What Is the Split Payment Mechanism in Italy (2026): Who Is in Scope, FTSE MIB Exclusion, Invoicing & Refunds

Last updated: 24 May 2026

If you supply goods or services to Italian public bodies, understanding what the split payment mechanism in Italy requires is no longer optional, it is a core compliance obligation that directly affects invoicing, cash flow and VAT recovery. Known in Italian as scissione dei pagamenti, split payment is the VAT withholding regime introduced under Article 17‑ter of DPR 633/1972. It requires qualifying buyers, primarily public administrations and certain state‑controlled entities, to pay the VAT element of a supplier’s invoice directly to the Italian Treasury (Erario) rather than to the supplier. The regime currently operates under an EU authorisation that runs through 30 June 2026, meaning businesses must continue to comply for the foreseeable future.

Crucially, companies listed on the FTSE MIB index have been excluded from the split payment mechanism since 1 July 2025, a change that has significant invoicing and accounting implications for their suppliers.

Key Facts at a Glance

• Legal basis. Article 17‑ter, DPR 633/1972 (Decreto del Presidente della Repubblica), as amended by subsequent legislative decrees and ministerial implementing measures.
• EU authorisation expiry. The current derogation permitting Italy to operate the split payment regime is valid through 30 June 2026.
• FTSE MIB carve‑out. From 1 July 2025, companies listed on the FTSE MIB index are no longer subject to split payment obligations as purchasers.
• Who withholds VAT. The buyer (public administration, state‑controlled entity or other listed body) withholds and remits VAT to the Erario; the supplier receives only the taxable base.
• Scope check. The Agenzia delle Entrate publishes and periodically updates official beneficiary lists identifying entities subject to split payment.
• Supplier impact. Suppliers accumulate input VAT credits they cannot offset against collected output VAT, creating a structural cash‑flow disadvantage that must be managed through refund claims or cross‑period offsetting.

What Is Split Payment in Italy: Legal Basis and How It Works in Practice

Legal Basis, Article 17‑ter DPR 633/1972 and Legislative History

The split payment mechanism in Italy was introduced by the 2015 Stability Law (Legge di Stabilità 2015, Law No. 190 of 23 December 2014), which inserted Article 17‑ter into DPR 633/1972, Italy’s principal VAT statute. The provision creates an exception to the ordinary rule that the supplier charges, collects and remits VAT: instead, where the buyer is a qualifying public‑sector entity, the buyer must pay the VAT component directly to the Treasury.

Because the mechanism represents a derogation from the EU VAT Directive (Directive 2006/112/EC), Italy requires periodic authorisation from the Council of the European Union to maintain it. The current authorisation, the most recent in a series of renewals, permits the regime to operate through 30 June 2026. An analysis commissioned by the EU Taxation and Customs Union has examined the measure’s effectiveness in combating VAT fraud and improving collection rates, broadly supporting Italy’s case for renewal.

Over the years, the scope of Article 17‑ter has been progressively widened through legislative decrees and ministerial decrees (decreti ministeriali), extending split payment obligations beyond central government bodies to local administrations, healthcare entities, state‑controlled companies and, until the 2025 carve‑out, certain large listed companies.

Mechanism Flow: Who Pays What and When VAT Reaches the Erario

The practical operation of the split payment mechanism follows a three‑step flow that every supplier to a public body needs to understand:

1. Supplier issues invoice. The supplier prepares and transmits an electronic invoice through the Sistema di Interscambio (SdI). The invoice shows the full taxable amount plus VAT at the applicable rate but includes a notation that VAT is subject to scissione dei pagamenti under Article 17‑ter DPR 633/1972.
2. Buyer splits the payment. Upon receiving and validating the invoice, the public body pays only the taxable base (net amount) to the supplier. The VAT amount is segregated internally and routed to a dedicated Treasury account.
3. VAT remitted to the Erario. The buyer remits the withheld VAT directly to the Erario, either through monthly or quarterly payment routines depending on the entity type, following the procedures set by the Agenzia delle Entrate.

