Observatory › Value added tax › Input VAT: more time, and a new rule for year-end invoices

Input VAT: more time, and a new rule for year-end invoices

The corrective decree implementing the tax reform, given final approval on 4 August 2026, restores the second following year as the deadline for deducting and recording, and would allow invoices received in the following year to be attributed to the year of the transaction. However, the decree is not yet in the Official Gazette and its commencement remains the open question.

On 4 August 2026 the Italian Council of Ministers gave final approval to the legislative decree laying down «Supplementary and corrective provisions on income taxes, inheritance and gift tax, value added tax and excise duties, as well as on tax controls, cooperative compliance and simplification», the fourth corrective decree issued under the tax reform enabling act (Law no. 111 of 9 August 2023). Two of its measures concern the right to deduct input VAT and bear on the day-to-day management of every taxable person exercising that right: an extension of the time limits and a new rule for invoices straddling the year end. However, as at the date of this note the decree does not appear to have been published in the Official Gazette, and the Council of Ministers press release does not describe its technical content: what follows reflects early readings of the approved text and will have to be checked against the final version.

The rule currently in force

The right to deduct arises when the tax becomes chargeable. Article 19(1) of Presidential Decree no. 633 of 26 October 1972 provides that the right is to be exercised, at the latest, in the return for the year in which it arose and under the conditions existing at that time. As regards formal requirements, Article 25 of the same decree requires the purchase invoice to be recorded before the periodic settlement (liquidazione periodica, the monthly or quarterly VAT computation) in which the deduction is taken and, in any event, by the deadline for filing the annual return for the year in which the invoice was received.

This framework is not the original one: it derives from Article 2 of Decree-Law no. 50 of 24 April 2017, converted with amendments by Law no. 96 of 21 June 2017, which replaced the earlier reference to the return for the second following year. In Circular no. 1/E of 17 January 2018 the Italian Revenue Agency (Agenzia delle Entrate) clarified that exercising the right requires two conditions to be met together: the tax must be chargeable and the invoice must be held. From this follows the consequence that still weighs most heavily today: an invoice for a December purchase but received in January cannot be attributed to the year of the transaction; the deduction may be taken only from the settlement for the month of receipt and by the deadline for the return for the year of receipt. Recording in a dedicated section of the purchase register, which the same circular governs, concerns a different situation – an invoice received during the year but not recorded by 31 December – and allows it to feed into the annual computation for the year of receipt without being included in the current year’s periodic settlements.

First measure: the time limit returns to the second following year

The corrective decree amends both time limits in a coordinated way, the substantive one for the deduction and the formal one for recording, because extending the time limit in Article 19 alone would leave the taxable person without the accounting mechanism needed to exercise the right. The two limits remain differently anchored, however: the deduction may be exercised by the deadline for filing the return for the second year following the one in which the right arose, whereas the invoice may be recorded by the deadline for the return for the second year following the year of receipt. In ordinary cases the two coincide; they diverge where the invoice is received in a year other than the year of chargeability, and it is in those cases that the calculation must be redone document by document.

Second measure: invoices straddling the year end

This is the change with the greatest cash-flow impact, and it has attracted less attention than the extension of the time limits. According to early readings of the approved text, an invoice relating to a transaction carried out in one year but received in the following year will, provided it arrives before the return for the year in which the right arose is filed, be deductible in that same return, subject to its being recorded in a dedicated section of the purchase register. This would remove the bar on backdated attribution which, since 2017, has required the deduction of year-end invoices to be deferred by a year, releasing cash that is far from marginal for businesses with significant December purchasing. The measure is presented as an alignment with the EU principle of fiscal neutrality, under which the right arises when the tax becomes chargeable and possession of the document conditions only its exercise.

A concrete example

Under the current rules, an invoice received in 2026 and relating to a transaction on which the tax became chargeable in that same year must be recorded, and the tax deducted, by 30 April 2027 at the latest, the deadline for filing the VAT return for 2026. With the time limit restored to the second following year, the same tax could be deducted by the deadline for the return relating to 2028, that is, by 30 April 2029. The common description «two-year time limit» is therefore approximate: the statutory reference is to the return for the second following year, so that the effective window ranges from a little over two years to more than three, depending on the month in which the tax became chargeable.

The open question: from when it applies

This is the most delicate issue and, as matters stand, one without a settled answer. Early readings of the approved text indicate that the commencement is not expressly regulated and that transitional provisions have been called for, both to extend the new rules to rights already accrued and to protect deductions recovered by means of a supplementary return. The precedent points the other way: Article 2 of Decree-Law 50/2017 expressly delimited the application of the restriction. In the absence of a commencement provision, the position would have to be reconstructed by interpretation in the light of Article 11 of the preliminary provisions to the Civil Code and Article 3(1) of Law no. 212 of 27 July 2000, with the result that the extended time limit could be relied on for periods still open at the date of entry into force, but not to reopen those already time-barred. However, this is a reconstruction and not a statutory rule: before reopening input VAT not previously deducted, it is advisable to await the published text and official guidance.

