No VAT Deduction for In-House Companies Donating Works Free to Sole Shareholder Municipality

• The Italian Supreme Court ruled that an in-house company cannot deduct VAT on purchases for works (e.g., a school, sports facility, photovoltaic systems) given free of charge to its sole shareholder municipality.
• Any transfer from the company to its shareholder, whether free or for payment, is generally subject to VAT.
• EU case law allows exemption only if the free transfer also serves the interest of the transferring company.
• In this case, that condition was not met, so allowing VAT deduction would violate the principle of tax neutrality.
• VAT deduction on purchases is only allowed if the free transfer meets both the relevance of costs and the specific EU law requirements, including being subject to VAT or serving the transferor’s interest.

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.

---

---