Understanding Suspended VAT

Italian law allows businesses that sell goods to certain government-owned or controlled institutions, such as hospitals and schools, to defer the booking of VAT payable until receipt of complete or partial payment for the invoice. Instead of booking VAT to an active VAT payable account at the time of the sale, the business must hold the VAT in suspense until payment is received. This deferment of VAT payable is called suspended VAT. Typically, invoices that are subject to suspended VAT are for large amounts that are paid in installments over a long period of time.

In Italy, businesses report and remit VAT to the government on a periodic basis. The amount that a business owes is calculated as the difference between the VAT payable (generated in the JD Edwards EnterpriseOne Accounts Receivable system) and the VAT recoverable (generated in the JD Edwards EnterpriseOne Accounts Payable system) amounts.

You must report on suspended VAT, in addition to VAT payable and VAT recoverable. When the suspended VAT is realized, it becomes VAT payable and is reported as such.