Global

Details

  • Service: Tax, Global Indirect Tax
  • Type: Business and industry issue
  • Date: 2/25/2013

Italy - Is VAT paid on fictitious transactions always irrecoverable? 

Italy - VAT paid
In recent years, Italian tax authorities and the Supreme Tax Court have taken a strict approach to VAT recoverability rights in fictitious transactions. Their approach was to consistently deny the VAT recoverability right to taxpayers who had purchased goods and services in a genuine transaction if the invoice had come from a company other than the supplier (referred to as ‘subjectively fictitious transactions’ – see Global Indirect Tax Brief 24, December 2011.

Lately, however, the Supreme Tax Court seems to have embraced a less rigid policy. Namely, with a number of consecutive judgments (see judgments on 19 September, 19 October and 14 December 2012) where the court has ruled that if the customer acted in good faith and is unaware of the apparently fraudulent aims behind the subjectively fictitious transaction, then its recovery right is preserved.


Nevertheless, the taxpayer must still demonstrate that they were not party to the fraudulent structure and were unaware of the fraud, or prove that the supply was ‘subjectively existent’, by demonstrating they had undertaken sufficient due diligence to exclude any doubt.


Though the softer line taken by the court is welcome, it contrasts with the view of tax authorities and departs from previous CJEU jurisprudence on the point1. This stipulates that, to successfully challenge VAT recoverability, it was up to the tax authorities to prove that the taxpayer was party to and therefore aware of the fraud.


While we wait for Italian jurisprudence to come into line with the CJEU position, to secure VAT recoverability rights Italian and non-resident customers not only still have to pay careful attention to the identity of the supplier appearing on the invoice and whether it has the title over goods sold or is the effective provider of the services, but also – with a view to demonstrating their non-involvement in any fraud – collect adequate evidence of the genuineness of the purchase, both in terms of the business rationale and values concerned.



1 Judgments of 21 June 2012 in cases C-80/11 (Mahagében Kft v. Nemzeti Adó- és Vámhivatal Dél-dunántúli Regionális Adó Fo˝igazgatósága) and and C-142/11 (Péter Dávid v. Nemzeti Adó- és Vámhivatal Észak-alföldi Regionális Adó Fo˝igazgatósága)

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Eugenio Graziani

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Global Indirect Tax Brief: February 2013

GITB: February 2013
Updates on key tax issues and challenges in indirect tax being faced by taxpayers in countries around the world.

More Global Indirect Tax Briefs