Ruling no. 212: Sums agreed under settlement agreements are subject to VAT when they are paid as consideration for the supply of goods or services

According to the Italian Tax Authority a settlement agreement (accordo transattivo) aimed at settling a dispute between the parties – concerning the violation of a non-competition agreement signed between an employer and an employee – should qualify as supply of services taxable for VAT purposes due to the existence of reciprocal performance link between the assumption of an obligation not to do something, which takes the form of the waiver of litigation, and the payment of a sum of money as consideration for the assumption of such an obligation.

Source DLA Piper

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