By imposing their SDI e-invoicing regulations and making real-time e-invoicing mandatory for all B2B, B2C and B2G transactions as from 1st January 2019, Italy has been a pioneer in the battle against tax fraud in the European Union. After some small technical changes to the SDI rules and formatting early on, the Italian government decided to enhance the SDI system by including more transactions and making the legal reporting Esterometro obsolete. This means that as of July 2022 all transactions, including foreign transactions, should be reported to SDI.
With their SDI system (Sistema di Interscambio), the Italian Revenue Agency (Agenzia delle Entrate) have created a central platform dedicated to verifying and transmitting electronic invoices. In my blog post, titled “How to get SAP ERP compliant with the Italian SDI E-Invoicing law”, you can read all details on the Italian SDI e-invoicing requirements and on how to make your own SAP system (either SAP ECC or SAP S/4HANA) compliant with these rules.
In this blog post, I will zoom in on the additional requirements for e-invoicing in Italy.
At the end of 2020, the the Italian Revenue Agency (Agenzia delle Entrate) released the new rules that came into force in July 2022. The changes were significant as SDI will replace the Italian legal reporting Esterometro. With the Esterometro report, Italian companies reported all foreign sales and purchases to the government. This implies that now not only domestic sales need to be reported to SDI, but also all foreign sales and purchases. Please notice that domestic purchases are excluded, because the vendor will already report this transaction as their sale to SDI.
What was already reported to SDI:
- Domestic customer invoices
What was added in 2022:
- Foreign customer invoices
- Foreign vendor invoices
SDI update: what does it mean for the SDI process
With their new SDI rules, the Italian Revenue Agency imposes the following additional technical specifications that need to be submitted to their SDI system as from July 2022:
- A change in the XML structure that needs to be submitted to the Italian SDI system
- A change in the mapping (document types, …)
- A change in the validation rules for submission
This means that also your SAP system needs to be updated. From a process point of view, the current e-invoicing process remains the same as shown in the following process overview graphic. In case of vendor invoices, the invoice is sent back to the sending party.
How to prepare your SAP system (ECC or S/4HANA) to be compliant with the new Italian SDI update
In order to make your SAP system compliant with the new technical updates from the Agenzia delle Entrate, you need a partner that understands your current technical SAP setup for compliance with the current SDI regulations and has in-depth knowledge of the new technical updates that need to be implemented in your SAP ECC or SAP S/4HANA system.
This 2022 update brings some smaller technical changes like the TipoDocumento that needs more options indicate the type of transaction. But mostly, it means integrating new types of invoices, which can be challenging. You SAP system needs to be able to pick up the right customer and vendor invoices, recognize their transaction, map the source data to the XML format given by the SDI and sent it the SDI.
We at PIKON have implemented numerous different SAP solution scenarios to make our customers’ SAP systems compliant with the Italian e-invoicing rules. Some examples are the SAP Document Compliance solution (with the built-in SAP eDocument Framework and SAP eDocument Cockpit), SAP IDoc solutions, etc. We have integrated these technical SAP frameworks with internal middleware systems (such as SAP PI and SAP CPI) but also with third-party middleware systems from our partners in order to create a solid, secure communication flow with the Italian SDI exchange system of the Agenzia delle Entrate.
In our case study, you can read how we helped Edgewell Personal Care making their SAP ECC system compliant with the Italian SDI e-invoicing regulations.
In general, the following tasks need to be carried out to make your existing SAP solution compliant with the new technical SDI updates:
- The XML format (XSD scheme) needs to be updated to the newest version and its newest mapping.
- All Italian processes (transactions) and value mappings need to be reviewed and enhanced.
- All implemented changes need to be thoroughly tested in the test portal of the Agenzia delle Entrate
In order to make this as smooth as possible, SAP are currently developing specific SAP OSS notes. We at PIKON have all expertise to make your own SAP system compliant. Please click the following button to request a web-meeting and learn about our approach.
PIKON’s Competence Center for Legal Requirements to make your SAP system compliant with country-specific regulations, such as with the Italian SDI rules
With our Competence Center for Legal Requirements, we are a strategic partner who ensures that your SAP system and business processes meet different country-specific legal requirements all over the world. Our team of experts combines SAP expertise and extensive knowledge of country-specific regulations and has gained a lot of project experiences over the years. This ranges from country-specific legal requirements, such as e-invoicing in Mexico (CFDI), Italy (SDI), Spain (SII), Hungary, VAT reporting in the UK (MTD-VAT), e-accounting with SAF-T in France, Portugal and Poland to accounting standards such as lease accounting under IFRS16 and SEPA.
Especially for compliance with the Italian SDI e-invoicing regulations, we have a team of SAP experts that have already implemented many customer projects and have in-depth knowledge of the end-to-end legal process and technical requirements. Please do not hesitate to ask your questions in the comment section below or to send them to me by e-mail at tanja.nikolaus@pikon.com. I am happy to help you.
Why Italy has made e-invoicing mandatory and is coming with updates to their SDI rules
The main reason why Italy imposed their e-invoicing regulations on 1st January 2019 was to fight against tax fraud and to lower the VAT gap. Many other countries worldwide are also failing to collect VAT and are closely watching the Italian experiences in order to impose their own mandatory e-invoicing regulations.
So far, the Italian e-invoicing regulations have not missed their purpose. By mid-March 2019, the Italian government already uncovered EUR 688 million in fraudulent credits. In the first half of 2019, the captured VAT was over EUR 160 billion based on a total amount of 890 million invoices.
Although Italy has already made great progress in lowering their VAT gap since the introduction of the mandatory e-invoicing regulations, there is still great room for improvement. As such, we expect that in future some additional updates will come into effect based on some new learnings from the Italian Agenzia delle Entrate. Because of that, it makes sense to have a strategic partner who takes care of this, informs you on new updates and keeps your SAP system compliant with the latest version of the country-specific legal requirements. We recommend starting to make the necessary changes to your SAP system rather sooner than later.