VAT refund: instructions, deadlines and amounts

VAT, or value added tax, is a tax levied by the tax authorities on goods and services. In Italy, all VAT holders must periodically (monthly or quarterly) settle VAT, i.e. calculate VAT credits and debits and pay it. For some accumulated VAT credits, however, there is the possibility of a refund or offsetting.

Obtaining a VAT refund... how to do it?

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VAT refund: let's look at the concept

When we speak of a VAT refund, we are referring to the refund of VAT credits.

In fact, all periodic VAT settlements are included in the annual VAT settlement. The latter determines and expresses the final VAT credit and debit amount for the entire year. The debit VAT amount annual must be paid by 16 March, while the credit amount can be:

• Used as a set-off for other taxation;
• Requested as a refund.

A VAT refund may be requested and is applicable for VAT related to any type of good or service, provided that the deduction is applied. Thus, the possibility of refund is only available for taxable transactions.

→ There is also a possible flat-rate deduction for certain goods for private/business use.

→ According to Article 19-bis of Presidential Decree No. 633/1972, if the company has carried out both taxable and exempt transactions, it may deduct the VAT paid on purchases in proportion to the ratio between taxable and exempt transactions.

Who can apply for a VAT refund?

A VAT refund can be claimed by all businesses, if they meet the necessary requirements. According to Articles 30 and 38-bis of Presidential Decree 633/72, these are:

• Resident persons;
• Non-resident persons, but in possession of a permanent establishment in Italy, or who are registered for VAT purposes by direct identification, or through the appointment of a tax representative in Italy. In the latter case, the appointed representative will be entitled to claim the refund.

Warning! In order to obtain the refund, non-residents registered for VAT purposes must submit the application to the Pescara Operational Centre of the Revenue Agency. On the other hand, non-residents who have appointed a fiscal representative must send the request to the Revenue Office of the representative's fiscal domicile.

Persons who are not resident in Italy and are not registered for VAT purposes may also possibly benefit from a VAT refund. This is done, however, through specific procedures that differ depending on the country in which the persons are established (EU country or non-EU country).

There are also other conditions for claiming a VAT refund. These provide that:

• The taxpayer must be in possession of a credit exceeding €2,582.28;
• The amount of the refund requested must exceed €10.33;
• The taxpayer meets the average rate requirement, i.e.:

Executes exclusively or predominantly activities involving the carrying out of transactions at rates lower than those of the tax on purchases and imports, counting for this purpose also the transactions carried out pursuant to Article 17 para. 5, 6 and 7, as well as pursuant to Article 17-ter

Articolo 30, comma 2, lettera a) del DPR n. 633/72

How to apply for a VAT refund?

A request for a VAT refund can be made

• Together with the annual VAT return;
• In each of the first 3 quarters of the year using the VAT TR form, which can be downloaded from the Agenzia delle Entrate website. In this case, the request can be made directly by the taxpayer or by an authorised intermediary.

When is it possible to request a VAT refund?

Deadlines

It is possible to request a refund as part of the annual VAT return. This must be submitted between 1 February and 30 April each year.

Quarterly applications, on the other hand, must be submitted within the following deadlines:

• 1 to 30 April for the first quarter comprising the months of January, February and March;
• From 1 to 31 July for the second quarter comprising the months of April, May and June;
• 1 to 31 October for the third quarter comprising the months of July, August and September.

In the course of a year, a refund may be claimed by submitting one claim for the annual credit and up to 3 claims for the quarterly credit.

☝ The disbursement time of the refund is normally 3 months. Beyond this limit, the applicant is entitled to an interest rate of 2%.

How to fill out the application?

The refund application must contain the same information as the annual VAT return or the quarterly application, e.g:

• The taxpayer's identification data;
• The results of the VAT settlement;
• The basis for requesting the refund.

What to do in the event of an error?

In the event of an error, if the application has already been sent, it is possible to submit a supplementary application to complete the first one.

On the other hand, if a refund has already been paid but is not due, the Revenue Agency may request the return of the sums paid and any interest.

In the event of irregularities, penalties are provided for, but these are applied only in the case of irregularities considered serious.

What to do in case of refusal or suspension of the application?

In the event of suspension or refusal of the refund, it is possible to appeal within 60 days from the date of notification of the act to the competent Tax Commission.

Warning! You can do so even if no actual denial has been notified, but also if 90 days have passed without a reply since the application was submitted. In the case of disputes up to 20,000 euro in value, the Revenue Agency's mediation procedure is available.

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VAT refund for cessation of business

It is also possible to apply for a VAT refund in case of cessation of business. In this case, reference will be made to the VAT credit resulting from the annual return for the tax period in which the activity ceased.

Paragraph 2 of Article 30 of Presidential Decree 633/72 allows a refund request to be submitted for any amount. However, paragraph 4 of Article 38-bis of the same Presidential Decree requires the presentation of an appropriate guarantee by the taxpayer in case of amounts exceeding EUR 30,000.

☝ The guarantee, according to paragraph 5 of Article 38-bis of Presidential Decree 633/72, must consist of a security (in government bonds or government-guaranteed bonds), or a bank guarantee, or a surety insurance policy. For this reason, applying for reimbursement in this case can be quite a difficult hurdle to overcome.