May 18, 2023
Italian Tax Authority rules effects of UK VAT groups not recognized for Italian VAT purposes
The Italian Tax Authorities (ITA) have published a ruling response (n. 314/2023) addressing the value-added tax (VAT) relevance of supplies between an Italian branch or head office (HO) and a United Kingdom (UK) branch or HO of the same entity, where the UK establishment is a member of a UK VAT group.
In a prior ruling (n.756/2021), issued in December 2021, the ITA had stated that, notwithstanding Brexit, supplies flowing from a UK HO in a UK VAT group to its Italian branch were subject to VAT in Italy under Skandia/Danske Bank principles 1 to the extent that the UK group has the same essential features of the VAT group as defined by Article 11 of the VAT Directive. The ITA reached this conclusion despite that, under Italian law, the principles at issue applied only to supplies involving VAT groups established in EU Member States.
In its recent ruling the ITA clarified that:
We are working with a number of businesses to make adjustments and submit claims as needed. Reach out to one of the contacts listed below if you would like to discuss this further.
For additional information with respect to this Alert, please contact the following:
Studio Legale Tributario, Rome
Studio Legale Tributario, Milan
Studio Legale Tributario, Treviso
Studio Legale Tributario, Turin
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
1 In the Skandia case (C-7/13), the Court of Justice of the European Union (CJEU) decided that services supplied by a non-EU company to its Swedish branch, which was a member of a VAT group, were liable to reverse charge VAT in Sweden. The decision was based on the principle that the VAT group (to which the branch belonged) shall be deemed as a separate taxable person for VAT purposes with respect to the head office. In the Danske Bank Case (C-812/19), the CJEU decided that the supply of services by an HO located in and belonging to a VAT group in one EU Member State and a branch situated in another Member State is relevant for VAT purposes because the VAT group shall be regarded as a separate taxable person from the branch situated in a different Member State.