Split payment: invoicing an Italian public body without collecting the VAT

Elena runs a small IT support company and has just invoiced a town council €8,000 plus €1,760 of VAT. What lands in her bank account is €8,000, not €9,760. Nobody in the council's accounts office made a mistake: this is split payment. Suppliers who have never met it can spend days chasing a tax that the law wants the customer to pay straight to the Treasury.

What split payment changes

The starting point is the first paragraph of article 17 of Presidential Decree 633/1972: VAT is owed by whoever makes the taxable supply of goods or services. That person pays it to the Treasury for all their transactions together, after deducting the VAT on their purchases, in the ways and by the dates the decree sets.

Article 17-ter carves out an exception. Where goods or services are supplied to public administrations and the customer is not otherwise liable for the tax, the VAT is "in any case paid by them", meaning by the buyers, following the procedures and deadlines laid down by a decree of the Minister of Economy and Finance.

It helps to be clear about what stays the same. The supply is still taxable, the rate is the one that belongs to the goods or service, and the invoice still shows the net amount, the rate and the tax. What moves is the money: the tax no longer passes through the supplier's account on its way to the State.

The change is felt above all in cash flow. Under the normal rules a supplier collects VAT from customers and holds it until the periodic settlement. With split payment that money never arrives: the supplier receives the net figure and has to fund, from other resources, the VAT already paid to its own suppliers.

Who applies split payment: public administrations

The first paragraph of article 17-ter does not list the administrations by name. It points to those defined in article 1, paragraph 2, of Law 196 of 31 December 2009. That is a public-finance definition, written for the State budget, which the VAT legislator borrowed to mark out where the mechanism applies.

For a supplier the practical question is different: how do you know whether a customer is in or out? The Department of Finance explains that it does not publish a list of the public administrations bound by split payment, because the rules follow those on compulsory e-invoicing to public bodies under Law 244/2007.

The reference it gives is therefore the Index of Public Administrations at indicepa.gov.it. It adds one warning: entities classified as "Gestori di pubblici servizi", public service operators, must be left out. They appear in the Index but fall outside compulsory public-sector e-invoicing, and so, by that route, outside split payment.

In practice a look at the Index does two jobs. It confirms that the customer is a public administration, and it gives you the code of the office the e-invoice has to reach. If you deal with many different bodies, keep for each customer a screenshot or extract of what you checked, together with the date you checked it.

The other bodies and companies in paragraph 1-bis

Paragraph 1-bis extends split payment to entities that are not public administrations in the strict sense but are tied to the public sector through ownership or control. This is the trickiest part for suppliers, because many of these customers are ordinary limited companies that look, from the outside, exactly like any private client.

Both 70% thresholds are written as "not less than", so a public stake of exactly 70% is enough. The text also speaks of a "combined" percentage, which means adding up the holdings of several public shareholders. A company owned 25% each by three town councils reaches 75% and falls under letter c).

For the controlled companies of letters a) and b), the text refers to the notions of control in article 2359 of the Civil Code, which this course has not read and so does not summarise. Where a group structure is not obvious, the safest route is the customer's written statement, described a little further on.

Letter d) was deleted by Decree-Law 84 of 2025. The update note in the Official Gazette states that the deletion takes effect from 1 July 2025 for transactions invoiced from that date. A customer that came under split payment only through that letter now receives invoices on which the supplier collects the VAT in the ordinary way.

That still leaves the question of whether a given customer belongs to one of these categories. Paragraph 1-quater answers it: when the supplier asks, the customer must issue a document stating that it is one of the entities covered by article 17-ter. A supplier holding that statement is required to apply split payment.

The statement therefore cuts both ways. It protects a supplier who relies on written information from the customer, but it also binds that supplier: once it is on file, invoicing in the ordinary way is no longer an option. Ask for it when the relationship starts and file it with the contract or purchase order.

When split payment does not apply

The first exclusion sits in the first paragraph itself. Split payment covers transactions where the customer is not liable for the tax. If some other VAT rule already makes the customer liable, as the reverse charge does, the condition is not met and split payment stays out of the picture. The second module comes back to this crossover.

Paragraph 1-quinquies leaves out public bodies that manage collective land, but only for goods and services connected with managing the collective rights of civic use over that land. Other supplies to those same bodies remain under the general rule of article 17-ter.

