Lombardy Court: VAT deduction on transaction costs incurred by a SPV in a merger leveraged buyout operation

• The Lombardy Court of Justice has confirmed the legitimacy of VAT deduction on transaction costs incurred by a special purpose vehicle (SPV) in a merger leveraged buyout (MLBO) operation.
• This decision is significant as it is the first ruling on this issue, which concerns the qualification of the VAT taxpayer and the right to deduction.
• The case originated from a tax assessment that denied VAT deduction to the SPV, claiming it was incorrectly classified as a “static holding” without VAT taxpayer status.
• The court emphasizes the importance of substantial qualification of the holding as the VAT taxpayer, based on its operational activities and not just the holding of shares.
• The court agrees with the interpretation provided by the Italian Association of Chartered Accountants, stating that the SPV is not solely for holding shares but also for raising funds and directly managing the target company after the merger.
• The acquisition of the target company is considered a preparatory activity that is already part of the SPV’s economic activities.
• The court confirms that the substantive requirements for VAT deduction must be evaluated based on these principles.

Source: eutekne.info

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

---

---