Italy Approves New Unified VAT Code and Updated ATECO Classification

March 6, 2026 EU VAT Update

Italy has taken a major step toward simplifying its tax framework with the approval of a new unified Value Added Tax (VAT) code alongside the implementation of the updated ATECO 2025 classification.

The reform is largely organizational rather than substantive, aiming to modernize the country’s tax system, align it more closely with EU standards, and provide greater clarity for businesses operating in Italy.

Reform’s background

For decades, Italian VAT legislation has been dispersed across numerous decrees, amendments, and administrative provisions, making compliance and interpretation of same significantly challenging for both businesses and tax professionals.

To address this issue and improve accessibility and legal clarity, the Council of Ministers approved a new consolidated VAT code (“Testo Unico IVA”) in December 2025, which is expected to enter into force on 1 January 2027.

The Role of ATECO Codes in VAT and Business Classification

Alongside the VAT consolidation, Italy has introduced the ATECO 2025 classification, replacing the previous ATECO 2007 system.

ATECO codes are used to classify economic activities for:

  • VAT registration
  • tax reporting and declarations
  • statistical analysis and eligibility for input VAT refunds

The Key Changes in the ATECO 2025 System can be summarised as follows:

  1. Greater clarity in determining Economic Activities as the revised classification introduces more detailed sector breakdowns, particularly in emerging industries such as digital services and online commerce.
  2. Alignment with Modern Economic Trends: the reform reflects structural changes in the economy, including digitalization, platform-based businesses, sustainability and green sectors as well as evolving service industries.
  3. Improved Data and Tax Administration as the new updates allows public authorities to produce more accurate economic statistics better monitor sectoral trends and improve tax administration and compliance.

Practical Implications for Businesses

  • Updating ATECO Codes

Companies and professionals must ensure their registered activity codes align with the new ATECO 2025 classification when submitting VAT declarations or administrative filings.

  • ERP and Accounting System Adjustments

To comply with the reform, organizations may need to update:

  1. ERP tax codes
  2. invoice descriptions
  3. compliance reporting systems to reflect the revised classification and the future consolidated VAT code.

 

Impact on VAT Procedures

The Italian 2026 Budget Law also introduced related administrative changes, such as automated VAT settlement in case of missing returns and revised VAT treatment or reliefs on certain imports.

In summary, these developments are particularly relevant for companies holding an Italian VAT number, multinational groups operating in the Italian market, required to classify their activities under the ATECO system.

Businesses operating in Italy should monitor the official publication of the consolidated VAT code and prepare for its full implementation on 1 January 2027, ensuring that their ATECO activity codes and VAT processes are updated accordingly.

If your company has an active VAT registration and compliance requirements in Italy and would like to receive additional information, please do not hesitate to get in touch.

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