The exclusion that matters to most readers is in paragraph 1-sexies. It removes from split payment the services supplied to the entities of paragraphs 1, 1-bis and 1-quinquies whose fees are subject to final withholding tax or to the advance withholding of article 25 of Presidential Decree 600/1973.

In practice, a professional who bills a town council for fees on which the council withholds income tax collects the VAT just as with any other client. The legislator avoided stacking two deductions on the same invoice, the withholding on the fee and the VAT diverted to the Treasury, which would have left the professional with too little in hand.

Finally there is a time limit. Paragraph 1-ter provides that the article applies until the special derogation granted by the Council of the European Union under article 395 of Directive 2006/112/EC expires. The text read for this course gives no expiry date, so it is worth checking every year.

The invoice to a public body

Invoices to public administrations are electronic and travel through the Exchange System, the SdI. The page in which the Revenue Agency addresses its own suppliers points out that every invoice must carry the Unique Office Code, also called the IPA code, in field 1.1.4 of the file layout, named "Codice Destinatario".

The Unique Office Code is what lets the SdI deliver the document to the right desk. One administration may have many, one for each office that receives invoices; get it wrong and the invoice reaches people who never ordered anything. You find it in the Index of Public Administrations or on the purchase order.

The same page mentions two traceability codes: the tender identification code, CIG, save for the exemptions in Law 136/2010, and the unique project code, CUP, for invoices relating to public works. The Agency warns that it cannot pay invoices lacking the CIG and CUP where they are required.

A missing CUP can be added after issue, through the code-integration service in the reserved area of the Fatture e Corrispettivi portal. The page describes no equivalent service for the CIG, so check it against the order before you send the invoice, not after the first reminder goes unanswered.

The ministerial decree implementing article 17-ter also says how the invoice should flag a split-payment transaction. This course has not read that decree and does not repeat its content: invoicing software for public customers and the compilation guide published by the Agency show how to fill in the document.

The VAT the supplier never collects

On the supplier's side, the most visible effect is on the periodic settlement. The tax on split-payment invoices is paid by the customer, so the supplier does not add it to the tax it owes. It does, however, keep deducting the VAT paid on its own purchases, under the ordinary rules of article 19.

A business that works almost only for public bodies therefore ends up with a built-in VAT credit. Every month it deducts input tax, but it has little or no output tax to set that against. The credit rolls from one settlement to the next and, if nobody manages it, ties up cash the business has already advanced to its suppliers.

Article 30 of Presidential Decree 633/1972 takes this into account. Among the cases in which the deductible surplus shown in the annual return can be reclaimed, it lists businesses whose sales carry lower rates than their purchases, and in making that comparison it counts split-payment transactions as well.

The same letter of article 30 also counts reverse-charge transactions under the fifth, sixth and seventh paragraphs of article 17. The article further sets a minimum amount for a refund, still expressed in lire. This course does not convert it into euros: check the exact conditions against the instructions for the annual VAT return.

Paying the split tax over is the customer's job. The Agency's tax calendar lists it, for instance, among the deadlines of 16 January 2026, as payment of VAT due from public administrations that are not VAT-registered, following split payment.

The detailed entry concerns public bodies and central government administrations that make unified payments on form F24 EP, and it gives tax code 620E. For bodies buying in the course of a commercial activity the entries read here give no code: anyone who needs one should look it up in the Agency's official tax calendar.

For the supplier those deadlines are useful to know rather than binding. If a public body fails to pay the tax over, article 17-ter places the payment on the body. The supplier's task is to issue a correct invoice, with the tax shown and with the codes that allow the office to pay it.

Checks before issuing the invoice

• Is the customer an administration in the IPA Index that is not classified as a public service operator?
• Or does it fall under paragraph 1-bis: public economic body, foundation or company at least 70% publicly owned, or controlled?
• Have I asked for, and filed, the paragraph 1-quater statement?
• Is the service paid through a fee subject to withholding, which paragraph 1-sexies excludes?
• Is the customer liable for the tax under another rule, for example the reverse charge?
• Are the Unique Office Code, the CIG and, for public works, the CUP in the file?
• Is the growing VAT credit built into the cash-flow plan?

The rules described here are those of Presidential Decree 633/1972 as it stands in 2026. The consolidated VAT act adopted by Legislative Decree 10/2026 repeals that decree from 1 January 2027, so for invoices dated in that year the article references will need checking against the new text.