Domestic reverse charge: when the buyer completes the invoice and owes the tax

Marco installs electrical systems and has just sent a building firm a €20,000 invoice without a cent of VAT on it. The customer saves nothing: it must complete that invoice with €4,400 of tax and enter it both as a sale and as a purchase; it may also send the SdI an integration document, with no obligation to send it to the supplier.

Reverse charge: who owes the tax

Under the general rule in the first paragraph of article 17, the seller owes the tax. The fifth paragraph departs from it, starting with gold: for taxable supplies of investment gold, and of gold material or semi-finished products of a purity of 325 thousandths or more, the buyer pays the tax if it is a taxable person in Italy.

The same paragraph sets out the procedure that the sixth paragraph then applies to other sectors. The seller issues the invoice without charging tax, marked "inversione contabile" and, where relevant, citing the rule. The buyer completes it with the rate and the tax, and records it both among its sales and among its purchases.

The text sets the timing of the entry. The completed invoice goes into the register of invoices issued, or of daily takings, within the month of receipt, or later but no more than fifteen days after receipt and with reference to the month of receipt. For deduction purposes it is also entered in the purchase register.

Why shift the liability to the buyer? In sectors where tax charged by the seller is at risk of never reaching the Treasury, putting the debt and the deduction in the same hands removes the chance to pocket the VAT and vanish. For a buyer with full deduction rights, the tax goes in and out of the same settlement.

The sixth-paragraph transactions

The sixth paragraph of article 17 lists the domestic transactions to which the gold procedure also applies. For a small business the decisive entries are the construction ones; the rest concern specific sectors, from electronics to energy, where traders usually already know how their own market works.

Letter a) follows the contracting chain. It covers a construction subcontractor working for a building or renovation firm, for the main contractor or for another subcontractor. The text excludes services supplied to a general contractor to whom the client has entrusted the whole of the works.

Letter a-ter) draws its line differently: it does not mention subcontracting at all, only the type of service. Cleaning, demolition, installation of systems and finishing, provided they relate to buildings. An electrician installing a system in a warehouse for a business falls here even when working directly for the owner.

One underlying condition runs through the whole mechanism, though: the customer must be able to account for the tax as a taxable person. Someone installing a system in a private consumer's home has nobody on the other side who can complete the invoice, and charges VAT under the general rule.

Letter a-bis) concerns sellers of buildings or parts of buildings in the cases covered by items 8-bis and 8-ter of article 10, and only where the seller has opted for taxation in the deed. Without that option written into the deed the letter does not apply, and the treatment of the sale has to be found elsewhere.

Two letters hang on a European decision. Letter a-quater), on consortia awarded public contracts, and letter a-quinquies), on logistics, take effect only once the EU Council grants a derogation or authorisation. The text read here does not say whether it has been granted, so check before applying them.

A date written into the text: 31 December 2026

One sentence of article 17 deserves a place in your calendar. Letters b), c), d-bis), d-ter) and d-quater) of the sixth paragraph apply to transactions carried out up to 31 December 2026. Mobile phones, consoles, tablets, laptops, microprocessors, emission allowances, certificates and gas or power sold to resellers therefore have an end date.

At the same moment Presidential Decree 633/1972 gives way to the consolidated VAT act of Legislative Decree 10/2026, which repeals it from 1 January 2027. This course has not read whether or how the new text carries those letters over, so anyone buying or selling these goods must recheck the rule for invoices from 2027 onwards.

The practical advice is simple. A December 2026 invoice and a January 2027 invoice for the same batch of tablets could follow different rules, because what counts is the date the transaction takes place. If you trade in these markets, make sure your software switches rule on the right day.

The e-invoice and the TD16 document

Under the reverse charge, invoices between businesses established in Italy are still electronic. In its frequently asked questions the Agency explains that for domestic purchases the buyer receives an e-invoice bearing one of the codes provided for the "N6" nature, because the transaction falls under the reverse charge.

An e-invoice once received cannot be altered. Circular 13/E of 2 July 2018, cited in the same answer, describes an alternative way of completing the invoice: preparing a separate document, attached to the invoice file, holding the data needed to complete it and the details of the invoice being completed.

That document can be sent to the Exchange System under document type code TD16, "Integrazione fattura reverse charge interno". The seller section carries the details of the actual supplier; the buyer section carries the details of the business completing the invoice and sending the file.

Since 1 October 2020, another answer adds, self-billed documents completing domestic reverse-charge purchases must use code TD16 rather than the code for an ordinary invoice. Businesses using the Agency's free storage service also find the document placed into storage automatically.

The TD16 does not go to the supplier. The Agency points out that there is no obligation to send the self-billed document to the seller: it exists for the buyer, to account for the tax and keep a record. A further answer warns that the SdI rejects a TD16 showing a supplier VAT number closed more than five years earlier.

For purchases from abroad the same answers point to other codes, TD17 for services and TD18 for goods bought from other EU countries. That is a separate family of transactions, with its own place-of-supply and invoicing rules, which this module leaves aside: here only the reverse charge between two Italian businesses matters.

The effect on the VAT settlement

For the buyer, completing the invoice produces two entries of the same amount. The tax recorded among sales joins the month's output VAT; the same tax, recorded among purchases, joins the deductible VAT. With full deduction the two cancel out and the settlement does not move by a single euro.

The balance breaks when deduction is restricted, for instance because the goods or service are used for exempt supplies or are not wholly business-related. The output tax then counts in full while the deductible part is smaller, and the gap becomes a real cost for the buyer.

On the supplier's side the picture resembles split payment. Marco has no output tax on reverse-charge invoices, yet he keeps paying VAT on the materials he buys. If he works almost entirely as a subcontractor, his settlements drift towards a credit.

That is why article 30 counts transactions under the fifth, sixth and seventh paragraphs of article 17 among those that can support a refund claim for the deductible surplus when sales carry lower rates than purchases. It is the same route as for split payment, with the same conditions to check in the annual return.

How these amounts appear in the quarterly settlement report is covered in the ActioFin course on reporting and filing VAT. The one point to keep here is that a reverse-charge purchase is not a sale by the buyer, even though its tax ends up in the sales register.

Reverse charge or split payment: which wins

A business working for public bodies can meet both mechanisms in the same week. Article 17-ter supplies the test: split payment covers transactions where the customer is not liable for the tax. If the customer is liable under the reverse charge, the condition fails and completing the invoice takes precedence.

Letter a-quinquies) says so expressly for logistics: it does not apply to transactions with public administrations and the other bodies and companies in article 17-ter. In the other cases the question is whether the public customer is buying as a VAT-taxable person, that is, in the course of a commercial activity.

A body buying solely for its institutional functions is in no position to complete an invoice as a taxable person, and the reverse charge, which assumes a taxable buyer, finds nobody to apply to. When the customer's status is unclear, ask in writing how it intends to account for the tax and keep the reply.

• Does the service fall under a letter of the sixth paragraph, or under the gold rule of the fifth?
• Is the customer a taxable person in Italy, buying in that capacity?
• For letters a-quater) and a-quinquies), has the EU authorisation been granted?
• For letters b), c), d-bis), d-ter) and d-quater), does the transaction take place by 31 December 2026?
• Does the invoice carry the wording "inversione contabile" and an N6 nature code?
• Has the completion, TD16 included, been recorded within the month or within fifteen days of receipt?