Split payment is regulated, within the Italian VAT system, by Article 17-ter of Presidential Decree no. 633 of 26 October 1972 (VAT Decree), which identifies the entities subject to the mechanism and defines how it is applied.
In summary:
- Suppliers who issue invoices to specific Public Administrations and related entities must apply split payment.
- The invoice normally shows VAT, but the tax is not collected by the supplier: the party liable to the Tax Authorities is the customer receiving the split payment invoice.
- The supplier formally remains liable for the tax, with the possibility—where there are structural excess input credits—of accessing priority refunds under certain conditions.
Suppliers carrying out taxable transactions with the categories of clients listed in the legislation are required to apply split payment:
- Public administrations required to use electronic invoicing and listed in the Public Administration Index (IPA);
- Companies (including de facto) controlled by the Presidency of the Council of Ministers and Ministries, and their legally controlled entities, included in lists published by the Ministry of Economy and Finance (MEF);
- National, regional, and local public economic entities, special agencies, public service entities, and foundations participated in by public administrations with at least 70% of endowment capital or otherwise controlled by public entities;
- Companies legally controlled directly by local public authorities and their subsidiaries, as well as those in which such entities hold at least 70% of the share capital;
- Until 30 June 2025, listed companies identified for VAT purposes and included in the FTSE MIB index, provided they are not already included among companies controlled by public administrations.
The split payment regime is a derogation from ordinary VAT rules and therefore requires EU authorization.
For transactions with public administrations and with the other public entities/companies mentioned above, the EU has authorized Italy to apply split payment until 30 June 2026.
For FTSE MIB listed companies, the EU authorization—and thus the scope of split payment—ended on 30 June 2025; invoices issued from 1 July 2025 to such entities apply VAT under the ordinary rules.
The EU reference is Decision no. 1552 of 25 July 2023, which allows Italy to continue applying the mechanism within the above deadlines, distinguishing between public administrations and other entities such as FTSE MIB listed companies.
However, following a favorable opinion from the EU Directorate-General for Taxation and Customs Union (DG TAXUD), an extension—at least until 31 December 2026—appears very likely, compared to the current deadline of 30 June 2026.
In the absence of extensions or new EU derogations, from 1 July 2026 Italy would have to realign with the ordinary VAT regime for transactions with public administrations and public companies.