VAT Deductibility of Transaction Costs in MLBO: Clarifications for Special Purpose Vehicles

• VAT Deductibility of Transaction Costs: The resolution clarifies that transaction costs incurred by a Special Purpose Vehicle (SPV) during a merger leveraged buy-out (MLBO) can be deductible for VAT purposes, provided that the SPV is engaged in activities that ultimately lead to taxable operations.
• Conditions for VAT Registration: To qualify for VAT deduction, the SPV must be classified as a taxable entity under the VAT law. If the SPV’s activities are limited to merely holding financial assets without involvement in management, it cannot claim VAT deductions.
• Role of SPV in MLBO: The SPV is seen as playing a preparatory role in facilitating the acquisition and subsequent operational management of the target company, thereby establishing a direct connection between incurred costs and future taxable activities, affirming its status as a VAT taxpayer.

Source Agenzia Entrate

See also

• ECJ C-42/19 (Sonaecom) – Judgment – Input VAT on preparatory activities for acquisition of shares and restructuring that did not happen – VATupdate

---

---