Italy Split Payment (Scissione dei Pagamenti): Complete Guide

Italy's split payment, known as scissione dei pagamenti, is an anti-VAT-evasion mechanism where suppliers invoice the full amount including VAT, but the buyer pays only the taxable base to the supplier and remits the VAT directly to the Italian Treasury. The mechanism applies to invoices issued to public administration entities, government-controlled companies, and certain listed companies. Authorized under Article 17-ter of DPR 633/1972, it fundamentally alters the standard VAT collection flow: the supplier never receives the VAT portion in their bank account.

For foreign companies selling goods or services to Italian public entities, this creates an immediate practical challenge. You invoice your Italian public sector client for, say, EUR 10,000 plus EUR 2,200 VAT. Your client pays you EUR 10,000. The EUR 2,200 goes straight from the buyer to the Erario (Italian Treasury). Your invoice shows the full EUR 12,200, but your bank account only ever sees EUR 10,000.

The legislative origin. Italy introduced this mechanism through the Stability Law 2015 (Law 190/2014, Article 1, paragraph 629), which inserted Article 17-ter into Presidential Decree 633/1972, Italy's foundational VAT statute. The measure required and received a derogation from the EU Council under Article 395 of Directive 2006/112/EC, since it departs from the standard EU VAT collection model. That derogation has been renewed multiple times, most recently extending authorization through June 30, 2026.

Why it was introduced. Italy historically faced one of the largest VAT gaps in the EU. The split payment mechanism targets a specific vulnerability: suppliers who collected VAT from government buyers but failed to remit it to the Treasury. By removing the supplier from the VAT remittance chain for public sector transactions, the mechanism eliminates that risk entirely. Italy expanded the scope of split payment significantly in 2017 to cover government-controlled companies and companies listed on the FTSE MIB index, and in the same period began rolling out mandatory electronic invoicing. The combined effect was measurable. Italy's VAT gap fell from EUR 35.6 billion in 2017 to EUR 17.8 billion in 2021, according to data reported by Il Sole 24 ORE, effectively halving the shortfall over four years.

No other EU member state operates a comparable mechanism. France, Germany, and Spain all use standard VAT collection where the supplier remits. Poland's split payment for certain sectors comes closest in concept but differs substantially in scope and implementation. This makes Italy's scissione dei pagamenti particularly unfamiliar to international finance teams encountering it for the first time, and getting the invoicing requirements wrong can delay payment or trigger compliance issues with the Agenzia delle Entrate (Italian Revenue Agency).

Which Entities Are Subject to Split Payment

Split payment obligations are determined entirely by the buyer's classification, not by what you sell or who you are as a supplier. If your Italian customer appears on the official entity list, you must format your invoice accordingly. The supplier has no discretion here.

Four categories of entities fall within split payment scope:

Pubblica Amministrazione (PA) entities. This is the original and broadest category. It covers all Italian public administration bodies: central government ministries, regional and municipal authorities, public hospitals, state universities, and other government agencies. Any entity identifiable through the Indice delle Pubbliche Amministrazioni (IPA) generally falls here.

Companies controlled by central government ministries. These are corporate entities where one or more Italian government ministries hold a controlling stake. They operate as private-law companies but remain within split payment scope because of their ownership structure.

Companies controlled by central and local public bodies. This extends the net beyond ministry-controlled entities to include companies controlled by regions, municipalities, and other local public bodies. Many Italian utility companies and local service providers fall into this category.

State-owned or public-entity-controlled companies. A catch-all for remaining entities where the Italian state or a public body holds a controlling interest, including subsidiaries and sub-controlled entities that meet the ownership threshold.

The FTSE MIB Exclusion

One of the most significant recent changes to split payment scope was the removal of FTSE MIB-listed companies. Until mid-2025, many large Italian corporates listed on the FTSE MIB index were subject to split payment, even when their public-sector ownership stake was indirect or partial.

Per Council Implementing Decision (EU) 2023/1552, FTSE MIB-listed companies were excluded from split payment scope effective July 1, 2025. This was a substantial narrowing. Companies like major Italian banks, energy groups, and industrial conglomerates with partial state ownership moved outside the mechanism. If you previously applied split payment to invoices for these buyers, you need to confirm whether they remain in scope under the current lists.

How to Verify Whether a Buyer Is In Scope

Italy's Ministry of Economy and Finance (MEF) publishes annual lists of all entities subject to split payment. These lists are your definitive reference. They are updated periodically and published on the MEF's institutional website, broken out by entity category.

