Italian Tax Authority aligns with case law on MLBO transaction costs recoverability and clarifies how to recover VAT prudentaly non deducted

The issue concerned whether an SPV incorporated to implement a management-led buyout (MLBO) qualifies as a VAT taxable person and may therefore deduct input VAT on M&A transaction costs (including advisory, due diligence and financing fees) incurred in acquiring the target.

Historically, the Italian Tax Authority treated such SPVs as “static” holding companies and denied input VAT recovery on the basis that share acquisitions are, per se, non‑economic activities and that the related costs lack a direct and immediate link with taxable outputs, given the absence of effective management interference with subsidiaries.

This position was progressively overturned by case law. The CJEU held that initial investment expenses incurred with the intention of commencing taxable activity fall within the scope of “economic activity” and may give rise to input VAT deduction. The Italian Supreme Court applied these principles to MLBOs, characterising the acquisition as instrumental to a pre‑arranged merger under the Italian Civil Code and the transaction costs as preparatory to post‑merger taxable activities.

Resolution No. 7/2026 formally incorporates this interpretative approach, aligning administrative practice with the relevant jurisprudence and confirming, in principle, deductibility where an objective link with post‑merger taxable activity can be demonstrated. Ruling No. 58/2026 subsequently clarified the procedural route and conditions for recovering input VAT previously not deducted on MLBO transaction costs.

 

Key takeaway

Taxpayers that previously carried out MLBOs in Italy and prudentially did not deduct input VAT on duly registered transaction costs may now rely on Ruling No. 58/2026 as a recovery roadmap. Amended VAT returns are excluded, as non‑deduction is treated as a conscious choice. Recovery must be sought through an “anomalous VAT refund” under Article 30‑ter of the Italian VAT Decree. For pre‑2024 costs, the two‑year deadline runs from 9 August 2024.

 

Reference

Italian Tax Authority, Resolution No. 7 of Ruling No. 58 of 12 February 2026 and Ruling No. 58 of 2 March 2026