Clarification by the Italian tax authorities on input VAT deduction incurred on the purchase of residential buildings

• The Italian tax authorities clarified the deductibility of input VAT for transactions involving the purchase of residential buildings intended for tourist rental as taxable transactions for VAT purposes.
• The applicant, ALFA S.R.L., asked for clarification regarding the deductibility of VAT incurred on the purchase of a residential building intended for tourist rental.
• The Italian tax authorities provided a positive answer, stating that the VAT paid at the time of purchase is deductible in the hands of ALFA, even though the property is classified as residential.
• This is because the property will be used for a real commercial activity, and there is a necessary correlation between the goods and services purchased and the activity carried out.
• The cadastral classification of the property is not relevant in determining its instrumentality for the purpose of production or exchange within the scope of the activity of the company.

Source PwC

---

---