OPINION OF THE REVENUE AGENCY
Article 2 of the Decree Law of September 27, 2021, No. 130, converted with amendments by Law of November 25, 2021, No. 171, has provided that “Contrary to what is provided by the Decree of the President of the Republic of October 26, 1972, No. 633, the supplies of methane gas used for combustion for civil and industrial uses, as referred to in Article 26, paragraph 1, of Legislative Decree of October 26, 1995, No. 504, accounted for in the invoices issued for estimated or actual consumption in the months of October, November, and December 2021, are subject to a 5 percent VAT rate. If the supplies referred to in the first period are accounted for on the basis of estimated consumption, the 5 percent VAT rate also applies to the difference resulting from the amounts recalculated based on actual consumption, also proportionally, for the months of October, November, and December 2021.”
This provision aimed, within the context of urgent measures to contain the effects of price increases in the electricity and natural gas sectors, to reduce the VAT rate to 5 percent for supplies of methane gas intended for civil and industrial uses, accounted for in invoices for consumption during October, November, and December 2021. The measure was initially extended to cover supplies made in the year 2022 and, finally, those executed in the first and second quarters of 2023 (respectively, for the first quarter of 2023, by Article 1, paragraph 13, of Law No. 197 of December 19, 2022, and for the second quarter of 2023, by Article 2, paragraph 1, of Decree Law No. 34 of March 30, 2023).
In essence, this provision temporarily reduces the VAT rate to 5 percent for supplies of methane gas for civil and industrial uses, with explicit reference to Article 26, paragraph 1, of the Consolidated Law on Excise Taxes (TUA), approved by Legislative Decree of October 26, 1995, No. 504.
Regarding the scope of this tax relief provision, it has been clarified in Circular No. 17/E of December 3, 2021, that the same qualification of “civil and industrial uses” used for the application of excise duties on natural gas should be adopted for VAT purposes, as specified in Article 26, paragraph 1, of the same Consolidated Law.
Article 26 of the TUA provides, in paragraphs 2 and 3, indications concerning the distinction between “civil use” and “industrial use” of natural gas intended for combustion. Paragraph 2 of Article 26 includes in “civil uses” the use of natural gas intended for combustion in the premises of industrial, artisanal, and agricultural enterprises located outside the establishments, laboratories, and companies where the productive activity takes place, as well as for producing hot water, other thermal vectors, or heat, not used in the productive activities of the enterprise but supplied to third parties for civil uses. As for “industrial uses,” paragraph 3 includes such uses in all industrial activities producing goods and services, artisanal and agricultural activities, as well as uses in the hotel sector, commercial distribution sector, catering establishments, sports facilities used exclusively for amateur activities and managed on a non-profit basis, district heating supplied by cogeneration plants that have the technical characteristics indicated in letter b) of paragraph 2 of Article 11 of Law No. 10 of January 9, 1991, and which also supply civil users. Additionally, uses of natural gas intended for combustion in accommodation activities carried out by institutions aimed at assisting the disabled, orphans, the elderly, and the destitute are considered part of industrial uses, even when profit is not the purpose.
Therefore, concerning the question raised by the taxpayer about the application of the 5 percent VAT rate to the supply of methane gas used for chemical reduction in electrolytic, metallurgical, and mineralogical processes, as provided in Article 21, paragraph 13, of the TUA, the proposed interpretative solution is agreed with. These specific uses are to be considered entirely separate and distinct from the uses intended for civil and industrial purposes as described in Article 26, paragraph 1, of the TUA.
In conclusion, in light of the aforementioned arguments, it is the opinion that the reduced VAT rate of 5 percent provided by Article 2, paragraph 1, of Decree Law No. 130 of September 27, 2021 (the so-called “Energy Decree”), cannot be applied to the supply of methane gas used for chemical reduction in electrolytic, metallurgical, and mineralogical processes, in other words, uses excluded from the scope of application of excise duties under Article 21, paragraph 13, of the TUA.
Source: gov.it