From the supplier’s perspective, the critical consequence is that it never collects the VAT it has charged. Output VAT is recorded in the supplier’s books for accounting purposes but is never received as cash, a distinction that drives the refund and credit dynamics discussed later in this guide.

Types of Transactions Typically Affected

Split payment applies broadly to supplies of goods and services made to in‑scope entities. The table below summarises the most common transaction categories and their VAT treatment under the regime.

Who Is Subject to Split Payment in Italy: Full Scope, Exclusions and the FTSE MIB Carve‑Out

Knowing who is subject to split payment in Italy is the single most important compliance question for any business that sells to the public sector or quasi‑public entities. The scope has evolved through multiple legislative and administrative interventions, and the current position, valid through 30 June 2026, encompasses the following categories of buyers:

• Central government administrations. All ministries, departments and agencies of the Italian State, including constitutional organs.
• Local public administrations. Regions (regioni), provinces, municipalities (comuni), metropolitan cities and their unions.
• Healthcare entities. National Health Service bodies (Aziende Sanitarie Locali, hospital trusts, IRCCS).
• Public‑law bodies (enti pubblici). Chambers of Commerce, universities, publicly funded foundations and other autonomous entities classified as public administrations.
• State‑controlled companies. Companies directly or indirectly controlled by the State or by public administrations, as identified in the official lists.
• Companies listed on the FTSE MIB index. These were in scope until 30 June 2025, but from 1 July 2025 they are excluded (see below).

Within each category, the Agenzia delle Entrate maintains and annually updates specific lists (elenchi) of entities subject to split payment. Suppliers should not rely solely on the category descriptions above, the definitive test is whether the counterparty appears on the current published list.

FTSE MIB Split Payment Exclusion, Effective 1 July 2025

The most significant recent change to the VAT split payment Italy 2026 landscape is the exclusion of FTSE MIB listed companies. From 1 July 2025, companies whose shares are included in the FTSE MIB index of Borsa Italiana are no longer obligated to apply the split payment mechanism when receiving supplies. Industry observers regard this as a recognition that large listed corporates already pose a lower VAT‑fraud risk and that their inclusion in the regime generated disproportionate compliance costs for both the companies and their supply chains.

For suppliers, the practical effect is straightforward: invoices issued to FTSE MIB companies from 1 July 2025 onward should follow standard VAT procedures, the supplier charges VAT, the buyer pays the full invoice amount (inclusive of VAT) to the supplier, and the supplier remits VAT to the Erario through its own periodic VAT returns. Suppliers who had been invoicing these entities under split payment must update their invoicing templates, SdI configurations and accounting entries to reflect the change.

Transitional attention is required for invoices straddling the 1 July 2025 date. Early indications suggest that the governing criterion is the invoice date: invoices dated before 1 July 2025 remain subject to split payment, while those dated on or after 1 July 2025 follow standard rules. Suppliers should confirm this interpretation with their tax advisors and monitor any clarifying circulars from the Agenzia delle Entrate.

How to Check If a Counterparty Is on the Official Split Payment List

The Agenzia delle Entrate publishes searchable split payment beneficiary lists on its website. These lists are typically updated annually and categorised by entity type (public administrations, state‑controlled companies, etc.). Suppliers should adopt a routine verification procedure:

1. Access the Agenzia delle Entrate portal and navigate to the scissione dei pagamenti, elenco section.
2. Search by the buyer’s tax identification code (codice fiscale) or legal name.
3. Confirm that the entity appears on the current‑year list. If it does not, split payment should not be applied.
4. Re‑check at the start of each calendar year or when contracting with a new counterparty, as lists are updated periodically.

Practical Scenarios: Municipalities, Foundations and Healthcare Entities

Consider a supplier of medical equipment invoicing a regional hospital trust (Azienda Ospedaliera). The trust appears on the split payment list, so the supplier must issue an SdI invoice showing 22% VAT but annotated for scissione dei pagamenti. The hospital pays only the net amount; the supplier’s VAT credit increases.

