COUNTRY FACTSHEET
Expense Compliance in Italy
Country Demographics
VAT rates
In Italy, Value Added Tax (VAT) is a levied tax, supervised by the Ministry of Finance. Known as the Imposta sul Valore Aggiunto (IVA) in Italy, it is a consumption tax applied to goods and services.
The different VAT rates in Italy are:
| Rate | Type | Goods and services |
| 22% | Standard | Most goods and services if not otherwise exempt |
| 10% | Reduced | Water supplies, pharmaceuticals, hotel accommodations, restaurant services, household electricity, theatrical performances, and passenger transportation |
| 5% | Reduced | Specific foodstuffs, medical equipment, social or welfare services, children’s products, and water transportation services |
| 4% | Reduced | Necessities, including essential foodstuffs (e.g., dairy, vegetables, fruits), books, newspapers, agricultural products, and medical equipment for disabled persons |
| 0% | Zero-rated | Passenger transport, medical and dental care, educational and financial services |
Per Diem Rates
The per diem rates in Italy cover meals, lodging expenses, mileage rates, and public transportation. They do not cover other types of transportation like flights or rental cars. The rules regarding business travel and per diem rates in Italy are set out in Article 51, Paragraph 5 of the country’s Consolidated Income Tax Act.
Per Diem Rates
Employers can pay a per diem to employers using:
- A flat rate (metodo forfettario) or mixed method (metodo misto), or
- reimburse the actual expenses accrued (metodo analitico); in this instance, the employee must keep all supporting documents such as receipts.
Reimbursements generally count as taxable income if they are within municipal limits, except for documented transportation expenses.
Outside municipal limits, most reimbursements are tax-exempt.
If employees receive allowances for travel or work outside their local area, only the amount that exceeds €46.48 per day (or €77.46 for international travel) is considered taxable income.
The per diem rates in Italy are:
| Domestic trips (Euros) | International trips (Euros) |
| €46.48 per day | €77.46 per day |
Deductions
Rates for assignments within the State:
If the employer provides or reimburses the employee’s meals or accommodation during the business trip, the tax-free allowance should be reduced.
| Meals or accommodation | Deduction of 1/3 |
| Meals or accommodation | Deduction of 2/3 |
Traceability of Expenses
In accordance with Legge di Bilancio, a budget law introduced in 2025, businesses are no longer allowed to make cash payments for business expenses. It is now necessary that all payments must be through traceable payment systems, such as credit or debit cards, cheques, and bank or postal transfers.
This ban applies to employee travel and entertainment expenses, including food, accommodation, transportation, and representation costs. This means that businesses can only reimburse these expenses tax-free if they are paid using traceable methods; otherwise, they will be treated as taxable income and will not be deductible for IRES and IRAP.
Record Keeping
The Digital Administration Code (CAD) declares that any tax-relevant documents issued or received in paper form can be digitised in electronic form. This includes receipts and invoices. The requirements to digitise state that the digitised document must:
- ensure the authenticity of the original document,
- provide a reliable account,
- be readable, and,
- accessible whenever necessary.
You must apply for a Conservazione Sostitutiva certificate if you want to convert paper documents into a digital format without maintaining the original document.
According to Agenzia Entrate, records must be kept for 5 years following the year of filing the return of income yearly, which become 7 years if the relevant tax declaration has not been lodged. From a civil law point of view, the accounting records and physical paper copies must be kept for 10 years.
Mileage
In Italy, an employer can reimburse employees for any expenses incurred from using their personal vehicle for business journeys.
Reimbursements for business journeys within the municipality of the company’s office are part of an employee’s taxable income. If the business journey is outside of the municipality of the company’s office, the reimbursement is not considered part of the employee’s taxable income. The Italy mileage reimbursement rates can be calculated based on ACI tables that are published annually in the Gazzetta Ufficiale – these differ depending on the fuel type of vehicle type.