Italian Tax Authority clarifies the procedure for VAT recovery on medical devices payback

Under the Italian payback mechanism, when national and regional expenditure caps for medical devices purchased by the National Health Service (NHS) are exceeded, a portion of the excess cost is charged to suppliers, in proportion to their turnover as a percentage of total regional expenditure.

Since caps are VAT-inclusive, suppliers may deduct the VAT embedded in the payback amounts paid to the Regions, as such payments are treated as a reduction of the original price charged for the supplies.

The Italian Tax Authority clarified that VAT must be recovered analytically, with a breakdown by year, Region, and applicable VAT rate, rejecting the use of a simplified average VAT rate. For instance, if a supplier’s EUR1,000 turnover in a Region was split 20% at 4% VAT and 80% at 22% VAT, EUR100 payback is allocated accordingly, yielding EUR15.20 in recoverable VAT.

Once calculated, the VAT recovery must be carried out through the issuance of an internal credit note under Article 26 of the Italian VAT Decree, which should not be transmitted via the e-invoicing system and must include references to the relevant regional measures giving rise to the payback obligation. For VAT recovery purposes, the credit note must be recorded no later than the VAT return filing deadline for the year of payment.

Key takeaway / recommendation

Despite ongoing uncertainties surrounding the payback mechanism, currently under review by the Italian Council of State, Ruling No. 7/2026 provides key operational guidance for medical device suppliers to the NHS.

Medical devices suppliers should ensure that recoverable VAT is calculated in accordance with the analytical method required by the Italian Tax Authority and that the internal credit note is issued and recorded within the prescribed deadline to preserve the right to VAT recovery.

Readers may wish to refer to the Boehinger UK case at the end this publication, which deals with when packs can in principle lead to a VAT adjustment.

Reference / Link to document

• Italian Tax Authority, Ruling n. 7 of 31 March 2026 Stampa pubblicazione