In a recent ruling (Judgment No. 25685/2023), the Italian Supreme Court (Cassazione) stated that non-resident entities with an effective and operational permanent establishment (PE) in Italy are not entitled to VAT refunds under Article 30, paragraph 3, letter e) of Presidential Decree 633/72. This denial of refunds also applies to transactions conducted directly by the parent company, without involving the PE.
The ruling reaffirmed that there are two methods for recovering VAT: deduction and refund, and the legitimate method depends on the location of the taxable person making purchases or imports in Italy.
According to the Court, there is no real alternative between VAT recovery methods, as the refund of VAT for non-resident taxpayers is based on the rules of the Eighth Directive (currently Directive 2008/9/EC). Therefore, the taxpayer’s establishment in a specific location determines the VAT recovery method.
The presence or absence of a permanent establishment in Italy is the decisive factor for VAT recovery. If a taxpayer has a PE in Italy, they can only claim VAT recovery through deduction, regardless of whether the goods were purchased by the PE or the parent company. On the other hand, taxpayers without a PE in Italy can only request VAT refunds directly.
In summary, the existence of a PE in Italy leads to the exclusion from VAT refund entitlement, even if the PE is not directly involved in the operations of the parent company. However, the position taken by the Italian Revenue Agency may be less clear-cut, leaving room for some exceptions in specific cases.
Source: eutekne.info
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