- Substance over form in VAT territoriality: Italy’s Supreme Court judgment no. 23842/2025 shifts the concept of “foreign-dressing” from direct taxes to VAT, ruling that territorial relevance must be based on actual management and operational substance, not formal location.
- Freedom of establishment upheld: The Court aligns with EU law, emphasizing that VAT liability cannot be presumed unless a company lacks economic substance — reinforcing that artificial arrangements alone do not justify taxation in Italy.
- Functional approach to VAT residence: The ruling introduces a “VAT-oriented” lens for assessing tax residence, requiring concrete evidence of managerial control and decision-making within Italy to establish a permanent establishment and VAT liability.
Source osservatorio-fiscalita.it
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