Italy has extended the VAT split payment system until 30 June 2026 for most public sector transactions. From 1 July 2025, FTSE MIB-listed companies must exit the regime and return to the standard VAT system.

Italy has extended the VAT split payment mechanism until 30 June 2026, following Council Implementing Decision (EU) 2023/1552, published in the EU Official Journal on 27 July 2023.

The extension applies to most transactions involving public sector entities.

However, from 1 July 2025, the split payment regime will no longer apply to companies listed on the FTSE MIB index of the Milan Stock Exchange. Unless specific rules state otherwise, these companies must return to the ordinary VAT system.

This adjustment aligns with Italy’s plan to gradually eliminate the split payment system, following EU guidelines and the temporary exemption from standard VAT payment and invoicing regulations.

The split payment VAT system is proposed to help close the VAT gap and simplify VAT collection for governments. Currently, sellers receive the full payment for their goods or services and only report and pay the VAT portion weeks or even months later. With the split payment system, the VAT amount would be separated and paid directly into a special VAT account set up by the government at the time of the sale. This approach aims to prevent late tax payments and mistakes in reporting, helping to reduce the difference between VAT owed and VAT collected.

The regime will continue until mid-2026 for transactions involving public administrations, public economic bodies or foundations, and entities owned or controlled by public institutions.