Insights from Italian Revenue Agency’s Letter No. 193/2025
Background
On July 24, 2025, the Italian Revenue Agency issued Response No. 193/2025, providing critical clarification on VAT treatment for cross-border transactions involving fixed establishments (FEs) of EU-based companies operating in Italy.
The case concerns Alfa, an EU company under Beta Group, which had reorganized its product segments and operates in Italy through an FE involved in wholesale scientific and industrial equipment sales.
The Core Issue
The key question was whether Alfa’s Italian FE is sufficiently involved in transactions where goods are delivered directly from the EU-based HQ to Italian clients—thereby triggering VAT obligations in Italy.
Agency’s Analysis of FE Involvement
To assess whether the FE’s role is “qualifying” for VAT purposes, the Agency referred to:
- EU Directive 2006/112/EC, Article 192bis
- EU Regulation 282/2011, Article 53
These define FE involvement by:
| Criteria | Explanation |
|---|---|
| Operational Infrastructure | The FE must have sufficient human and technical resources to participate in sales transactions |
| Active Role | The FE must be involved in initiating, negotiating, or managing the supply of goods or services |
In Alfa’s case, the FE demonstrated:
- Independent client management
- Authority to negotiate and propose sales terms
- Control over marketing and post-sale logistics
- Autonomy in price setting and commercial strategy
The Revenue Agency’s Interpretation
The Agency concluded:
✅ The FE does intervene in B2B sales of products from segments Delta and Delta 1 (including sub-segment X1), even when the goods are shipped directly from the EU HQ.
❌ The FE does not intervene in sales of sub-segment X2 products, nor in purchases and imports negotiated solely by HQ—these remain HQ’s responsibility.
Compliance Requirements
Where the FE is involved, it must:
- Apply the reverse-charge mechanism for intracommunity acquisitions
- Submit Intrastat declarations
- Issue e-invoices for domestic sales
Where the FE is not involved, it must:
- Record purchases in a dedicated VAT register
- Include relevant tax figures in periodic and annual VAT filings (e.g., VP3, VP5, VP14)
Applicability
These clarifications apply only going forward from the date of the Agency’s response. Prior transactions managed under earlier interpretations remain valid.
Closing Thoughts
Letter No. 193/2025 underscores how functional involvement—not merely logistical flow—determines VAT obligations. Multinational groups must carefully evaluate how their fixed establishments operate within each jurisdiction to ensure accurate tax compliance.
Source Ruling request 193/2025
Italian Revenue Agency Clarifies VAT Obligations for EU Companies with Permanent Establishments in Italy
- The Italian Revenue Agency issued Letter No. 193/2025 on July 24
- The letter clarifies VAT regulations for transactions involving a permanent establishment in Italy
- The taxpayer is a company from an EU country with a wholesale business in Italy
- The permanent establishment handles sales, marketing, and customer support
- Products are stored in the EU and shipped to customers in Italy
- The taxpayer sought clarification on VAT obligations for sales and purchases in Italy
- VAT obligations depend on the role of the permanent establishment in transactions
- The taxpayer must use the reverse charge mechanism for intra-community purchases
- Invoices must be issued for domestic sales
- Purchases attributable to the taxpayer must be recorded and declared in separate annual VAT returns
Source: news.bloombergtax.com
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.
