Italian e-invoicing in Business Central: how the SDI flow works

In Italy, electronic invoicing is now business as usual: for most transactions between parties resident or established in the country, whether with businesses, consumers or the public administration, the invoice goes through the Italian Revenue Agency’s exchange system, the Sistema di Interscambio (SDI), as an XML file. Business Central users often assume “the ERP takes care of it”. That is partly true, but the full flow involves several parties, and knowing who does what avoids a lot of surprises.

Let’s walk through it step by step.

What the Italian localisation provides

The Italian version of Business Central includes features to export sales invoices and credit memos as electronic documents in the FatturaPA format, the XML layout required by the SDI. The name comes from invoicing the public administration, but the same format is used between private businesses too.

Basic setup

Microsoft’s documentation starts from two pages specific to the localisation:

• Fattura Setup: where you specify the VAT business posting group used for self-billing documents and the code to report as the recipient code on self-billing documents;
• Fattura Document Type List: where you define the document types exported to the XML (the TD codes) and which one is the default for invoices, credit memos, self-billing documents and prepayments.

The data that ends up in the XML

The file is built from data already held in Business Central, so the quality of the output depends on the quality of your master data:

• company data in company information: legal name, address, VAT number, fiscal code and the other administrative details required on fiscal documents;
• customer data: VAT number or fiscal code, full address and the delivery channel, meaning either the recipient code (codice destinatario) or a certified email (PEC) address;
• VAT setup: for zero-rated, exempt, out-of-scope or reverse-charge transactions, the format requires the correct “natura” code and a consistent legal reference. If the VAT setup isn’t configured carefully, the error repeats on every invoice;
• payments: payment terms and methods need to match the codes defined by the format.

Exact field names can vary between versions and also depend on the apps installed, so it’s worth checking them in your own environment.

Who actually talks to the SDI

This is where most misunderstandings start. In most installations, Business Central generates the XML file but doesn’t transmit it to the SDI itself. Transmission needs an accredited channel, and in practice it relies on an intermediary: an e-invoicing provider, usually connected through a partner app or connector that sends the file, handles signing where needed and brings the outcome back into Business Central.

Microsoft lists an update to Italian e-invoicing based on its new e-documents framework among its planned work. It’s one to watch, but until it is available and verified on your version, the intermediary model remains the norm.

For a business, this means choosing the connector isn’t a technical detail: it determines how invoices are sent, where you read the outcomes and how much manual work is left.

SDI receipts and rejections

After submission, the SDI checks the file and returns a receipt. The main ones are:

• delivery receipt (ricevuta di consegna): the invoice has reached the recipient;
• failed delivery notice (mancata consegna): the SDI couldn’t deliver it, for example because the channel isn’t active. The invoice is still considered issued and is made available to the customer in their reserved area on the Revenue Agency’s portal;
• rejection notice (notifica di scarto): the file failed the checks. In this case the invoice is considered not issued and has to be corrected and resubmitted within the time allowed by the SDI rules.

Rejections are the case to keep an eye on. Typical causes are invalid VAT numbers or fiscal codes, duplicate files, and missing or inconsistent mandatory data, such as a zero VAT rate without a natura code. You need someone checking outcomes every day, and a connector that shows them in Business Central next to the document, not in a separate portal nobody opens.

Incoming invoices

The reverse flow matters just as much. Supplier invoices arrive from the SDI at your recipient code or PEC address, and from there they need to get into Business Central. Here too, the work is usually done by the intermediary or partner app: it downloads the XML, makes it readable and helps turn it into a purchase invoice, matching the vendor and, in some solutions, the lines to the order or receipt.

Business Central has its own incoming documents feature, but reading the FatturaPA format and matching automatically depend on the solution you choose. Before deciding, check what it really does: how much it recognises automatically, how it handles new vendors, what happens with credit memos.

Retention is a separate obligation

Sending and receiving through the SDI is not the same as archiving. Compliant digital retention of electronic invoices (conservazione sostitutiva) is a separate obligation with its own rules, and it has to be handled explicitly: through a retention service, from your provider or a third party, or with the tools offered by the Revenue Agency. Business Central keeps posted documents, but that doesn’t replace compliant retention. For the legal details, your accountant remains the reference point.

The most common pitfalls

In practice, most problems come not from the software but from the data:

• customers created in a hurry, with no recipient code or PEC, or with the fiscal code in place of the VAT number;
• VAT codes for exempt or zero-rated transactions with no natura code or with vague legal references;
• document numbering changed mid-year, producing duplicates;
• foreign customers treated as Italian, with data the SDI won’t accept;
• submission outcomes never checked, discovered only when a customer says they never received the invoice.

A practical checklist

Before going live, or if you’re seeing too many rejections today, check these points:

1. company information complete and correct;
2. Fattura setup and document types configured;
3. customer records with valid tax identifiers and a delivery channel, recipient code or PEC;
4. VAT setup with a natura code for every transaction without VAT;
5. payment terms and methods mapped to the format’s codes;
6. an SDI connector chosen and tested, with outcomes visible in Business Central;
7. a named person responsible for checking rejections and failed deliveries every day;
8. a defined process for incoming invoices, from receipt to posting;
9. compliant retention in place and verified.

For setup details, a good starting point is Microsoft’s documentation on Italian electronic invoicing and the overview of Italian local functionality, where Microsoft also lists planned updates.

Let’s talk

If you’re setting up e-invoicing in Business Central, or want to understand why you’re seeing rejections and too much manual work today, get in touch: we’ll start from how your environment is configured.