Rome is the capital city of Italy, and it is one of the oldest and most famous cities in the world. It is a favorite destination for visitors from all over the globe. The city boasts numerous historic landmarks such as the Colosseum, the Pantheon, the Forum, and its cathedrals. Moreover, Rome is home to numerous art masterpieces, making it an ideal place for history and art enthusiasts.
From the mountainous north to the Mediterranean south, Italians have strikingly managed to combine history and modernity. Milan is a well-known hub for industry and fashion, Genoa is home to many global organizations, Venice is one of the oldest tourist destinations, Bologna is home to the first and oldest university, and Florence is the birthplace of the Renaissance cultural movement. In the south, the sprawling southern metropolis of Naples, Palermo, and others are famous for their cuisine, opera, and seafood, among other things. Italy is also known as the boot-shaped country and has two micro-independent states within its borders, the Republic of San Marino, “the Most Serene Republic”, and ”…Vatican City, the seat of the Roman Catholic Church and the spiritual home of Italy’s overwhelmingly Catholic population” (Wickham, et al, 2023). These are just a few facts about the country of La dolce vita, or "The sweet life."
Italy is a highly developed country with a population of over 60 million. It is the eight-largest economy in the world, and the third-largest economy in the European Union. Northern Italy is one of the wealthiest regions globally due to its industrial prospects, with cities such as Milan, Venice, and Turin generating over 50% of the county’s income. Some of the most prominent Italian companies, such as FIAT (Fabbrica Italiana Automobili Torino) and Ferrari, are headquartered in the north.
In contrast, the southern part of Italy, also known as “Mezzogirono”, has a different economy. It is home to approximately 4,5 million small, medium-sized enterprises, and micro-enterprises; many of which are family-owned. These businesses generate around one-third of the country’s GDP and provide 80% of the employment opportunities in the region. (Statista, 2023).
Italians take pride in their culture, language, and heritage. It is essential to understand Italian expectations when conducting business in Italy. This includes understanding their culture, language, and heritage.
Northern Italy is widely known as a hardworking and business-oriented area that promotes industry. An old Italian saying that best represents this feature is “For every church in Rome there is one bank in Milan.” The central region of Italy is more closely associated with politics and religion, with an abundance of diplomatic missions and Catholic pilgrims, not to mention historians, archaeologists, and other scholars.
The south, in turn, has earned its fame for being the birthplace of some of the world’s famous food, such as pizza with tomato and mozzarella, and it is no surprise, then, that UNESCO has recognized the skill of making Neapolitan pizzas as an intangible world heritage (UNESCO, 2023).
The following is a selection of cultural characteristics that influence business in Italy:
The following figure underlines this statements and shows how cultural differences affect international business:
In the previous chapters, we have highlighted Italy's diversity in the context of business and culture. When it comes to SAP implementation in Italy, especially focusing on finance, there are several key business requirements to consider.
Italy has specific financial regulations and tax requirements that any business operating there must adhere to. This is reflected in Italy’s accounting standards and profile of the legal and regulatory environment. The following legislative documents regulate accounting and financial reporting in Italy:
For a successful SAP implementation in Italy, it is essential to have a comprehensive understanding of the country's regulatory frameworks, tax laws, and accounting practices. SAP Country Version Italy offers functionalities to meet legal requirements in areas such as electronic invoice processing, managing taxes and declarations, asset accounting, payments, and travel management. Chapters 4.1 – 4.4 offer an overview of the functions of some relevant localization topics from the areas of general ledger, asset accounting, bank accounting and electronic invoice processing.
Italy follows the European Union’s VAT system. VAT in Italy, officially known as "imposta sul valore aggiunto", is abbreviated to "IVA" and was introduced relatively late in 1973. The following tax rates are valid, depending on the type of goods or services offered:
Companies operating in Italy are required to file annual tax returns and maintain accurate accounting records in accordance with Italian accounting standards. Incorrect VAT calculations can result in penalties or audits.
In some cases, a business can have both taxable and non-taxable activities. To adjust the VAT amount proportionally based on these activities, the business might use VAT Pro-Rata Adjustment. Country version Italy offers specific reports that companies can use to calculate, process, and report pro rata VAT, making it easier for them to meet these requirements.
This function helps mitigate errors in VAT calculation by ensuring accuracy and adherence to regulations, reducing the risk of penalties.
In addition to the standard country-specific depreciation keys, the County Version Italy includes functionality to calculate specific tax depreciation scenarios.
Super Ammortamento (super depreciation) and the Iper Ammortamento (hyper depreciation) are tax incentive programs in Italy that aim to encourage businesses to invest in new tangible assets. These incentives allow companies to depreciate the value of these assets at an accelerated rate, which means deducting a higher percentage of the asset's value from their taxable income in the early years of its use. Essentially, this helps companies to reduce their tax burden and incentivizes them to invest in new assets.