What remains unchanged

Extending the time limit does not affect the conditions for deduction: restrictions relating to the nature of the goods and services and to the status of the taxable person remain in place, as do the specific exclusions from the right and the pro rata (partial exemption) calculation. Precisely because the time limit is being extended, the wording of Article 19(1) requiring the right to be exercised under the conditions existing when it arose deserves attention: the applicable deductible percentage remains that of the year in which the right arose, not that of the year in which the invoice is recorded. Businesses operating under a pro rata will therefore need to retain, for each document deducted late, evidence of the percentage for the relevant year, which two or three years on will almost always differ from the current one. Nor is the longer period an amnesty: an invoice never received, or relating to a non-existent transaction or to a purchase not made for the purposes of the business, does not become deductible merely because more time is available. Finally, the risk of findings on the penalty side remains, under Article 6(6) of Legislative Decree no. 471 of 18 December 1997, where the deduction is taken out of time or in excess of the amount due, with the possibility of voluntary correction under Article 13 of Legislative Decree 472/1997.

Coordination with the VAT Consolidated Act

The provisions of the VAT Consolidated Act, enacted by Legislative Decree no. 10 of 19 January 2026 (Ordinary Supplement no. 4 to Official Gazette no. 24 of 30 January 2026), apply from 1 January 2027; the decree itself entered into force on 31 January 2026. It reorganises Presidential Decree 633/1972 and Decree-Law no. 331 of 30 August 1993 into 171 articles without altering the substantive rules. For that very reason it was finalised reflecting the framework then in force, namely the one-year limit: the first point to check in the text published in the Official Gazette is therefore whether the corrective decree also amends the corresponding provisions of Legislative Decree 10/2026, or only Articles 19 and 25 of Presidential Decree 633/1972. On the second hypothesis the extended time limit would risk applying for 2026 alone and being absorbed back into the Consolidated Act from 1 January 2027. However, the timetable itself should be treated with caution: the consolidated acts enacted by Legislative Decrees 173/2024 and 174/2024 have already been deferred once, and a further postponement is not a remote possibility.

What to do now

Until the decree enters into force, which follows publication in the Official Gazette, nothing changes: time limits that have already expired do not reopen by virtue of approval by the Council of Ministers. It is, however, an appropriate moment to carry out a systematic review of purchase invoices received but not yet recorded, distinguishing them by year of chargeability and year of receipt, and to identify the items whose time limit expires on 30 April 2027. For invoices both chargeable and received in 2025 the deadline already fell on 30 April 2026: in those cases the route is not the corrective decree but, if anything, a claim for repayment of tax not due under Article 30-ter of Presidential Decree 633/1972, an avenue on which official guidance and case law are not fully aligned and which must be assessed case by case. In dealings with suppliers it is advisable to request the issue and transmission of any missing documents, without prejudice to the customer’s own duty to report unissued invoices to the Revenue Agency under Article 6(8) of Legislative Decree 471/1997: a delay does not forfeit the deduction, since the right arises with chargeability and the recording deadline is anchored to the year of receipt, but it shifts the year of attribution and pulls the two time limits apart, with consequences for cash-flow planning. Once the text is published, the first point to check will be precisely whether the decree contains commencement rules at all: on that, or on their absence, depends the input VAT for which recovery is actually available.

• Council of Ministers no. 185 of 4 August 2026 – final approval of the supplementary and corrective legislative decree on income taxes, inheritance and gift tax, VAT, excise duties, controls, cooperative compliance and simplification.
• Law no. 111 of 9 August 2023 – enabling act delegating the tax reform to the Government.
• Presidential Decree no. 633 of 26 October 1972, Articles 19(1), 25 and 30-ter – exercise of the right to deduct, recording of purchase invoices and repayment of tax not due.
• Decree-Law no. 50 of 24 April 2017, Article 2, converted with amendments by Law no. 96 of 21 June 2017 – shortening of the time limits for deduction and recording.
• Italian Revenue Agency, Circular no. 1/E of 17 January 2018 – the twin requirements of chargeability and possession of the invoice; year-end invoices.
• Legislative Decree no. 10 of 19 January 2026 – VAT Consolidated Act, Official Gazette no. 24 of 30 January 2026, Ordinary Supplement no. 4; provisions applicable from 1 January 2027.
• Article 11 of the preliminary provisions to the Civil Code and Article 3(1) of Law no. 212 of 27 July 2000 – temporal effect of tax legislation.
• Legislative Decree no. 471 of 18 December 1997, Article 6(6) and 6(8), and Legislative Decree no. 472 of 18 December 1997, Article 13 – penalties relating to deduction, the duty to report unissued invoices and voluntary correction.

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• Decree-Law 200/2025, converted by Law 26/2026 – deferral of the consolidated acts enacted by Legislative Decrees 173/2024 and 174/2024.
• Note: as at the date of this note the corrective decree does not appear to have been published in the Official Gazette. The Council of Ministers press release does not describe its technical content, which here reflects early readings of the approved text and must be checked against the final version.