In Resolution No. 1 published on 3 January 2022, the Italian Revenue Agency (ITA) has clarified that the net cash settlement payments made upon the execution of derivative contracts are exempt from Value Added Tax (VAT) under Article 10.1.4 of the Italian VAT Law, implementing Article 135.1b-f of the European Union (EU) VAT Directive.
The Resolution supersedes the former ITA’s official interpretation, provided in Resolution 77 of 16 July 1998, which stated that the net cash settlement payments were to be considered out of the VAT scope.
The new ITA interpretation may have a significant impact on Italian taxpayers that apply the pro rata calculation to recover input VAT.
Source EY
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