Amendments to Italian VAT Warehouse rules

3 August 2011, TMF Group

Further to the 2010 VAT package, and the introduction of a reverse charge on goods sold within Italy by non-residents, foreign companies have been looking for ways to avoid running up very large input VAT credits.  The recovery of these credits, for foreign companies VAT registered in Italy, can take up to three years, and require the provision of a bank guarantee and a full VAT audit.

One available option was the use of VAT warehouses for imported goods, which allowed transactions within them to be made exempt of VAT.

According to the new provision, (art. 7, paragraph 2, letter cc-ter, of the Law Decree 70/2011) that came into force on July 13^th 2011, the introduction and customs clearance into Italy of non-EU goods directly into a VAT warehouse is still exempt of VAT, but it is now subject to the presentation of a specific bank guarantee.  This guarantee must remain in place until the goods are removed from the warehouse, and the associated VAT has been settled accordingly.

Consequently, this could impact traders who enter goods into the VAT warehouses and then sell them on within the warehouse.  The required guarantee set up by this trader must remain in place until the customer, or any further party within the chain, removes the goods from the warehouse and settles the VAT, which is out of the control of the guarantee provider.

This guarantee requirement can only be avoided if the trader entering the goods is an Authorised Economic Operator (AEO)