International transport: extended VAT non-taxability for sub-carriers

The VAT Directive – implemented in Italy through the VAT Decree – provides for the exemption of services, including transport and related operations, when they are directly connected with the export or import of goods. This exemption ensures that taxation occurs only where the goods are ultimately consumed following international transport.

However, its application has raised significant issues concerning services rendered not to the recipients of transport, but to subcontractors or intermediaries. In Italy, a Law Decree restricted the scope of VAT exemption, excluding services supplied to parties other than the exporter, importer, or holders of customs or temporary import regimes.

This restrictive interpretation – confirmed by the Italian Tax Authority – conflicted with the principles set out by the CJEU, which held that the exemption for international transport should apply broadly along the supply chain, given its objective nature.

In this context, the draft legislative decree, recently approved by the Government – but still awaiting publication in the Official Gazette – seeks to bring Italian VAT law fully into line with EU principles, extending the exemption to services provided by intermediaries involved in international transport operations.

 

Key takeaway / recommendation

The forthcoming legislative decree brings Italy’s VAT framework closer to EU standards, promoting greater consistency across the EU VAT system. Once in force, transport and customs services subcontracted by a main carrier to a sub-carrier will also qualify for the VAT non-taxable regime, marking a significant expansion of the exemption’s scope in line with recent EU case law.