By contrast, a foundation that was previously state‑controlled but has since been privatised may no longer appear on the current list. The supplier in that case reverts to standard invoicing, underscoring the importance of the list‑verification step described above.

Split Payment Invoicing, SdI and Accounting Mechanics

How to Issue an Electronic Invoice Subject to Split Payment

All invoices to Italian public administrations must be transmitted through the Sistema di Interscambio (SdI), managed by the Agenzia delle Entrate. When the split payment mechanism applies, the invoice must contain specific data elements that signal the VAT treatment to both the SdI and the recipient’s accounting systems.

The invoice body should include a clear notation, typically rendered in Italian as follows:

“IVA a carico del cessionario/committente ai sensi dell’Art. 17‑ter DPR 633/1972, scissione dei pagamenti.”

An English translation for internal reference: “VAT to be paid by the purchaser under Art. 17‑ter DPR 633/1972, split payment.”

Within the SdI XML structure (FatturaPA format), the key technical field is <EsigibilitaIVA>, which must be set to “S” (for scissione dei pagamenti). This tag tells both the SdI platform and the buyer’s automated systems that the VAT is subject to split payment and should not be paid to the supplier.

Technical documentation from the SdI portal provides the full XML schema specification. Suppliers should ensure their invoicing software or ERP system populates these fields automatically when a buyer is flagged as a split payment entity.

Accounting Entries for the Supplier (When VAT Is Not Received)

When a supplier issues a split payment invoice, the journal entries differ from a standard sale because the VAT amount is never collected. A simplified example for a €10,000 supply at 22% VAT illustrates the treatment:

• On invoice issuance:
  • Debit: Trade Receivable, €10,000 (net amount only, since VAT will not be received)
  • Credit: Revenue, €10,000
  • Debit: VAT Split Payment Suspense, €2,200
  • Credit: Output VAT Payable, €2,200
• On confirmation that the buyer has remitted VAT to the Erario:
  • Debit: Output VAT Payable, €2,200
  • Credit: VAT Split Payment Suspense, €2,200

The net effect is that the supplier’s output VAT register records €2,200, but no cash is received for it. The supplier’s periodic VAT return will show an excess of input VAT credits over output VAT collected, because the output VAT was never actually collected. This structural mismatch drives the refund dynamics discussed in the next section.

Accounting Entries for the Buyer (Withholding and Remitting VAT)

The buying public body records the purchase as follows:

• On receipt and validation of the invoice:
  • Debit: Expense / Asset, €10,000
  • Debit: Input VAT (if the body has recovery rights), €2,200
  • Credit: Trade Payable (supplier), €10,000
  • Credit: VAT Payable to Erario, €2,200
• On payment to the supplier:
  • Debit: Trade Payable, €10,000
  • Credit: Bank, €10,000
• On remittance of VAT to the Treasury:
  • Debit: VAT Payable to Erario, €2,200
  • Credit: Bank, €2,200

Where the public body has partial VAT recovery rights (for example, a municipality conducting both VATable and exempt activities), the input VAT debit is adjusted according to the entity’s pro‑rata recovery percentage.

VAT Refunds, Credits and Reconciliation for Suppliers in Italy

The most commercially significant consequence of the split payment mechanism for suppliers is the accumulation of input VAT credits that cannot be absorbed through collected output VAT. Because the supplier never receives the VAT it charges on split payment invoices, it will typically report a net VAT credit position on its periodic returns. Managing this credit efficiently is essential to preserving working capital.

