Split Payment: what it is, how it works and how to use the API

The split payment regime, introduced in 2015 to combat tax evasion, is a specific system intended for suppliers of Public Administration, which affects the settlement and payment of VAT.

When a supplier provides services to a public entity, the VAT is not paid by the supplier—who charges it to the customer on the invoice—but is instead paid directly to the Treasury by the customer.

The split payment obligation for Public Administration also applies to several listed companies, which are included in specific split payment lists published by the Ministry of Economy and Finance.

Let's take a closer look at how the split payment works, what suppliers of Public Administration need to indicate on their invoices, and how to resolve invoicing issues with APIs.

Split Payment: What Is It?

The split payment is a VAT payment system intended for suppliers of Public Administration, state-owned or public entity-controlled companies, and some listed companies included in the FTSE MIB index.

When split payment (literally, split payment) is applied, the value of the taxable amount and the corresponding VAT take different paths. While the value of the goods or services follows the traditional route and is paid to the seller, the Value Added Tax is paid directly by the customer, never passing through the supplier's account.

This specific tax regime was introduced by Law 190/2014 to combat VAT evasion. Initially, Italy was authorized to use split payment until June 2023, but a decision by the EU Council on July 25 of that year extended the use of this mechanism until June 30, 2026.

How Does the Split Payment Regime Work?

The split payment regime involves a specific separation of payments when goods or services are provided to Public Administration.

If the customer is a public entity or one of the companies listed in the registers published by the Ministry of Economy and Finance (MEF), the supplier does not charge VAT to the customer, as the tax is paid directly by the customer through an F24 form or other approved procedures.

In essence, VAT is separated from the rest of the transaction and automatically charged to the customer, bypassing the step where the supplier invoices the tax to the counterpart. Typically, the supplier invoices VAT to the customer and then pays it to the Treasury.

When the split payment regime is applied, however, the supplier receives payment for goods and services excluding VAT, which must be indicated on the invoice.

Professionals under the flat-rate regime, those applying withholding tax, and subjects to reverse charge or reverse invoicing, where VAT is already paid by the customer, are excluded from the split payment mechanism.

Who Is Obligated to Use Split Payment?

Public Administration is not the only final customer subject to split payment. Since 2017, this system also applies to transactions with companies controlled by Public Administrations and listed companies included in the FTSE MIB index.

In addition to public entities, universities, and the Public Administration in general, all entities listed in Article 17-ter, paragraph 1-bis of Presidential Decree 633/1972 are subject to split payment, including:

• National, regional, and local public economic entities, including special companies;
• Foundations with at least 70% public participation;
• Companies directly controlled by the State;
• Companies controlled by public administrations, publicly owned foundations, or controlled companies;
• Companies with at least 70% public participation;
• Listed companies included in the FTSE MIB index, identified in a specific list by the Ministry of Economy and Finance.

The 2024 split payment lists are available on the website of the Department of Finance, while the identification of Public Administration entities is based on the list published on the Public Administration Index website.

Electronic Invoicing and Split Payment

Invoices issued under the split payment regime for Public Administration are recorded in the VAT sales register, but the VAT shown on the invoice should not be included in the supplier's VAT settlement, as the customer directly pays the tax to the Treasury without passing it to the supplier.

This means that the invoice must be recorded with a different VAT account to prevent it from being calculated among the taxes to be paid. Another accounting method for split payment is to record a single entry where VAT is reported both as a debit and a credit.

The electronic invoice must include the statement: "Transaction subject to split payment – the seller does not collect VAT under Article 17-ter of Presidential Decree 633/1972, the purchaser is obliged to pay it to the Revenue Agency."

In the VAT Payment field, the value "S" should be indicated, referring specifically to split payment. Other than that, no special rules apply to issuing invoices under the VAT split payment regime.

How to Resolve Invoicing Issues with APIs

This exception to VAT payment creates the need for quickly and securely verifying whether the company you are invoicing is subject to the split payment regime.

For businesses and e-commerce platforms that issue a large number of commercial documents, manually verifying each outgoing invoice is not a viable option. In this case, automating the split payment verification process is essential to know in real-time whether a company is subject to this regime or not.

Openapi's Split Payment service is designed for this purpose: it allows you to perform this check via API, in real time, simply by entering the company's tax code or VAT number, while also providing useful information such as the full company name and the date of registration on the list.

 

Check in real time and via API

whether a company is under the Split Payment regime

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