Italy Supreme Court Allows VAT Deduction for SPV in MLBO Transaction

• Italy’s Supreme Court ruled that an SPV involved in an MLBO transaction can deduct input VAT related to transaction costs
• An MLBO transaction involves a vehicle acquiring shares in a target company with borrowed funds, followed by a merger
• In the case before the Supreme Court, the SPV was established to purchase shares in a target company and then merged with it
• The Supreme Court distinguished between a static holding company and an SPV in an MLBO transaction, stating that the SPV engages in preparatory activities for the target’s economic business
• The Court concluded that even though the SPV does not engage in sales transactions, its preparatory activities constitute economic activities and qualify it as a VAT-taxable person in Italy.

Source: bdo.global

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.

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