Country-specific updates: Italy

Italian Supreme Court, ruling no. 27813 of 22 September 2022

The right to recover VAT (or the alternative right to VAT refund) must be recognised for works carried out on real estate owned by third parties, provided that there is a direct link with the business or professional activity of that party, even if it is not certain or prospective.

DLA comment: According to Article 30 paragraph 3 letter c) of the VAT Decree, the right to a VAT refund must be granted to a taxpayer for the excess tax, but limited to “the VAT relating to the purchase or import of depreciable goods as well as goods and services for studies and research”.

In the case at hand, the Italian Tax Authority challenged the VAT refund requested and obtained by the taxpayer (pursuant to Article 30 paragraph 3 letter c) of the VAT Decree), with reference to construction works carried out at a tourist village, insisting on a piece of land obtained on a loan for use agreement (“contratto di comodato”) from a third owner.

According to the Italian Supreme Court – in light of the principles of the CJEU (see case C-672/16 and C-132/16) – the taxpayer is entitled to exercise the right to recover VAT paid on the costs of construction, maintenance and renovation of real estate owned by third parties, even if he is not the owner, regardless of civil law rules and agreements between the parties.

Comment: With the present judgment, the Italian Supreme Court reiterates a principle already affirmed previously (Cass. no. 215/2021, no. 6022/2020, no. 34291/2019, no. 23278/2018), but not yet implemented by the Italian Tax Authority as the latter still seems to anchor its considerations to previous rulings in which VAT refunds were excluded for improvements made to third parties' property, unless they entailed the creation of identifiable and functionally autonomous assets (see, Italian Tax Authority, Circular No. 36/2013 and Resolution No. 179/2005).