On April 6th 2018, the Italian Minister for Economic Affairs and Finance issued an implementation decree that introduced new provisions concerning Vat grouping rules, pursuant to 2017 Budget Law and amendments added to article 70-bis and to the Decree of the President of the Italian Republic 633/72. In practice, the parent company of the Vat group can choose a single periodic Vat settlement on sales and purchases related to all companies belonging to the group. This new option should not be confused with the existing group VAT settlement procedure pursuant to article 73 of the Decree of the President of the Italian Republic 633/72, according to which subsidiaries may entrust the parent company to comply with all obligations related to periodic Vat settlement; in this way, eventual credits may be balanced with debts. Let’s see in detail how it works. Who are the involved subjects? How can you choose this option?


According to this new provision, companies closely bound to one another on account of specific financial, economic and organizational links can create a single Vat group that is considered to be a single taxable person (only for Vat purposes). As a result, it will have a sole Vat identification number. Companies belonging to the Vat group will invoice their operations to thirds by means of a sole Vat identification number, the group’s Vat identification number, whereas transfer of goods and supplies of services among the subsidiaries of the Vat group are outside the scope of Vat. As a result, all operations that a single subsidiary of the Vat group carries out are considered to be operations carried out by the Vat group itself.


The first requirement to set up a Vat group is that taxable companies performing their business, artistic of professional activity permanently have their seat in Italy. This option is extended not only to joint stock companies, but also to partnerships. As a result, all kinds of commercial bodies and companies are included. Moreover, in order to become a subsidiary of the Vat group, companies shall be closely bound to one another on account of specific financial, economic and organizational links.

Financial, economic and organizational links

  • a “financial link” exists when two or more taxable persons established in Italy at least from July 1st of the calendar year preceding the setting;
  • up of the VAT groupare directly or indirectly linked by controlling interests
  • an “organizational link” exists in cases of “coordination” between two or more taxable persons, resulting “by law” or “as a matter of fact” between the decision-making bodies of the same entities, even though such coordination is performed by another entity. As a general rule, if the financial link exists, it is assumed that the economic and organizational links also exist..

Excluded subjects

From a subjective point of view, the following are not allowed by law to join a VAT group:

  • seats and branches established abroad;
  • persons whose company is under seizure;
  • persons subject to insolvency proceedings;
  • persons under winding-up procedure.


The parent body or company representing the Vat group needs to submit a specific statement in order to set up the Vat group by electronic means to Agenzia delle Entrate (Revenue Agency), according to a form approved on September 19th 2018 by means of the provision No. 215450 and signed by all its subsidiaries. Companies can fill in the form from January 1st to September 30th in order to apply Vat grouping rules starting from the following year. If companies fill in the form from October 10th to  December 31st the Vat grouping rule will apply starting from the second year following the option. As regards the first application, if companies fill in the form within November 15th 2018, the Vat grouping rule will apply starting from January 1st 2019. The form, filled by the parent company, shall contain the following information:

  • the kind of communication;
  • data on the Vat group’s representative;
  • data on the Vat group’s subsidiaries;
  • the kind of activities performed by the group;
  • the election of domicile c/o the Vat group’s representative;
  • the signature of the Vat group’s representative and of its subsidiaries.

The duration of this option

This option is binding for a three-year period that starts as indicated in the previous paragraph and it is automatically renewed for each subsequent year until the revocation is exercised. The Vat group revocation and its eventual modifications shall be exercised according to the same provisions and terms contained in the communication of its setting up.


The setting up of a Vat group involves all subsidiaries (without any exception), if they meet all law requirements. Moreover, if a company participates to a Vat group, it is no more allowed to benefit from the Vat group settlement regime (article 73 of the Decree of the President of the Italian Republic 633/72). The exceeding tax amount that can be deducted and results from the fiscal declaration related to the year before the first participation year is not transferred to the Vat group, but it can be refunded even in case of a lack of grounds pursuant to article 30 of the Decree of the President of the Italian Republic 633/72 or it can be used as compensation. An exception is represented in this case by the deductable exceeding part that is equal to total Vat amounts paid during the year before the first participation year. As the group itself is considered as a single Vat taxable person, its representative will be the person in charge for periodic payments and settlements, adjustment at the end of the year and any other tasks related to declaration obligations. Invoices and any other document are issued by the representative of the Vat group or by other subsidiaries indicating the Vat identification number of the group and the tax code of the participating subject that carries out this operation. Any operation must be recorded in sales and purchases journals and in daily takings books also by means of specific sectional journals.

Limits of this regime

A key element of this new set of rules is the impossibility to carry out the so-called horizontal size compensation. Indeed, both the Vat group’s tax payable and its credit cannot be balanced by credits or debts related to taxes or duties of the single subsidiary.


The main purpose of this tax regime is an administrative simplification, as the companies belonging to the group, although legally different, are considered to be a single subject for Vat purposes with a sole Vat identification number like many other countries in the European Union.