Electronic invoicing: updates and tips
Electronic invoicing was introduced in the 2018 Italian Budget and became law in July of that year. Its most important feature is the obligation, even for private individuals, that invoices must be issued in a digital format.
This obligation regards all invoices which can be considered Business to Business (B2B), issued between companies and private individuals, including freelancers and artisans (although those in the ‘advantageous taxation scheme’ and businesses with very low incomes are exempt).
How electronic invoicing works
Issuing an electronic invoice is relatively simple, thanks to the numerous free services provided by the Agenzia delle Entrate (Italian Inland Revenue Agency). All the business person needs to do is prepare the invoice in XML format (eXtensible Markup Language), using the purpose-built software downloadable for free from the Agency’s website.
The invoice file prepared as above must then be filled in and sent to the Sistema di Interscambio (Exchange system) within 12 days of the commercial transaction; all this can be done using the software available from the Agency as mentioned above.
It is important to take great care when filling in the field ‘Codice Destinatario’ (Recipient Code), which identifies the recipient or addressee of the invoice. It is through this identification code that the SdI (Exchange system) will then send the document to the client.
As well as by web services, the document can also be transmitted by FTP transfer, which is ideal for anyone wishing to transfer several longer invoices at the same time) or by using PEC (certified email). In the latter case, the field ‘PEC recipient’ should be filled in instead of the ‘recipient code’.
Many business managers seem pleased to sign up for the Exchange System, which simplifies the issuing of electronic invoices considerably. Registration is completely free and means they can omit the completion of those fields reserved for the recipient, since the SdI sends out the invoice automatically according to the recipient’s VAT code.
Among the various services it provides, the SdI also offers the option to consult all invoices sent or received up until December 31st of the year successive to the receipt of the file. Thanks to a service agreement which can be requested directly from the Inland Revenue Agency, free storage of these invoices is also guaranteed.
Some news about electronic invoicing
July 1st 2019 marked the end of the ‘grace period’ set by the Italian Government for businesses to get up to speed with the new method of digital invoicing. On that date some amendments to the original legislation were added as follows.
The first change regards the terms for sending electronic invoices to the SdI. Originally, the time limit for this was set at 10 days from the commercial transaction, whereas the updated legislation extends this to 12 days.
Another important change regards business managers who exceed 400 thousand Euros per year being obliged to issue digital receipts. The purpose of this legislation is to facilitate the detailed monitoring of cash flows, so as to combat tax evasion more efficiently.
Electronic invoicing of foreign clients
The introduction of the obligatory issue of electronic invoices refers to subjects with an Italian VAT code who are domiciled or permanently resident in Italy and only involves those transactions between companies and private individuals which take place within Italian borders.
In the case of commercial dealings with foreign countries (whether inside or outside the EU), there is no legal obligation to issue an electronic invoice (due to the fact there would be no valid recipient code). Business managers therefore have two options:
- Issue an electronic invoice to the SdI, specifying a conventional recipient code and then issue a traditional invoice to the foreign client;
- Each month, send the details of all invoices issued or received to the Inland Revenue Agency by traditional methods.
Translated by Joanne Beckwith