The annual VAT return and the option for cash accounting

A web agency in Bari invoices 40,000 € plus 8,800 € of VAT in one quarter to clients who pay at ninety days. Halfway through the next quarter it pays the 8,800 € of tax, while its clients have so far paid it only 15,000 €. It is advancing to the Treasury money it has not yet received. A little-known option, reported in the annual return, moves the tax debt to the day the customer pays.

Who files the annual return, and within which window

The annual return closes the VAT year. It takes up every periodic settlement, reconciles them with the registers and brings out the final debt or credit. In 2026 the form is Iva/2026, which covers tax year 2025: the return always looks back at the year just ended.

Every holder of a VAT number carrying on a business, an artistic activity or a profession must file it. The duty follows from the VAT number, not from the result: a year closed in credit, or with very few transactions, is still declared unless the taxpayer falls within one of the exemptions.

The form is filed online only, between 1 February and 30 April. The window is the same whether the taxpayer sends it directly or through an authorised intermediary, and there is no paper version for VAT number holders.

The deadline moves earlier because of one specific choice. A taxpayer who wants to avoid sending the fourth-quarter return of settlements separately can put that data in the annual return, which must then be filed within February. For Iva/2026 the date was 28 February 2026, moved to 2 March because it fell on a Saturday.

The choice is a matter of organisation. A business that closes its books early saves itself one file; one that needs time until April sends the fourth-quarter return by February and files the annual return at leisure within the ordinary window.

A warning on the same page shows that the form carries rules in transition. Repeal of the provision on adjusting deductions when a scheme changes has been postponed to 1 January 2027, and for line VF70 the Agency points to the instructions of the previous year's form.

A wider caveat covers the whole course, which describes the rules applied in 2026. The VAT decree cited throughout the guidance, Presidential Decree 633 of 1972, is being replaced by the consolidated VAT Act, Legislative Decree 10 of 2026. The date from which the new text applies has not been read: lines, cross-references and deadlines will then need checking again.

Who is exempt

The list of exemptions is long and specific. For a small business three entries matter most. The first is the flat-rate scheme, when applied for the whole tax year: someone who leaves it during the year goes back to filing. The second covers those who recorded exempt transactions only.

That exemption, however, comes with conditions that cancel it. It does not apply if the taxpayer also made taxable supplies, even in an activity with separate accounts, recorded intra-EU transactions or adjusted deductions, or made purchases on which the buyer owes the tax, such as gold or scrap.

The third entry is a sole trader who has leased out their only business and carries on no other activity relevant for VAT. The remaining entries deal with special situations: the former minimum-taxpayer scheme, certain farmers, entertainment and gaming, foreign operators, occasional gatherers and associations under special schemes.

• Flat-rate taxpayers for the entire tax year
• Those who recorded only exempt transactions, with no taxable, intra-EU, adjustment or buyer-liable purchases
• Sole traders who leased out their only business and carry on no other VAT activity
• Farmers exempt from VAT formalities and the other special cases on the Agency's list

Ordinary form or the Iva base form

Next to the traditional form there is a simplified one, called Iva base. It is filed in the same way and within the same deadlines, online between 1 February and 30 April, with the same earlier February date for those who include the fourth quarter in it.

The base form is designed for taxpayers who applied the general rules of the tax. It is open to those who did not use special schemes, such as the ones for farmers or travel agencies, and who at most sold second-hand goods on an occasional basis.

The other conditions shut out anyone with foreign dealings or extraordinary operations. No intra-EU sales or acquisitions, no exports or imports, no VAT-free purchases under the plafond mechanism, no part in mergers, demergers or substantial changes of the taxable person.

One exclusion is close to home for businesses short of cash. The base form cannot be used by someone who, having missed periodic payments, fills in section VQ. A year with a skipped payment therefore requires the ordinary form, even for a business that is otherwise simple.

The return as the place where choices are recorded

Many VAT options are not requested by application: they are exercised by conduct and reported in the return. Quarterly settlement is the most common example. The option is reported in the first annual return filed after the choice, takes effect from the year it is exercised and stays until revoked.

The practical consequence follows. A business that moves to the quarterly rhythm in January does so at once, through its payments; the following year's return records the choice. Forgetting to report it does not undo the choice, but leaves the return incomplete on the very point that explains the payment dates.

