VAT Deductibility in Leveraged Buyout Mergers: AIDC’s Analysis of VAT Deductibility in SPV’s Purchases

The AIDC (Agency for the Administration of Taxes and Customs) has examined the conditions for VAT deductibility on purchases made by a Special Purpose Vehicle (SPV) in the context of a merger following a leveraged buyout (LBO) transaction. According to the AIDC, VAT can be considered deductible if the resulting company from the merger with the target company qualifies as an VAT-registered entity and is entitled to deduction rights. This analysis highlights the distinction between SPVs in LBO operations and holding companies, emphasizing the instrumental nature of the acquisition in the context of the subsequent merger. The AIDC disagrees with the interpretative position of the Italian Revenue Agency, which excludes VAT deductibility if the acquisition of the target company’s share capital by the SPV does not involve interference in the target’s management. The AIDC argues that the SPV’s purchases, including those related to structuring the LBO operation, qualify as preparatory activities for the merged entity’s business and therefore justify VAT deductibility. The continuity of the acquired business operation is crucial for VAT deductibility, as supported by both national and EU jurisprudence. Additionally, the AIDC highlights the exclusion of VAT on transfers of goods and services in merger situations, aligning with the principle of business continuity and the neutrality of legal forms.

Source: eutekne.info

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