Country specific updates: Italy

Italian Supreme Court, judgement no. 24661 of 14 September 2021

Pursuant to Article 19-ter of Presidential Decree 633/72, where a non-business taxable person also carries on business activities, to recover input VAT, the non-business taxable person must record separately, those transactions on which it has paid VAT and which are attributable to its business or institutional activities.

DLA Piper comment:

Pursuant to Article 19-ter, par. 2 of the Italian VAT Decree for the purposes of the VAT recoverability, it is necessary to keep separate accounts for transactions carried out as part of the institutional or business activities. However, where the purchase of goods and services that (in view of their nature) may be used for both taxable and non-taxable activities, the taxpayer may adjust the VAT recoverability according to the actual use of those goods or services (see, ECJ cases C-374/19 and C-140/17).

Italian Tax Authority, ruling no. 584 of 14 September 2021

A taxpayer is entitled to claim for a refund of the VAT paid before the start of the business activity. In particular, such VAT refund may legitimately be granted whether the taxable purchases are actually connected with the planned business and that the resulting taxable transactions would give the taxpayer the right to recover VAT.

DLA Piper comment:

In order to establish whether the taxpayer is entitled to recover VAT, it is not necessary to assess the actual performance of the business activity. It is sufficient that the goods and services purchased are intended to be used in taxable transactions giving rise to the VAT recoverability. According to Italian and EU case law (see, Italian Supreme Court ruling no. 23994/2018 and ECJ case C-248/20) “in order to recover VAT, it is necessary that the goods or services purchased are actually related to the business purposes, but the actual performance of the business activity is not required. Indeed, the VAT may be recovered even in the absence of active transactions, with regard to activities of a preparatory nature, provided that they are aimed at creating the conditions for the actual commencement of the business activity”.