VAT fraud is one of the main instigators for the establishment of e-invoicing mandates. Increased visibility over tax collection activity via e-invoicing mandates has served as a successful catalyst to improve the flow of revenue to governments via increased VAT collection.

However, VAT fraud prevention arguably needs to expand solely beyond the application of e-invoicing mandates. Multiple parts in the wider fiscal process are vulnerable to VAT fraud.

Fiscal representation is a process where a supplier or buyer employs a representative on their behalf to register for VAT in another country. While an effective medium for allowing taxpayers to register for VAT, especially where countries fall outside the scope of European Union countries, the process is also susceptible to various VAT fraud risks.

To this effect, Italy has introduced some very stringent requirements for fiscal representatives of businesses who are not established in the EU. These were outlined in Legislative Decree no. 13 and was subsequently published in the Official Gazette in February 2024.

Specifically:

• Prior to its VAT registration, fiscal representatives must ensure that all information provided by the non-EU country is accurate before an application for Italian VAT registration.
• Fiscal representatives must meet stringent conditions which confirm their credibility to act as a fiscal representative.
• Fiscal representatives must also submit an Agenzia delle Entrante Guarantee. Details of this are expected to be provided in a separate Decree.

Fiscal representatives for businesses not established in the EU must ensure they adhere to these new provisions, with severe penalties ranging from 3,000 Euros to 50,000 Euros for non-compliance.