On 8 July 2026, the Council of the European Union adopted an implementing decision extending Italy's authorisation to apply a special VAT split-payment measure derogating from Articles 206 and 226 of the VAT Directive (2006/112/EC) until 30 June 2029. The measure requires taxable persons supplying public authorities and certain publicly controlled companies to pay the VAT due into a separate, blocked bank account of the tax authorities, rather than directly to the supplier. The extension replaces the previous authorisation, which expired on 30 June 2026.
The decision, published as a legislative act on 7 July 2026, amends Implementing Decision (EU) 2017/784. Italy must submit a report to the European Commission by 30 September 2027 covering VAT refund times, the measure's effectiveness, and other anti-fraud measures, replacing the earlier reporting deadline of 30 September 2024. The measure is part of a broader anti-fraud package that includes mandatory electronic invoicing. Companies listed on the stock exchange were excluded from the scope from 1 July 2025 and remain excluded.
Policy orientations and trade-offs The extension reflects a balance between combating VAT fraud and minimising administrative burdens on businesses. The split-payment mechanism aims to prevent suppliers from collecting VAT and then disappearing without remitting it to the tax authorities, a common fraud pattern. However, it imposes cash-flow constraints on suppliers, who receive the VAT amount only after the tax authorities process the payment. The exclusion of listed companies from 1 July 2025 reduces the scope of the measure, limiting its impact on larger, publicly traded firms.
Impact on stakeholders - Italian tax authorities: Benefit from continued fraud prevention, with a new reporting obligation to assess the measure's effectiveness and refund times. - Suppliers to public authorities: Face ongoing cash-flow disadvantages as VAT payments are blocked, though the exclusion of listed companies reduces the burden for some. - Public authorities and publicly controlled companies: Continue to benefit from reduced risk of VAT fraud in their supply chains. - Listed companies: Exempted from the split-payment requirement since July 2025, avoiding cash-flow constraints.
Institutional follow-up The decision takes effect upon notification to Italy. The Commission will assess Italy's report due by September 2027 and may propose further amendments or a new extension based on the findings. No further Council action is required unless Italy seeks another extension beyond 2029.