What VAT to Apply in Invoices: Complete Guide

VAT (Value Added Tax) is an indirect tax applied on the added value of goods and services. In Italy, VAT is regulated by law and must be applied correctly in invoices. In this guide, we’ll explain how to calculate and apply the correct VAT in invoices, illustrating the VAT rates in force and the rules for invoicing.

What is VAT and How Does it Work

VAT is an indirect tax that burdens the final consumer, applied on goods and services at every stage of the production and distribution chain. VAT is calculated on the difference between the value of sales and the cost of raw materials and services purchased. VAT is a tax that affects the selling price of a product or service, but is not borne by the company that applies it.

VAT Rates in Italy

In Italy, there are different VAT rates applied depending on the type of good or service. The main VAT rates in force are:

• Standard VAT: the standard rate is 22% and applies to most goods and services.
• Reduced VAT: the reduced rate is 10% and applies to specific goods and services, such as some food products, books, newspapers, medicines, etc.
• Super-reduced VAT: the super-reduced rate is 4% and applies to particular goods and services, such as some basic food products, catering services, etc.

How to Calculate VAT

To calculate VAT on an amount, you must multiply the amount by the corresponding VAT rate and divide by 100. The formula for calculating VAT is as follows:

VAT Amount = Amount * VAT Rate / 100

For example, if you need to calculate VAT on an amount of 100 euros with a rate of 22%, the calculation will be as follows:

VAT = 100 * 22 / 100 = 22 euros

The total amount to be invoiced will therefore be 122 euros.

Examples of VAT Application

Companies that Apply 22%

• Example: An IT consulting company that provides software development services.
  • VAT Rate: 22%
  • VAT Code: N1

Companies that Apply 10%

• Example: A restaurant that provides catering services.
  • VAT Rate: 10%
  • VAT Code: N2

Professionals

• Example: A lawyer who provides legal consultancy.
  • VAT Rate: 22%
  • VAT Code: N3

Companies that Issue Invoices to Europe

• Example: An e-commerce company that sells products to customers in Germany.
  • VAT Rate: 0% (Intra-community operations)
  • VAT Code: N4

Companies that Issue Invoices to Non-EU States

• Example: A manufacturing company that exports products to the United States.
  • VAT Rate: 0% (Exports)
  • VAT Code: N5