Italy: Role of fixed establishment in negotiating contracts; standard VAT rate for hearing aid repair services
Recent VAT developments
The KPMG member firm in Italy prepared reports that includes recent value added tax (VAT) developments:
- The tax authorities published a reply to Ruling Request no. 193/2025, clarifying the role of an Italian fixed establishment in negotiating contracts for an EU-based company.
The fixed establishment actively negotiates sales contracts, demonstrating independence in client relations, marketing, and pricing. It must account for value added tax (VAT) under the reverse charge mechanism for intra-EU purchases and charge VAT on sales to Italian customers, recording these in its VAT books and returns.
For purchases, the fixed establishment's role is limited to supplier identification and economic evaluation, with contracts negotiated by the head office.
- The tax authorities clarified in Consultancy Request No. 8/2025 that the standard VAT rate applies to repair works on hearing aids.
The reduced 4% rate is limited to sales of hearing aids by manufacturers, wholesalers, and retailers, as outlined in Presidential Decree No. 633/72.
This position aligns with Circular No. 87/87 and similar principles for vehicle maintenance for disabled transport, where only adaptation services qualify for the reduced rate.
For more information, contact a KPMG tax professional in Italy:
Davide Morabito | dmorabito@kpmg.it
Elia Travagliati | etravagliati@kpmg.it