Suppliers have three principal options for recovering VAT withheld under split payment:

1. Offset against other VAT liabilities. Where the supplier has output VAT from non‑split‑payment sales (e.g., sales to private‑sector customers), the accumulated input VAT credit can be offset against that liability in the same or a subsequent VAT return period. This is the simplest and fastest route, but it is available only if the supplier has sufficient taxable private‑sector turnover.
2. Cross‑tax offset (compensazione orizzontale). Under Italian law, excess VAT credits can be offset against other taxes (income tax, IRAP, social security contributions) through the F24 payment form, subject to annual thresholds and, above certain amounts, a requirement for a visto di conformità (compliance endorsement) from a qualified professional.
3. Direct refund request. Suppliers may apply for a VAT refund from the Agenzia delle Entrate. Article 38‑bis of DPR 633/1972 governs the refund procedure. Split payment suppliers benefit from a priority refund channel: they are entitled to request quarterly VAT refunds (rather than waiting until the annual return) provided they meet the conditions set out in the relevant implementing provisions.

Step‑by‑Step Reconciliation Workflow

1. Month‑end. Reconcile all split payment invoices issued during the period against the sales ledger. Confirm that each invoice correctly shows the EsigibilitaIVA = S flag and the accurate VAT amount.
2. VAT return preparation. Segregate split payment output VAT from ordinary output VAT. The return should report split payment VAT as a distinct line or annotation, depending on the format prescribed by the Agenzia delle Entrate.
3. Credit position assessment. Calculate the net credit balance. Determine whether offset against private‑sector output VAT, cross‑tax offset via F24, or a direct refund claim is the most efficient recovery route for the period.
4. Documentation. Retain copies of all SdI‑transmitted invoices, buyer payment confirmations (showing net‑of‑VAT payments), and any correspondence with the public body regarding VAT withholding.
5. Quarterly refund filing (if applicable). Submit Form TR to the Agenzia delle Entrate within the prescribed deadline for the quarter, attaching the visto di conformità if the refund exceeds the threshold requiring it.

Typical Errors and How to Avoid Them

• Incorrect EsigibilitaIVA code. Setting the field to “I” (immediate) or “D” (deferred) instead of “S” will cause the SdI to treat the invoice as a standard invoice, potentially leading the buyer to pay VAT to the supplier and triggering reconciliation discrepancies.
• Failure to update templates after FTSE MIB exclusion. Continuing to apply split payment to FTSE MIB companies after 1 July 2025 results in the supplier not receiving VAT it is now entitled to collect. The invoice will be formally incorrect, and the buyer may reject it.
• Late refund claims. Missing the quarterly Form TR deadline delays cash recovery by an additional quarter. Suppliers should diarise filing dates well in advance.
• Omitting the visto di conformità. Refund claims above the statutory threshold without the required compliance endorsement will be rejected by the Agenzia delle Entrate.

Practical Timeline for Supplier Cash Flow

Industry observers note that the typical cash‑flow lag for a supplier relying on quarterly refunds is approximately 90–120 days from invoice issuance to receipt of the refund. Suppliers can mitigate this by negotiating shorter payment terms with the public body (reducing the interval between invoice date and net‑amount payment), invoicing promptly at service completion, and using the cross‑tax offset route where available to avoid waiting for a formal refund.

Interaction With Reverse Charge and Other VAT Regimes in Italy 2026

A frequent source of confusion is the relationship between the split payment mechanism and the reverse charge (inversione contabile). Although both involve the buyer accounting for VAT rather than the supplier collecting it, they operate under different legal provisions, apply to different transaction types and have different reporting consequences.

The reverse charge in Italy 2026 applies to specific sectors and supply categories designated under Article 17, paragraphs 5 and 6, of DPR 633/1972, including construction sub‑contracting, certain cleaning services, supplies of scrap metal and energy products, and intra‑EU or cross‑border transactions. Where a transaction falls within a mandatory reverse charge category, the reverse charge provisions override split payment, even if the buyer is a public body.

