VAT rates in Italy

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  1. Introduction
  2. What is VAT?
  3. When does VAT apply?
  4. When doesn’t VAT apply?
    1. Nontaxable transactions
    2. Exempt transactions
    3. Excluded transactions
  5. VAT rates in Italy
    1. Recent changes to VAT rates in Italy
  6. VAT rates in EU countries

Value-added tax (VAT) is an indirect tax that applies to transactions involving goods and services. In Italy, VAT rates differ based on various categories of products and services. VAT is a primary source of funding for the government and supports the national economy. But what exactly is VAT? This article explores how it works, when VAT does and doesn’t apply to transactions, and the VAT rates in Italy and Europe.

What’s in this article?

  • What is VAT?
  • When does VAT apply?
  • When doesn’t VAT apply?
  • VAT rates in Italy
  • VAT rates in EU countries

What is VAT?

The Italian government requires the payment of various taxes including VAT on goods and services. But what does “added value” mean? When a professional or a company processes or improves a product or service, its value increases, hence the tax on added value. As a result, the customer ultimately pays the VAT, whether they are an individual, a self-employed professional with a VAT number, or a business.

Professionals and businesses can reduce their overall tax burden by deducting the VAT paid on purchases from the VAT collected on sales. You can apply the following calculation:

The Amount of VAT Payable = VAT on Sales − VAT on Purchases

VAT was introduced through European legislation in the early 1970s and is governed by Presidential Decree No. 633/1972 in Italy. It is an indirect tax because it is levied on consumption rather than on the taxpayer’s income or wealth.

When does VAT apply?

Article 1 of Presidential Decree No. 633/1972 outlines the basic definition of VAT: “VAT shall be applied to the supply of goods and services within the territory of the State in the course of business or the exercise of arts and professions, as well as to imports by any natural person.”

Here are the three basic preconditions of VAT:

  • Objective: In accordance with Articles 2 and 3 of Presidential Decree No. 633/1972, the transaction in question must be classified as a supply of goods or services.
  • Subjective: All transactions involving the supply of goods and services by a regular business or self-employed person are subject to VAT.
  • Territorial: The tax is applied to all transactions carried out within the territory of Italy.

When doesn’t VAT apply?

There are three types of transactions in which VAT is not calculated in Italy: nontaxable, exempt, and excluded.

Nontaxable transactions

These transactions involve the supply of goods and services to foreign countries. All VAT obligations apply, including invoicing, registration, and declaration, but the customer is not charged VAT. Specifically, these are:

  • Exports
  • Transactions treated as exports
  • International services or services related to international trade
  • Transfers to non-EU travelers
  • Transactions with San Marino and Vatican City
  • Transactions conducted within the purview of relations governed by international treaties and agreements
  • Intracommunity supplies

Exempt transactions

Exempt transactions are specific supplies of goods and services that are expressly defined by law. For example, health services, educational and cultural activities, and certain real estate transactions fall into this category. Again, all VAT obligations apply, but the customer is not charged VAT. The full list of exempt supplies of goods and services can be found in Article 10 of Presidential Decree No. 633/1972.

Excluded transactions

These transactions lack one or more conditions (objective, subjective, or territorial) for the application of VAT (e.g., default interest due or costs related to packaging), or are considered as such by explicit legal provisions. They are not subject to VAT requirements such as invoicing and registration, and VAT on related purchases is not deductible.

Additionally, transactions conducted by taxpayers under the flat-rate scheme are excluded from VAT. In fact, flat-rate taxpayers are excluded from maintaining accounting records for VAT purposes, as well as from quarterly settlements and payments.

VAT rates in Italy

In 2024, Italy’s standard VAT rate is 22%, which applies to the majority of goods and services. There are also reduced and minimum VAT rates for certain goods and services, which can be found in Table A, (including Part II, Part II-bis, and Part III) of Presidential Decree No. 633/1972.

The reduced rates are:

  • Reduced VAT rate (10%): This rate applies to certain goods and services, such as household electricity, medicines, feminine hygiene products, diapers, theatrical performances, methane gas used for combustion for civil purposes, and passenger transportation services (excluding water transportation and exempt services).
  • Reduced VAT rate (5%): This rate applies to specific types of food; medical equipment; social, welfare, and educational services provided by social cooperatives; water transportation services, and more.
  • Minimum VAT rate (4%): This rate applies to foodstuffs such as dairy products, vegetables, legumes, and fruits; products used in agriculture such as fertilizers or certain types of animal feed; the provision of meals for school canteens; printed items such as books, newspapers, and magazines; and basic necessities.

Recent changes to VAT rates in Italy

Following the recent crises related to the COVID-19 pandemic and increased energy costs due to the war in Ukraine, the Italian legislature intervened in 2023 by lowering some VAT rates to mitigate the adverse effects of these exceptional circumstances. However, the Budget Law of 2024 reinstated these VAT rates to their previous levels.

For example, the VAT rate on the supply of methane gas for civil and industrial use had been reduced to 5%. However, as of January 1, 2024, it has reverted to 10% or 22%, depending on the cases specified in Presidential Decree No. 633/72. Similarly, the VAT rate on absorbent sanitary products (tampons, menstrual cups, etc.), baby diapers, and baby food had been reduced from 10% to 5%, but as of January 1, 2024, it has been restored to 10%. Earlier in 2024, the 10% preferential VAT rate for the supply of wood pellets was also restored to the standard rate of 22%.

Staying current with constantly changing tax regulations can be a challenge for businesses. Tools such as Stripe Tax enable you to calculate and collect taxes and file tax returns for all payments in a single integration.

VAT rates in EU countries

The table below displays the standard, reduced, and minimum VAT rates for the 27 countries of the European Union:

Country
Standard rate
Reduced rate
Minimum rate
Austria 20% 10% / 13%
Belgium 21% 6% / 12%
Bulgaria 20% 9%
Croatia 25% 5% / 13%
Cyprus 19% 5% / 9%
Czech Republic 21% 12% / 15%
Denmark 25% 0%
Estonia 22% 9%
Finland 25.5% 10% / 14%
France 20% 5.5% / 10% 2.1%
Germany 19% 7%
Greece 24% 6% / 13%
Hungary 27% 5% / 18%
Ireland 23% 9% / 13.5%
Italy 22% 5% / 10% 4%
Latvia 21% 5% / 12%
Lithuania 21% 5% / 9%
Luxembourg 17% 8% 3%
Malta 18% 5% / 7%
Netherlands 21% 9%
Poland 23% 5% / 8%
Portugal 23% 6% / 13%
Romania 19% 5% / 9%
Slovakia 20% 10%
Slovenia 22% 5% / 9.5%
Spain 21% 10%
Sweden 25% 6% / 12%

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accurateness, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular situation.

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