VAT update: Italy confirms higher tax on pet litter

Italy’s Revenue Agency (Agenzia delle Entrate) clarified its Value Added Tax (VAT) rules for the pet product in a resolution issued in December 2024.

Plant-based pet litter will now be subject to Italy’s 22% VAT – ending an ambiguity that created loopholes for product manufacturers.

VAT is a system of tax levies and credits that requires manufacturers to pay tax on sales of goods – not just end consumers.

In Italy, the standard VAT of 22% applies to most products, but some qualify for reduced rates. Plant-based litter manufacturers were unclear whether they were included on the list of items that get lower taxes, as their component parts gave them some claim to the low-tax status.

According to the resolution, not only the parts but also the intended purpose of the end product are used to determine VAT status. This closed the ambiguous tax status Italian pet litter manufacturers enjoyed and clarified the Revenue Agency’s interpretation of the tax code for the future.

Expected impacts

Businesses throughout the supply chain must now pay a 22% tax on their sales if they manufacture plant-based cat litter.

It’s unclear how many companies were not already paying the standard rate, but local media reports that a lower tax rate has been standard in the country’s litter market for years. Companies like Monge, which manufactures its litter entirely from Italian corn, may be impacted.

Ultimately, as manufacturers get tax credits for selling products, much of the VAT cost will be passed on to consumers.

A long fight

The Revenue Agency’s ruling came just months after industry players pushed to reduce Italy’s VAT for a host of other pet supplies.

Advocates recently brought a bill to the Chamber of Deputies (Camera dei Deputati) proposing a decrease in the VAT for pet food and veterinary supplies to 10%. The bill was sponsored by members of the center-right Forza Italia party. The timeline for the proposal remains unclear.

A similar effort to lower VAT on pet goods is being made in Portugal.

However, not every country is cutting its taxes on the pet industry. In the Netherlands, an agricultural VAT increase from 9% to 21% may affect pet food producers, though products used for animal feed are excluded from the hike.