The calculation of the special depreciation can be customized using the country specific Business Add-Ins (BAdI). The base method ITSH (Italy - Superl/Hyper Depr. (% from UL * % Stated) contains the special/hyper depreciation percentage. Asset accountants can therefore maintain this depreciation key directly in the asset master and calculate the relevant depreciation.
Electronic invoicing through the Sistema di Interscambio (SdI) platform is a mandatory system in Italy for the transmission and reception of invoices between businesses and the Italian Revenue Agency (Agenzia delle Entrate). The SdI platform ensures the authenticity, integrity, and legal validity of electronic invoices, making it a crucial component for businesses operating in Italy.
Electronic invoice processing is not included in the country version for Italy but is covered by the SAP solution 'Document Compliance and Reporting'. 'Document Compliance and Reporting' is a platform for managing electronic documents throughout their entire lifecycle. This includes the transformation of documents created in various SAP applications into predefined exchange formats and electronic transmission to external systems, such as legal or tax authorities. These functions are executed centrally from the eDocument Cockpit and can also be monitored and archived. The following document types are processed in the eDocument Cockpit:
The following illustration provides an overview of An example of the eInvoice process with the eDocument XML Generation:
A payment method widely used in Italian business transactions is the electronic receipt (ricevuta bancaria "RIBA"). This is a fully automated collection mechanism that is initiated by the supplier and transmitted to its customer via the banking network. The creditor sends an electronic payment request, usually five to 14 working days in advance, to the debtor's bank via its banking institution in order to receive payment on a specific due date. The debtor's bank, in turn, requests its customer to issue a payment instruction.
In case the payment is not carried out on the due date, the creditor's bank receives an electronic notification of the unpaid status for each collection. Under this procedure, the supplier's account is credited with the total amount of the RIBAs submitted on the due date. In the event of non-payment, the corresponding amount is debited from the same account one or two days after the due date, whereby the original value date is retained.
In SAP, the RIBA process is covered with the functionality of the Bill of Exchange. SAP Bill of Exchange Receivable represents a customer's commitment to pay a specified amount within a set timeframe.
In the case where the payment terms extend over a month, a Bill of Exchange is issued, requiring acceptance by the customer. This document legally binds the customer to fulfill the payment within the agreed time. While the acceptance of the Bill of Exchange replaces the actual payment, the outstanding invoice cannot be settled. Consequently, in SAP, the Bill of Exchange is posted as a special G/L transaction.
Once the customer accepts the bill it can be discounted with the bank. Subsequently, the bank provides the payment, which is utilized to clear the outstanding customer. The recipient remains liable until the customer makes the final payment to the bank. Discounted Bills of Exchange are recorded as contingent liabilities, appearing in the appendix of the balance sheet.
In summary, the RIBA process consists of the following steps in SAP:
Support from the experts at BSP
An SAP implementation in Italy requires meticulous attention to specific legal, accounting and tax requirements. To ensure smooth legally compliant operations, a successful implementation requires comprehensive knowledge of Italian regulations, precise configuration within SAP, and ongoing compliance monitoring.
BSP possesses not only technical proficiency, but also established methodologies and management techniques to guarantee a successful execution of your project.
If you would like to know more, please feel free to contact us.
Reference List:
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Cultural Atlas. (2023, September 25). Italian culture: dos and don’ts. Retrieved from
https://culturalatlas.sbs.com.au/italian-culture/italian-culture-do-s-and-don-ts
Pixabay. (2017). Aerial view of city buildings, Milan [Photograph]. Retrieved from
https://www.pexels.com/photo/city-dawn-sunset-landmark-620308/
Pixabay. (2017). The Colosseum, Rome [Photograph]. Retrieved from
https://www.pexels.com/photo/ancient-architecture-arena-buildings-532263/
Pixabay. (2023). Torino cityscape [Photograph]. Retrieved from
https://www.pexels.com/photo/torino-cityscape-17901034/
Statista (2023). Largest companies by market capitalization in Italy as of May 22, 2023. (2023, September 25). Retrieved from
https://www.statista.com/statistics/1285258/italy-largest-companies-by-market-capitalization/
Wickham, C. J., Di Palma, G., Powell, J. M., Clark M., Lovett C. M., Nangeroni, G., Foot, J., Larner, J., Di Palma, G., Berengo, M., Signoretta, P. E., King, R. L., Knights, M. F., and Marino, J. A. (2023, September 25). Italy. Encyclopedia Britannica. Retrieved from https://www.britannica.com/place/Italy
SAP Help: Italy | SAP Help Portal
Erin Meyer: The Culture Map: https://erinmeyer.com/books/the-culture-map/
