New Italian VAT measures on Inward Processing Relief

in Tax, 14.09.2015

As of 18 August 2015, a new piece of Italian VAT legislation on Inward Processing Relief (IPR) has come into force. The new legislation means that businesses who move their own goods from another EU Member State (MS) to Italy for valuation, processing or other works, are required to register for Italian VAT purposes to account for Italian VAT on the deemed intra-EU acquisition (and to fulfill all the related compliance obligations) if the goods are not subsequently returned to the Same MS from which they were initially dispatched or transported.

What has changed?

Under the new Italian IPR rules, the movement of own goods from another MS to Italy will be disregarded only if the goods, after being valued or worked upon in Italy, are returned to the taxable person in the same MS from which they were initially dispatched or transported. The old Italian IPR rules made no reference to the destination of the valued/worked upon goods and were applicable as long as the goods were subsequently moved out of Italy.

Similarly, under the new rules, the movement of own goods from Italy to another MS will be disregarded only if the goods are returned to Italy after they are valued or worked upon in the said MS. Note that this is only from an Italian VAT perspective. Under the domestic rules of many Member States, an Italian taxable person would probably be required to register for VAT in the MS where the goods were sent to, if the goods were not subsequently returned to Italy, regardless of the Italian VAT rules.


The change is a result of the infraction proceeding launched by the European Commission against Italy and the decision of the Court of Justice of the European Union (CJEU) in the Dresser-Rand case (C-606/12 and C-607/12 of 6 March 2014). The CJEU decision ruled that the old Italian IPR rules were not in compliance with Article 17 (2)(f) of the European VAT Directive. The Italian tax authorities therefore had to amend the IPR rules in order to align them to the European VAT Directive and to close the infraction proceeding.

What remains unchanged?

The new IPR rules apply only to the movement of own goods from one MS to Italy or vice versa. Goods imported temporarily into Italy from a non-EU country such as Switzerland can still take advantage of a similar IPR for customs duty and import VAT, provided that the goods are subsequently exported out of Italy to another country (not necessary the same country where the goods are imported from).



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