Italy: E-Commerce: Exemption From Certification Of Income

Last Updated: 25 September 2017
Article by Cristina Knupfer

E-commerce: exemption from certification of income (Italian Decree October 27, 2015) and summary of the new territoriality rules in force since 2015

PREMISE

The Italian Ministerial Decree of October 27, 2015 (implementing section 7, second paragraph, of the Italian legislative decree 42/2015) has provided for the exemption to certify income for those who make online business transactions directed to individual consumers. This newsletter also summarizes the territoriality rules in force since January 1, 2015 concerning transactions relating to direct electronic commerce.

INDEX

  1. Definitions
  2. The exemption from certification of income in e-commerce
  3. Territoriality rules in force since January 1, 2015 for direct electronic commerce
  4. Conclusions

1. Definitions

Firstly, it is important to define the scope of the changes introduced by the Decree under review by introducing a general definition of e-commerce.

Electronic commerce or e-commerce consists in a business activity conducted electronically and aimed at entering into commercial transactions of goods and services. In e-commerce, the purchaser generally examines the goods or services through an online catalogue made available by the vendors within their own website or portal and proceed directly to order the product through the Internet. Payment may be made electronically by credit card or electronic payment systems (such as PayPal and similar), or through bank transfer or cash on delivery, according to the terms of sale and the type of purchases.

Briefly, electronic commerce can be defined as any business activity characterised by commercial transactions made electronically, which consist in:

  • commercialization of goods and services;
  • online distribution of products in digital format.

E-commerce can be classified into two distinct types: direct e-commerce and indirect ecommerce. The latter consists in any transaction in which the execution of the sales contract occurs online but the delivery of the goods occurs by traditional methods, i.e. the goods are delivered mostly by courier (for example, in the event of a sale of clothes). On the opposite, in direct e-commerce, both the actual transaction and the delivery of goods take place online (for example, in the event of a sale of software by downloading).

2. The exemption from certification of income in e-commerce

Following the publication in the Official Gazette on November 11, 2015 of the Italian Decree of October 27, 2015, for direct electronic commerce, the exemption from the certification of income for all online e-commerce transactions towards the final consumer (B2C) has entered into force, unless the customer expressly requests the invoice.

In terms of invoicing, it is worth noting that, with effect from May 3, 2015 (as a result of the amendment to Section 22 of the Italian Presidential Decree 633/72 introduced by Section 1, paragraph 1, letter (c) of the Italian Legislative Decree of March 31, 2015, n. 42, issued in implementation of Directive 2008/8/EC) invoicing is not compulsory anymore with reference to telecommunications services, broadcasting services and electronic services provided to remote clients entering into the transaction outside their business, art or profession, unless the customer requests the invoice before the transaction is completed.

The remote services rendered to individuals included in the new provision, are expressly identified in an indicative but not exhaustive annex to the Directive 2006/112/EC and are the following:

  1. website supply and web-hosting services, remote management of programs and equipment;
  2. supply of software and related updates;
  3. supply of images, text and information, and provision of databases;
  4. music, films and games supply, including gambling games, and political, cultural, artistic, sporting, scientific entertainment or programs;
  5. supply of distance teaching services.

In relation to indirect e-commerce, it should be noted that, by virtue of the assimilation of ecommerce to mail order, pursuant to Section 22, paragraph 1, of the Italian Presidential Decree n. 633/1972 and Section 2, paragraph 1, letter o) of the Italian Presidential Decree n. 696/1996, the sellers do not have any tax certification obligation, subject to the requirement to register the income pursuant to Section 24 of the Italian Presidential Decree n. 633/1972.

Today, therefore, as a consequence of the enactment of the Decree, the same requirement is prescribed for both direct and indirect e-commerce B2C transactions, that is, the exemption from the obligation to certify the related income.

On the other hand, no changes have been introduced as regards to online transactions between businesses (B2B), which shall comply with the ordinary rules on certification.

3. Territoriality rules in force since January 1st, 2015 for direct electronic commerce

Section 5 of the Directive n. 2008/8/EC (in effect since January 1st, 2015) has introduced significant amendments relating to the place of supply for direct e-commerce, whereby the goods and services purchased are made available to the customer in digital form and via an electronic network. These amendments imply the assimilation of "B2B" relations to "B2C" relations, therefore such transactions will be subject to VAT in the country of the customer (whether subject to VAT or not) regardless of the place where the supplier is deemed to be established (EU country or non-EU). With regard to the classification under VAT, it should be noted that these transactions are assimilated to the provision of services and not to the supply of goods.

However, it should be noted that, in order to ensure the taxation at the place of actual use of the service, Member States shall be granted a power of exemption (on the one hand, so as to exclude from taxation the services provided outside the EU, even if territorially significant, and on the other hand, so as to tax extraterritorial services if provided within Member States). From a procedural point of view, the rules for the application of VAT are, however, differentiated according to the status of the customer (whether subject to VAT or not), in that:

  • in "B2B" transactions, the tax is applied by the customer with the reverse charge mechanism;
  • in "B2C" transactions, however, the tax is applied directly by the supplier (EU or non-EU):
    1. subject to VAT identification in the EU country of the customer; or
    2. making use of the special regime "mini one-stop shop" (MOSS), already in place for ecommerce services provided by non-EU citizens, now extended to the services provided within the European Community.

Considering that services provided by electronic means must be considered "generic" when offered to individuals subject to VAT (circular no. 58/E/2009, § 1), the application of taxation in the country of the customer assumes that the Italian dealer is registered with the VIES (VAT Information Exchange System) register.

In such respect, it should be noted that the decree on tax simplification approved by the Council of Ministers on June 20, 2014, allows taxpayers to make intra-community transactions when applying for authorization, without thus awaiting for the expiry of the 30 days period required in order to obtain the tacit approval of the financial administration.

4. Conclusions

From the above, it is clear that it is now possible to manage both the online transfer of goods and the online supply of services with the same and unique certification procedure. Therefore, the manager of an electronic platform will be able to sell to final consumers, for example, clothes or pictures and music without issuing any tax certification document, but only registering the transaction on the income register. If the manager or dealer decides to electronically transmit the income directly to the Revenue Agency, the registration of the income could even be eliminated (with further simplification), (it should be noted, however, that this option is now allowed only to large-scale retail trade and groups of companies, but it will become available to all taxpayers, from January 1st, 2017 - as required by the Italian Legislative Decree no. 127/2015).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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