries that offer reciprocal treatment. Most of these EU member states have recognised that reciprocity conditions are fulfilled by the United Kingdom.
However there are a couple of exceptions where a reciprocity agreement is expected to be concluded and reciprocity for the Thirteen Directive purposes recognised, but this has not been completed yet – almost 3 years after Brexit.
Italy as Country of Refund would be one of these.
According to a recent update from the Italian tax authorities – the negotiations between Italy and the United Kingdom have been underway so the UK companies may avail of the simplified VAT recovery procedure as per Art. 38 ter (1) of the Italian VAT Law ((D.P.R. 633/72 ).
However no confirmation has yet been given in this regard, neither on the expected timelines nor on any modalities.
So to date the list of the countries to which reciprocity has been officially recognised by Italy, only comprises three countries: Israel, Norway and Switzerland .
Considering the above, until a reciprocity agreement is completed between Italy and the United Kingdom, UK companies may request a VAT refund only pursuant to art. 35 ter of the Italian VAT Law – via prior direct identification (VAT Registration) in Italy and must comply with the respective obligations and formalities – filing VAT returns, fulfilling requirements to obtain a refund (in some cases bank guarantee may be required).
Taxback International can assist with the VAT registration and compliance procedures in Italy to enable UK businesses to recover their foreign Italian VAT.
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