Italy moves ahead with comprehensive VAT code reform

Italy has taken a significant step toward modernising its indirect tax system, with the Council of Ministers giving preliminary approval to a new consolidated VAT code.

The reform represents one of the most sweeping overhauls of Italy’s VAT framework in decades.

The draft code brings together existing VAT rules into a single, more streamlined framework, containing 171 articles across 18 sections. The Government has said the measure is intended to simplify compliance for businesses, reduce ambiguity and align Italian VAT more closely with EU standards.

Key deadlines have already been set. The law requires implementation by 29^th August 2025, with the full reform to be completed by 31^st December 2025. This means companies operating in Italy should expect rapid legislative and regulatory developments over the coming months.

While specific details of the final provisions are still emerging, the reform is expected to address:

• Consolidation of fragmented rules into one comprehensive VAT code.
• Closer alignments wit EU VAT directives as part of broader harmonisation efforts.
• Simplification measures designed to make the VAT system more predictable and accessible to taxpayers.

Italy’s reform also comes against the backdrop of the EU’s ViDAViDA or 'VAT in the Digital Age', is an EU initiative proposed by the European Commission that seeks to modernise and harmonise VAT processes for member states, by embracing new technologies. It is aimed at updating processes for the management of VAT, and reduce the VAT gap and fraud. The proposal also aims to address challenges in the area of VAT raised by the development of the platform economy. initiative, which is reshaping how Member Sates administer VAT, particularly in areas such as e-invoicingElectronic invoicing - widely referred to as e-invoicing - is the exchange of a digital document between a supplier and a buyer. E-invoices are issued, transmitted and received in a structured data format that enabled automatic and electronic processing. They contain data in a machine-readable format so that an AP system can read an invoice without manual data entry, leading to faster and more efficient invoicing., digital reporting and cross-border trade.

This new code is therefore likely to incorporate provisions that facilitate compliance with these forthcoming EU-wide requirements.

For businesses, the next few months will be a critical period to monitor legislative updates, assess system readiness, and prepare for possible process adjustments. With implementation deadlines already fixed, proactive planning will be key to managing compliance smoothly once the new code comes into force.