Thanks to a reciprocity agreement between the United Kingdom and Italy, transactions carried out from January 1, 2021, are subject to Article 38-ter of Italian VAT Decree No. 633/1972, which allows VAT refunds to third countries under reciprocal conditions.
The Italian Revenue Agency clarified this in its resolution No. 22/E, issued on May 2, 2024, confirming that the agreement signed on February 7, 2024, applies retroactively from January 1, 2021.
What changed after Brexit?
The UK officially left the EU on February 1, 2020, but during the transition period (which ended December 31, 2020), it continued to be treated as an EU Member State for customs, VAT, and excise purposes.
During that time, Article 38-bis2 applied to VAT refunds for UK-based operators. From January 1, 2021, the UK is considered a third country, which required a new framework for handling VAT between the two nations.
The reciprocity agreement
Through an exchange of diplomatic notes, Italy and the UK recognized the legal basis for reciprocal VAT refunds. This means:
- Italian businesses can apply for VAT refunds in the UK under the British legal framework.
- UK businesses can request VAT refunds in Italy under Article 38-ter, which refers to the conditions set out in Article 38-bis2(1) and the procedures established by the Director of the Italian Revenue Agency on April 1, 2010.
The agreement ensures continuity and legal clarity for companies doing cross-border business between the two countries.