On 12 June 2015, the European Commission issued a proposal for a Council Implementing Decision authorizing Italy to introduce a special measure derogating from Articles 206 and 226 of the VAT Directive (2006/112/EC).

The special measure is the introduction of a split-payment system for goods and services supplied to Italian public bodies, including government bodies, public hospitals and universities. Under the system, VAT is charged normally, but the payment is split where the taxable amount is paid to the supplier and VAT is paid directly to a blocked VAT bank account of the Treasury. The purpose of the measure is to counter considerable VAT fraud that exists in Italy in relation to supplies of goods and services to public authorities.

In its proposal for authorization, the Commission includes the condition that Italy must provide a report on the VAT refund procedure for suppliers affected by the split-payment system, including the average time needed to effectively refund the VAT and an outline of particular problems. The report should be provided eighteen months after the entry into force of the derogation. In addition a sunset clause is included for an automatic time limit which is set at 31 December 2017 for the derogation.

Click the following link for the Commission proposal.