The return is also where ordinary quarterly filers settle up. The fourth-quarter payment is made as part of the annual balance, by 16 March of the following year. In that same balance the quarterly filer deducts the advance paid in December.

The guidance on periodic payments adds that the fourth quarter can take advantage of the longer deadlines granted for taxes arising from the income tax return. That path follows rules of its own, outside the scope of this course: the date to plan around remains 16 March.

Cash accounting for VAT: what it moves

The cash accounting scheme for VAT, the Iva per cassa, was introduced by article 32-bis of decree-law 83 of 2012. It lets an entrepreneur or self-employed professional postpone paying the tax on sales from the moment the transaction takes place to the moment payment is received.

The rule works in both directions. The right to deduct VAT on purchases arises when suppliers are paid, no longer when their invoice arrives. A business in the scheme postpones its debt, but it postpones its credit too: the benefit exists when it collects more slowly than it pays.

The postponement has a limit. The tax becomes chargeable one year after the transaction in any case, even if the customer has not paid, unless the customer has been placed in insolvency proceedings before that date. In the same way, VAT on unpaid purchases becomes deductible once a year has passed.

The scheme does not spread to trading partners. The guidance states that a counterparty which has not itself chosen cash accounting deducts VAT under the ordinary rules, from the moment the transaction is deemed to take place, regardless of payment. The choice stays internal to the business that opts.

Who may opt, and for which transactions

There are three conditions. The taxpayer must act in the course of a business, art or profession; must have had a turnover for VAT not above two million euro in the previous year, or expect not to exceed it when starting out; and must make taxable supplies in Italy to customers who themselves act as businesses or professionals.

Non-commercial bodies may also opt for cash accounting, for whatever commercial activity they carry on. The requirement of a business customer is decisive, though: the scheme does not apply to sales to final consumers, who in any case nearly always pay at the time of purchase.

On the sales side five families of transactions are excluded. Those under special schemes, such as agriculture, the margin scheme and travel agencies; those to customers not acting as a business; those to customers liable under the reverse charge; transactions already deferred without a yearly limit; and cross-border supplies invoiced without Italian VAT.

The already-deferred transactions that are excluded are those in article 6, fifth paragraph, of the VAT decree: sales to the State, to local health authorities and to hospital bodies, and pharmacists' sales of medicines. For them, postponement to the time of payment already exists, without the one-year limit.

On the purchase side, reverse-charge purchases, intra-EU acquisitions of goods, imports and withdrawals of goods from VAT warehouses stay outside. For these transactions, deduction follows the ordinary rules even for a business that has opted for the scheme.

A taxpayer running both a special-scheme activity and an ordinary one is not shut out. It may apply cash accounting to the ordinary transactions if it opts to keep separate accounts for the activities, under article 36 of the VAT decree.

Getting in, staying in, getting out

There is no advance application form. The choice is inferred from the taxpayer's conduct, that is from the fact that it accounts for the tax on collection. It must then be reported in section VO of the VAT return for the first year in which it applies.

The option binds for at least three years. The only early exit is exceeding the two-million turnover threshold, which ends the scheme from the month or quarter after the one in which the threshold is crossed. For counting the three years, the year in which trading started counts in full.

Once the three years are over, the option remains valid year by year. It is revoked the same way it was taken up: by reporting it in the first VAT return filed after the decision. Leaving the scheme, then, also goes through the annual return.

The scheme moves the moment of chargeability and of deduction but leaves every other formality alone. Invoicing and recording stay as usual. On top of that, every invoice issued must state that it is a transaction under cash accounting for VAT pursuant to article 32-bis of decree-law 83 of 2012.

This is where the link with the first module closes. In the quarterly return, the taxable amount of a cash-accounting invoice goes on line VP2 for the period in which the transaction takes place, while the tax goes on line VP4 only in the period in which it becomes chargeable. It is the rule for invoices with deferred chargeability.

Run the numbers before opting. A business that collects at sixty or ninety days and pays its suppliers at thirty gains cash. One that collects at once and pays late loses, because its deductions are postponed too. Three years of commitment make the choice anything but reversible at will.