Before issuing an invoice to an Italian buyer, check whether that specific entity appears on the current MEF list, published on the Dipartimento delle Finanze website. For public administration entities specifically, the Indice delle Pubbliche Amministrazioni (IPA) at indicepa.gov.it provides a searchable directory as a first-pass verification tool, though the MEF lists remain the definitive reference for split payment scope. Do not rely on assumptions based on the buyer's name or apparent public-sector affiliation. Entity classifications change: companies get privatized, ownership stakes shift, and the FTSE MIB exclusion removed entities that were previously in scope for years.

For recurring customers, build a verification step into your invoicing workflow. Review the MEF lists at least annually, and again whenever a new list is published mid-year. Getting this wrong means either failing to apply split payment when required (creating compliance exposure) or applying it unnecessarily (complicating your own VAT recovery for no reason).

How to Format a Split Payment Invoice

Getting the invoice format right is non-negotiable. An incorrectly formatted split payment invoice will be rejected by the public administration entity or flagged during SDI transmission, delaying payment and creating reconciliation headaches. Here is exactly what your invoice needs.

The Mandatory Split Payment Statement

Every invoice subject to split payment must carry a written annotation identifying it as such. Two forms are accepted:

Short form: "Operazione soggetta a split payment"
Full legal citation: "Scissione dei pagamenti ai sensi dell'art. 17-ter del D.P.R. n. 633/1972"

Either version satisfies the requirement. Most practitioners use the short form for readability, adding the full legal reference in their internal documentation. The statement must appear on the face of the invoice itself, not buried in supplementary attachments.

FatturaPA XML Configuration

Italy mandates electronic invoicing for all B2G transactions through the FatturaPA format. Within the FatturaPA XML schema, one field controls how the system processes your split payment invoice:

Field 2.2.2.8 (EsigibilitaIVA) must be set to the value "S", which stands for scissione (split). This single-character value is the machine-readable flag that tells both the Sistema di Interscambio and the receiving public entity that the VAT on this invoice will be paid directly to the Treasury by the buyer rather than collected by you. The same XML discipline matters for other Italian invoice edge cases too: when a transaction is VAT-exempt instead of split-payment subject, Italy's imposta di bollo invoice rules determine when a EUR 2 virtual stamp charge and related FatturaPA bollo fields must be populated.

If this field is left blank, set to "I" (immediata), or set to "D" (differita), the invoice will be processed under normal VAT collection rules, and the public entity will pay you the full gross amount, including VAT you then owe to the tax authority through your own periodic settlement. Correcting this after the fact requires a credit note and reissuance, and the Italy credit and debit note rules for TD04 and TD05 determine whether the correction should be issued as a credit note or debit note and when the VAT adjustment is legally available.

SDI Transmission Requirement

Split payment invoices must be transmitted through the Sistema di Interscambio (SDI), Italy's centralized electronic invoicing exchange system. This is not optional for B2G invoices. The workflow is as follows:

You generate the invoice in FatturaPA XML format with EsigibilitaIVA set to "S"
You transmit the file to SDI (directly or through an accredited intermediary)
SDI validates the XML structure and routes the invoice to the correct public entity
The public entity receives, verifies, and processes payment

SDI performs technical validation on the XML before forwarding. Structural errors, including an invalid or missing EsigibilitaIVA value, will trigger a rejection notification. For a deeper walkthrough of Italy's FatturaPA e-invoicing requirements through the SDI system, including XML structure and SDI registration, see our detailed guide.

VAT Register Treatment

Here is where split payment diverges from standard invoicing in your books. You record the split payment invoice in your VAT sales register (registro delle vendite) at the full gross amount, including the VAT line. However, when you calculate your periodic VAT settlement (liquidazione IVA), you exclude the VAT amount from split payment invoices.

In practice, this means:

Sales register: Invoice recorded at €10,000 + €2,200 VAT (22%) = €12,200 total
VAT settlement: The €2,200 VAT is not included in your output VAT for the period
Cash received: You receive only €10,000 from the public entity; the €2,200 goes directly to the Treasury

Your accounting system must distinguish split payment invoices from standard ones to avoid overstating your VAT liability. Most ERP systems handle this through a dedicated VAT code or tax treatment linked to the EsigibilitaIVA "S" flag.