The decision framework for suppliers is as follows:

1. Is the supply subject to a mandatory reverse charge provision? If yes, apply reverse charge. Split payment does not apply. Issue the invoice without VAT, noting the reverse charge article.
2. If no reverse charge applies, is the buyer on the current split payment beneficiary list? If yes, apply split payment. Set EsigibilitaIVA to “S” and annotate the invoice accordingly.
3. If neither applies, issue a standard VAT invoice and collect VAT from the buyer.

The following comparison table summarises the key differences:

Supplies that are exempt from VAT (e.g., certain financial, insurance or educational services under Article 10, DPR 633/1972) are outside the scope of split payment altogether, since there is no VAT to split.

Reporting Obligations by Entity Type: Split Payment in Italy at a Glance

Timeline of Key VAT Split Payment Italy Dates

Practical Compliance Checklist for Suppliers and Public Bodies

The following checklist provides a structured approach to ensuring compliance with the split payment mechanism in Italy for both suppliers and purchasing entities:

1. Verify counterparty status. Before issuing any invoice, check whether the buyer appears on the current Agenzia delle Entrate split payment beneficiary list. Re‑check at the start of each calendar year.
2. Confirm FTSE MIB status. If the buyer was previously subject to split payment as an FTSE MIB company, confirm its exclusion for invoices dated from 1 July 2025 onward.
3. Update invoicing templates. Ensure your standard invoice template includes the scissione dei pagamenti notation and correctly populates the SdI XML EsigibilitaIVA field as “S”.
4. Configure ERP / SdI integration. Flag split payment buyers in your customer master data so that the system automatically applies the correct XML coding and invoice text.
5. Adjust accounts receivable. Recognise that trade receivables from split payment buyers will equal the net‑of‑VAT amount. Do not expect or chase VAT payment from the buyer.
6. Record output VAT correctly. Post the output VAT to a dedicated split payment suspense account; clear it against the Erario upon confirmation of the buyer’s remittance.
7. Plan VAT credit recovery. Assess whether quarterly refund claims (Form TR), cross‑tax offsets (F24) or annual return credits best suit your cash‑flow position.
8. Obtain visto di conformità where required. For refund claims exceeding the statutory threshold, engage a qualified professional to issue the compliance endorsement.
9. Retain documentation. Keep SdI transmission receipts, buyer payment confirmations and refund application records for the statutory retention period.
10. Seek specialist advice. For complex scenarios, such as mixed reverse charge / split payment supplies, cross‑border transactions or transitional FTSE MIB invoicing, consult with an experienced Italian tax lawyer.

Conclusion: Staying Compliant With the Split Payment Mechanism in Italy

The split payment mechanism in Italy remains a defining feature of the country’s VAT compliance landscape through at least 30 June 2026. For suppliers, the regime demands precision in counterparty verification, invoicing configuration and VAT credit management. For public bodies and other in‑scope buyers, it requires disciplined segregation and timely remittance of withheld VAT to the Treasury. The FTSE MIB exclusion effective from 1 July 2025 has narrowed the scope but also introduced a transitional compliance challenge that businesses must address proactively, particularly in updating invoicing systems and SdI configurations.

Whether you are a supplier navigating cash‑flow pressures from accumulated VAT credits, a municipality managing its withholding obligations, or a listed company adjusting to its new exclusion from the regime, specialist tax guidance is essential to ensure full compliance and optimal financial management. For tailored advice on the split payment mechanism in Italy, including invoicing, refund strategies and transitional issues, consider consulting with an experienced Italian tax specialist through the Global Law Experts directory.

Sources

1. DPR 633/1972, Article 17‑ter (Normattiva)
2. Agenzia delle Entrate, Official Guidance and Split Payment Lists
3. EU Taxation and Customs Union, Split Payment Report
4. Taxathand, FTSE MIB Exclusion Alert (2025)
5. Stripe, VAT Split Payment in Italy Explainer
6. VATUpdate, Italy Split Payment Lists
7. Agenzia delle Entrate, SdI / FatturaPA Technical Documentation
8. Gazzetta Ufficiale della Repubblica Italiana