Periodic settlement, F24 payment and the December advance

A consultant in Padua owes 4,800 € of VAT for the third quarter. She pays 4,800 € on 16 November and thinks she is up to date. She is 48 € short: as an ordinary quarterly filer she had to add 1 % as interest. Six weeks later comes a second payment she had not planned for, the December advance.

What a settlement computes

VAT-registered businesses settle and pay VAT periodically, monthly or, in some cases, quarterly. The Agenzia adds that monthly settlement is the rule for most taxpayers. Quarterly settlement is an option with conditions, which we test further on.

The settlement itself is a subtraction. On one side, the VAT that became chargeable in the month or quarter, as it results from the entries made or to be made in the registers of issued invoices or of takings. On the other, the VAT on purchases for which the right to deduct is exercised in that same period.

Two adjustments complete the result. Any credit from the previous period is subtracted. Any debt from the previous period below 100 euros, which was not paid at the time, is added. The sum of these four items gives the final result of the period.

• Start from the VAT chargeable in the period, from the registers of issued invoices or takings
• Subtract the VAT on purchases whose deduction is exercised in the same period
• Subtract any credit carried over from the previous period
• Add any debt below 100 euros carried over from the previous period

The result may be a debt or a credit. A debt of 100 euros or more is paid to the Treasury. A debt below 100 euros is not paid at once: it is carried forward and added to the next period. A credit is deducted in the next period.

The small debt is not forgiven, only postponed. The Agenzia sets two limits: the amount that does not exceed 100 euros must in any case be paid by 16 November of the same year, and the one relating to December by 16 January of the following year. A chain of small debts cannot run on indefinitely.

A relief exists for monthly filers who entrust their VAT bookkeeping to a third party. They may settle on the data of the second preceding month instead of the preceding one. The accountant thus gets an extra month to close the figures, at the price of a longer lag between the sale and the payment.

Note what the settlement does not do. It does not decide whether a purchase gives a right to deduction: that is decided upstream, when the purchase is recorded. It only adds up what the registers contain. A wrong register gives a wrong settlement, however carefully the subtraction is done.

Monthly by default, quarterly by option

Quarterly settlement may be chosen by taxpayers whose volume d'affari in the previous calendar year did not exceed a threshold. The threshold depends on the activity. For the self-employed and for businesses whose object is the supply of services it is 500,000 euros; for businesses carrying on other activities, 800,000 euros.

The wording is not above, so a volume d'affari exactly equal to the threshold still opens the quarterly option. The test looks at the previous calendar year, and the volume d'affari is the VAT turnover defined in the first module, not the cash received.

The option has a price. For an ordinary quarterly filer the tax due is increased by 1 % as interest. The State lends the business the time between the monthly rhythm and the quarterly one, and charges for it. On a quarterly debt of 10,000 euros the surcharge is 100 euros.

The option is notified in the first annual VAT return filed after the choice. It takes effect from the year in which it is exercised and lasts until it is revoked, unless the threshold is exceeded. A business that grows past the threshold returns to the monthly rhythm without having to decide it.

Some categories settle quarterly regardless of their volume d'affari and without the 1 % interest. The Agenzia lists fuel distributors, road hauliers carrying goods for third parties, businesses supplying services to the public, and those practising health arts and professions. They are called special quarterly filers.

Whether the quarterly option is worth having is not a matter of principle. It saves eight settlements a year and gives the business the use of the tax for longer. It costs 1 % of every quarterly debt. A business that is often in credit, and so rarely pays, bears almost none of that cost.

The choice also changes the rhythm of the work. A monthly filer closes its registers twelve times a year and learns quickly when a figure is wrong. A quarterly filer checks three months of entries at once, and an error found late is corrected in a larger batch. Fewer settlements also means fewer occasions to catch a mistake.

Deadlines by type of filer

Monthly filers settle and pay any VAT due by the 16th of the following month: January by 16 February, February by 16 March, and so on. August is the exception: payments falling due from 1 to 20 August may be made by the 20th, with no surcharge. July's VAT is therefore paid by 20 August.

Ordinary quarterly filers pay the first three quarters by the 16th of the second month after each quarter. The Agenzia gives the dates as 16 May, 20 August and 16 November. The fourth quarter is paid within the annual adjustment, by 16 March of the following year.

For the fourth quarter of ordinary quarterly filers the Agenzia notes a possibility: using the longer deadlines provided for paying the taxes due on the income tax return. That route has its own rules, not covered here; the date to plan around remains 16 March.

Special quarterly filers pay on the same three dates as ordinary ones. Their fourth quarter is due earlier, by 16 February of the following year instead of 16 March, net of any advance paid by 27 December. That advance is the subject of the last section.

The liquidazione-iva-periodica calculator applies these rules: it computes the result of a period, adds the 1 % for an ordinary quarterly filer and shows the statutory deadline. It shows the date in law; it does not move it when it falls on a Saturday or a public holiday.

Paying by F24, online only

Periodic VAT is paid with the F24 form, and only online. The Agenzia's wording is explicit: the F24 is used exclusively by telematic means. A VAT-registered business cannot settle its periodic VAT at a bank counter with a paper form.

Online payment can be made by the business itself or through an authorised intermediary. The form is the same one used for many other taxes, and the VAT payment is identified in it by a tax code. For the December advance, the codes are 6013 for monthly filers and 6035 for quarterly ones.

Payment and reporting are two different duties. Besides paying, VAT taxpayers communicate the summary data of their periodic settlements. The report, the Comunicazione delle liquidazioni periodiche IVA, is sent every quarter, online only, by the last day of the second month after each quarter.

Monthly filers are not spared that report. They pay every month and report every quarter. The exemption covers only those not required to file the annual VAT return or to make periodic settlements, provided the conditions for exemption hold throughout the year.

A simple calendar covers the year: twelve monthly or four quarterly payment dates, four dates for the quarterly report, 27 December for the advance, and 16 November and 16 January, by which small debts carried forward must in any case be paid. Nothing else here has a date of its own.

The December advance

By 27 December each year, VAT-registered businesses pay an advance. For monthly filers it is an advance on the December payment; for quarterly filers, on the payment due for the fourth quarter. The advance may be offset against tax or contribution credits available to the business.

The advance can be computed by three methods, chosen according to what is most convenient. The historical method takes 88 % of the payment made, or that should have been made, for the same month or quarter of the previous year. The forecast method takes 88 % of the VAT expected to be due.

Under the historical method the base depends on the type of filer. For monthly filers it is the debt of the December settlement of the previous year. For ordinary quarterly filers it is the debt from the annual VAT return. For special quarterly filers it is the settlement of the fourth quarter of the previous year.

The analytical method works on actual transactions up to 20 December. The advance is 100 % of a special settlement that takes in the VAT on issued invoices and on purchases recorded since 1 December for monthly filers, or since 1 October for quarterly ones, and on transactions made but not yet recorded since 1 November.

Not everyone pays it. Businesses not required to make periodic settlements are outside it, as are those lacking a historical or a forecast base, for instance a business that started during the year or closed the previous year in credit. No payment is due when the advance would not exceed 103.29 euros.

Two rules keep the advance from being counted twice or charged twice. Ordinary quarterly filers do not add the 1 % interest to it. And the advance paid is then subtracted: from December's VAT for monthly filers, in the annual return for quarterly filers, and from the fourth-quarter settlement for special quarterly filers.

The choice of method is a cash decision, which the Agenzia leaves to convenience. A shrinking business pays less under the forecast method; one whose reference period was light may prefer the historical one. The analytical method asks for work in the busiest week of the year, in exchange for an advance built on actual figures.