Requirements for Foreign Suppliers

Non-Italian suppliers invoicing Italian public administration entities face the same formatting obligations. If you are a foreign company selling goods or services to an Italian PA entity subject to split payment, you must:

Issue the invoice in FatturaPA format with the EsigibilitaIVA field set to "S"
Transmit through SDI, which typically requires engaging an accredited Italian intermediary (intermediario accreditato) since direct SDI access requires an Italian tax code and digital signature
Include the split payment annotation on the invoice, just as a domestic supplier would

Foreign suppliers who are VAT-registered in Italy follow the same process as domestic suppliers. Those without an Italian VAT registration but with a VAT representative (rappresentante fiscale) or who have directly identified for VAT purposes in Italy can transmit through their representative or an intermediary. The critical point is that the FatturaPA format and SDI channel are mandatory for B2G invoicing regardless of where the supplier is established.

Cash Flow Impact and VAT Credit Recovery

On every split payment invoice, your incoming cash is roughly 18% less than under normal VAT collection. On a €100,000 contract, you receive €100,000 net while €22,000 in VAT bypasses your accounts entirely. For companies with significant Italian PA revenue, this creates a structural cash flow problem that requires active planning.

The compounding problem is on the input side. Your own business purchases (raw materials, services, overhead) still carry VAT that you pay to your suppliers in the normal way. Under standard VAT mechanics, you would offset this input VAT against the output VAT you collect from customers during each periodic settlement. Split payment breaks this cycle. Because you never collect output VAT on transactions with public administration entities, there is nothing to offset against. Your input VAT accumulates as a growing credit position on your balance sheet rather than washing through your VAT returns.

For companies whose revenue is heavily weighted toward Italian PA contracts, this imbalance becomes persistent. The VAT credit line on your balance sheet grows quarter after quarter, representing real cash you have paid out to your own suppliers but cannot recover through the normal settlement mechanism.

Recovering VAT Credits Through the Agenzia delle Entrate

Italian tax law provides a specific remedy. Suppliers subject to split payment have a priority refund right under Article 30, paragraph 2, letter a-bis of DPR 633/1972. This provision was introduced precisely because the legislature recognized that split payment systematically generates credit positions that suppliers cannot resolve through ordinary offsets.

The refund process works as follows:

Quarterly refund claims can be submitted when the VAT credit for the period exceeds EUR 2,582.28. This is the faster route and is available specifically because of the priority status granted to split payment suppliers.
Annual refund claims are submitted with the annual VAT return for credits accumulated over the full tax year.
Priority status means the Agenzia delle Entrate should process these refunds ahead of standard refund requests, though actual processing times vary in practice.

Refund claims require supporting documentation including proof that the credits arise from split payment transactions. For refunds exceeding EUR 30,000, the Agenzia delle Entrate may request a surety bond (garanzia fideiussoria), though split payment suppliers meeting specific reliability criteria can qualify for bond-free refunds. Check the Agenzia delle Entrate's current published guidelines for up-to-date threshold amounts.

Foreign Supplier Considerations

The cash flow drag hits foreign companies harder for two reasons. First, a foreign supplier selling into Italy but operating primarily outside the country typically has minimal Italian domestic purchases. Without significant input VAT from Italian suppliers to claim back, the credit accumulation problem is less about offset timing and more about pure cash recovery: you are paying Italian VAT on whatever local costs you do incur, with no output VAT collections to absorb it.

Second, navigating the Agenzia delle Entrate's refund procedures from outside Italy adds administrative complexity. Foreign suppliers often need to work through an Italian fiscal representative or direct VAT registration, and the documentation requirements for cross-border refund claims demand careful record-keeping.

Factor the timing gap into your financial planning. Between the date a public entity pays your net invoice and the date the Agenzia delle Entrate processes your VAT credit refund, weeks or months of working capital are tied up. For large contracts or high transaction volumes, this gap can materially affect your liquidity position. Budget for it when pricing Italian PA contracts, and build the expected refund timeline into your cash flow forecasts.

Split Payment vs Reverse Charge: Which Applies

Split payment and reverse charge are the two VAT mechanisms that shift tax remittance away from the supplier in Italian transactions. They serve a similar policy goal (securing VAT revenue) but they work differently, and they are mutually exclusive on the same transaction. Getting the distinction wrong means issuing an incorrectly formatted invoice, which creates compliance exposure on both sides. That distinction also matters because Italy's ritenuta d'acconto invoice rules reduce the supplier's cash receipt through income-tax withholding on certain professional fees, not through a VAT remittance shift. Teams mapping buyer-side deductions across jurisdictions may also want to compare Turkey's KDV tevkifat invoice requirements, where part of the VAT rather than the supplier's income tax is withheld from payment.

