Tax & Accounting Blog

Italy – VAT Increase Inevitable

Indirect Tax, ONESOURCE, VAT Tax Rates September 30, 2013


According to the latest press reports, the scheduled standard VAT rate increase from 21% to 22% will take effect on Tuesday, October 1st, 2013.  Passing a decree postponing the increase to 1 January 2014 failed in the Council of Ministers meeting on Friday. A proposed confidence vote in Parliament won’t be held before October 1st as reported by Minister for Parliamentary Relations Dario Franceschini. In this case, it seems to be too late to avoid the VAT increase.

The hike was initially scheduled to take effect on 1 July 2013 after having been announced in October 2012. It was later delayed until 1 October 2013 after the government coalition of Prime Minister Enrico Letta was threatened to be broken up if the VAT change would come into effect. The increase was subject of controversy and is still strongly discussed between the coalition government partners. The aim behind the hike was to meet the Euro currency 3% GDP deficit target. If the increase would became postponed, the funding was  planned to be obtained from rising the excise duties on fuel, the regional production tax (IRAP) and the corporate income tax (IRES).