Quick Guide for Correct VAT Payments

If you have dealt with the tax authorities before, you will have noticed that VAT is a bit like parsley... it is everywhere. This ubiquitous tax is a bit of the bread and butter of taxation procedures, but how is it calculated and what deadlines apply to its payment?

In this article, we will provide you with a detailed guide on VAT payments.

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What? Definition of VAT

Let's start with the basics. In order to make correct VAT payments, you should first define what VAT is.

VAT is an acronym that stands for Value Added Tax. It is a compulsory contribution levied on the added value of every stage of production, exchange of goods and services.

VAT is a proportional tax, as its value depends on the price of the good multiplied by the reference rate. The current reference rates are:

• 4%: minimum rate applied to basic necessities;
• 10%: reduced rate applied to tourism, food and construction services;
• 22%: ordinary rate applied in all other cases;

Transactions subject to VAT are:

• Taxable transactions;
• Non-taxable transactions;
• Exempt transactions pursuant to Article 10 of Presidential Decree 633/1972;
• Excluded transactions pursuant to Article 15 of Presidential Decree 633/1972.

Who? Types of VAT taxpayers

VAT taxpayers are subdivided into two categories, according to the frequency with which they settle, i.e. determine the VAT to be paid, of VAT:

1. Monthly taxpayers, who settle VAT on a monthly basis, i.e. every month;
2. Quarterly taxpayers, who settle VAT on a quarterly basis, i.e. every three months.

The monthly settlement corresponds to the ' ordinary' settlement mode, i.e. the one valid for most taxpayers.

Quarterly taxpayers

Quarterly settlement is possible for professional taxpayers whose turnover in the previous calendar year did not exceed

• 400,000 euro for companies active in the service sector;
• EUR 700,000 for enterprises engaged in other activities.

The choice of quarterly settlement is to be communicated in the context of the first annual VAT return. The option is valid from the year in which it is exercised and remains valid until it is revoked or the conditions are no longer met (if the limit is exceeded).

For quarterly taxpayers, there is a 1% surcharge on the tax liability by way of interest.

Special quarterly taxpayers

The quarterly settlement is applicable irrespective of turnover, but the following business entities are eligible for the exemption from the 1% interest charge

• Fuel distributors;
• Transporters of goods on behalf of third parties;
• Practitioners of health professions;
• Exercisers of public service activities.

When? Periodic deadlines for VAT payments

The periodic deadlines for VAT payments are determined according to the type of taxpayer.

Monthly VAT holders must pay VAT by the 16th of each month. The VAT payment must refer to the preceding month, i.e. the VAT amount for a specific month must be paid by the 16th day of the following month.

For quarterly taxpayers, on the other hand, VAT must be paid by the 16th day of the second month following each of the first three calendar quarters, i.e. by 16 May, 20 August and 16 November .

Attention! The payment for the last quarter must be made by 16 March of the following year at the time of the annual adjustment, unless the taxpayer can take advantage of further deadlines for the payment of taxes based on the tax return.

The same deadlines apply for special quarterly tax payers as for 'ordinary' taxpayers (16 May, 20 August, 16 November). However, a different deadline applies for the fourth quarter payment: it must be made by 16 February of the following year.

☝ The deadline for payment is automatically extended if the deadline for settlement falls on a Saturday or public holiday. In this case, the deadline will be the first following working day.

How? Method of payment of VAT

VAT settlement is carried out by completing the F24 form, which can be found on the Inland Revenue website. Let's take a look at the main steps for settling VAT.

A. Calculating VAT

First of all, VAT must be calculated, as follows:

1. VAT due in the month or quarter* - VAT resulting from entries in the registers relating to the goods and services purchased*= y;

*resulting from entries made or to be made in the registers containing invoices issued or receipts for taxable transactions.

*resulting from expenditure documents held and for which there is a right of deduction exercised in the same month or quarter.

2. y - any tax credit relating to the previous period + any tax liability relating to the previous period.

The resulting amount may be:

• Debit: to be paid to the Treasury;

  Caution! The amount must be equal to or less than €25.82. It may not exceed this amount: in that case, it is carried forward to the next period.

• On credit: to be deducted in the following period.

☝ Taxpayers with an obligation to settle monthly, where they outsource VAT accounting to a third party, may settle on the basis of the data for the second preceding month, instead of on the basis of the data for the directly preceding month.

B. Filling out the F24 form

VAT settlement, and therefore VAT payments, must be carried out using the F24 form, i.e. a specific form available and downloadable from the Inland Revenue website.

How to complete it?

To complete the F24 form, the necessary data must be entered in the relevant sections. Below is the schedule:

• In the taxpayer section, the following must be entered:
  • Tax code,
  • Personal data,
  • Tax domicile;
• In the Treasury section, i.e. the section corresponding to the taxes to be paid, the VAT data must be entered:
  • The tax code (available on the Agenzia delle Entrate website);
  • The instalment being paid (in the case of payment by instalments);
  • The amount to be paid (in the column 'debit amounts paid';
• The final balance.

  Caution! The final balance can never be negative, but can be 0: the form must be submitted even if the latter is the case.

If the taxpayer is in possession of tax credits, the relevant information must be reported in the column "credit amounts offset" in the Treasury section.

C. VAT payments

The F24 form must be submitted electronically via the online services of the Revenue Office.

☝ In order to carry out this operation, it is necessary to be enabled to Fisconline or Entratel, or to have a current account with a partner bank or Poste Italiane.

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Additional obligations: communication of periodic VAT settlements

According to Article 21-bis of Decree-Law 78/2010, persons liable for VAT are also obliged to submit a summary of the accounting data for periodic tax settlements, known as the communication of periodic VAT settlements. They are exempt from this:

• Taxpayers not obliged to submit an annual VAT return;
• Taxpayers not obliged to make periodic VAT settlements.

provided that the conditions for exemption are met.

The form, available on the Agenzia delle Entrate website, must be completed and submitted electronically every quarter by the last day of the second month following each quarter. If the submission deadline falls on a Saturday or public holiday, the deadline is extended to the first working day thereafter.