The core difference is straightforward:

Split payment: The supplier charges VAT on the invoice as normal. The buyer (a public administration entity) pays the taxable amount to the supplier but diverts the VAT portion directly to the Treasury.
Reverse charge: The supplier does not charge VAT on the invoice at all. The buyer self-assesses the VAT and accounts for it through their own VAT return, simultaneously recording it as output tax and (where entitled) input tax.

The Priority Rule

When a transaction could theoretically fall under both mechanisms (for example, a cleaning service provided by a domestic company to a public administration entity) reverse charge takes priority. The supplier issues the invoice without VAT, and the PA buyer handles the tax through the standard reverse charge procedure. Split payment does not apply.

This priority rule is codified in Article 17-ter of the Italian VAT Decree (DPR 633/72), which explicitly excludes transactions already subject to reverse charge under Article 17.

Common Scenarios

Standard domestic supply of goods to a PA entity. No reverse charge provision covers generic goods supplies, so split payment applies. The supplier charges VAT; the PA entity splits the payment.

Construction or building maintenance services to a PA entity. These fall under the domestic reverse charge provisions of Article 17, paragraph 6. Reverse charge takes priority. The supplier invoices without VAT regardless of the buyer's PA status.

Cleaning services to a PA entity. Same logic as construction: reverse charge under Article 17, paragraph 6 applies first.

Intra-EU supply of goods to an Italian PA entity. The supply is governed by the intra-EU reverse charge rules under Article 17, paragraph 2. The foreign supplier issues an invoice without Italian VAT, and the PA entity accounts for the tax via reverse charge. Split payment is not relevant here. For a broader look at how reverse charge invoicing works in practice across the EU, the mechanics follow a consistent pattern even though country-specific rules vary.

Why the Distinction Matters Beyond Invoice Formatting

The financial consequences differ substantially. Under split payment, the supplier did charge VAT on the invoice but never collected it from the buyer. This creates a structural VAT credit position: the supplier has output VAT on their books with no corresponding cash receipt, and they must recover it through their VAT return or request a refund. Under reverse charge, the supplier never charged VAT in the first place, so no credit position arises from the transaction itself.

For foreign companies evaluating their Italian VAT obligations, correctly identifying which mechanism applies determines not just how you format the invoice, but whether you will accumulate VAT credits that require active recovery from the Italian tax authorities.

The 2025-2026 Regulatory Timeline

Split payment's scope is not static. Two regulatory shifts define the current period, and both demand attention from any business invoicing Italian public entities.

July 1, 2025: FTSE MIB-listed companies removed from scope. As of this date, companies listed on Italy's FTSE MIB index are no longer subject to split payment. Invoices issued to these entities on or after July 1, 2025 follow standard VAT procedures, meaning the buyer pays VAT directly to the supplier rather than to the Treasury. If you supply goods or services to large Italian corporates, verify the updated entity lists published by the Ministry of Economy and Finance. A buyer that required split payment invoicing in June 2025 may require a standard VAT invoice in July.

June 30, 2026: EU authorization expiry. Italy's legal authority to operate the split payment mechanism comes from Council Implementing Decision (EU) 2023/1552, which expires on June 30, 2026. Split payment is a derogation from the standard EU VAT Directive, so Italy cannot continue the regime without explicit renewal from the EU Council.

Italy has successfully renewed this authorization in the past, but renewal is not automatic. The Italian government must submit a formal application before the expiry date, and the EU Council must approve it. As of early 2026, the outcome remains uncertain.

What happens if the authorization lapses. If Italy does not secure renewal by June 30, 2026, all transactions currently subject to split payment would revert to standard VAT collection. The practical consequences are significant:

Invoice formatting reverts to standard procedures, with VAT payable by the buyer to the supplier rather than split to the Treasury
Cash flow planning changes materially, as suppliers would collect and remit VAT through normal periodic liquidations instead of facing systematic VAT credit accumulation
ERP and accounting configurations would need updating to remove split payment logic from Italian PA transaction workflows

Whether or not renewal occurs, the transition period around the expiry date will require close monitoring. Businesses with ongoing Italian PA contracts should track official announcements from both the Italian Ministry of Economy and Finance and the EU Council. Building flexibility into your invoicing workflows now, rather than scrambling to adjust in mid-2026, is the prudent approach.