Country-specific updates - Italy

Italian Tax Authority, Ruling no. 471 of 9 July 2021

The activity of developing and renovating instrumental real estate assets (with a view to their subsequent sale after the reconversion into residential ones) can be kept separate from the sale and rental of real estate units already carried out. Therefore, the recoverability of VAT under Article 19 of the VAT Decree is allowed provided that the activity is managed with separate accounts.

DLA Piper comment: According to Article 36, par. 3 of the VAT Decree, persons who carry on more than one business or more than one activity within the same business may opt to apply VAT separately in respect of any of the activities carried on, by notifying the Italian Tax Authorities. In particular, the fact that the activities carried on by the taxpayer are covered by the same ATECO classification code does not necessarily preclude the aforementioned option. To this end, it is sufficient that the essential elements qualifying the different activities make them effectively distinct and objectively autonomous (see, Italian Tax Authority, Circular Letter no. 19/2018 and no. 22/2013).

Italian Supreme Court, Judgement no. 20589 of 19 July 2021

It is unlawful to exclude from VAT the secondment of staff whose cost is reimbursed by the company receiving the secondment (Art. 8, par. 35 of Law no. 67/88). Such transaction is relevant for VAT purpose whether it qualifies as a supply of service carried out for consideration.

DLA Piper comment: As already stated by the ECJ (case C-94/19) the reimbursement paid by company receiving the secondment may qualify as a transaction relevant for VAT purposes. In particular, it is necessary that such transaction qualifies as a supply of services for consideration, i.e. there should be a direct link between the two services and they should be mutually dependent on each other. Indeed, in such case, the Italian Supreme Court established that the company receiving the secondment paid the reimbursement only in return for the secondment service. Therefore, such transaction is entirely relevant for VAT purpose and the company receiving the secondment can legitimately recover VAT.