Summary
- The Italian Supreme Court has ruled that reimbursements of insurance premiums advanced in the name and on behalf of clients are excluded from the VAT taxable amount. The exclusion applies where the intermediary acts under a properly documented mandate with representation and the client, rather than the intermediary, is legally responsible for paying the insurance premium.
- The reimbursement was neither taxable consideration for the company’s management services nor remuneration for a VAT-exempt insurance activity. The Court found that the company’s insurance agency relationship with the Spanish insurer and its management-service relationship with the Italian car dealers were separate legal and economic relationships. The premiums remained amounts owed by the dealers to the insurance companies.
- The contractual structure and supporting evidence are decisive. Businesses can only treat a recharge as a VAT-excluded pass-through amount where the underlying expense was incurred in the principal’s name and on the principal’s behalf. A mandate without representation may produce a different outcome because the intermediary can then be treated as receiving and supplying the underlying service itself.
Extended article
1. Italian Supreme Court rules on insurance-premium reimbursements
The Italian Supreme Court, the Corte Suprema di Cassazione, has held that reimbursements of insurance premiums advanced by a taxable person in the name and on behalf of its clients do not form part of that person’s VAT taxable amount.
In Order No. 19536 of 12 June 2026, the Court concluded that the amounts qualified as reimbursements of advances within the meaning of Article 15 of Presidential Decree No. 633 of 26 October 1972, the Italian VAT Act. They were therefore outside the taxable amount of the services supplied by the company.
The ruling is important because it distinguishes three potentially different VAT treatments:
- consideration for a taxable management service;
- consideration for an exempt insurance or insurance-related transaction; and
- reimbursement of an amount advanced in the name and on behalf of a client, excluded from the taxable amount.
The classification affects not only output VAT but also the supplier’s input VAT deduction position. If an amount is treated as consideration for an exempt insurance-related transaction, it may affect the taxable person’s deductible VAT pro rata. By contrast, a genuine Article 15 reimbursement is excluded from the taxable amount and is not consideration for an exempt supply by the intermediary.
The Italian-language decision is available in Italian Supreme Court Order No. 19536 of 12 June 2026.
2. Facts of the case
The case concerned an Italian company performing two types of activity.
First, the company acted as an insurance agent for a Spanish insurance company. Second, it supplied management services to car dealers in connection with post-sale guarantees. Under its agreements with the dealers, the company managed several activities relating to those guarantees and was granted a mandate with representation to handle relations with insurance companies.
As part of this arrangement, the company initially paid the insurance premiums owed by the dealers. The dealers subsequently reimbursed the company for the exact premiums advanced on their behalf.
The company treated its remuneration for the management services as subject to VAT at the ordinary Italian rate. However, it excluded the reimbursements of the insurance premiums from its VAT taxable amount under Article 15 of the Italian VAT Act.
The cross-border Italy-Spain element arose because the Italian company acted as an agent for a Spanish insurer. Nevertheless, the decision itself concerns the Italian VAT treatment of the reimbursements and the application of Article 15 of the Italian VAT Act.
3. Position of the Italian tax authorities
The Italian tax authorities challenged the company’s treatment.
In their view, the reimbursements were connected with the company’s insurance agency activity. The authorities consequently sought to classify them as consideration for VAT-exempt insurance-related transactions under Article 10 of the Italian VAT Act.
This position would not have resulted in VAT being charged on the reimbursements, but it could have produced an important adverse consequence. Treating the amounts as turnover from exempt insurance activities could affect the company’s deductible VAT pro rata and restrict the recovery of input VAT on its costs.
Both the first-instance and second-instance tax courts upheld the taxpayer’s treatment. The Italian tax authorities then appealed to the Supreme Court.
4. Supreme Court distinguishes the separate business relationships
The Supreme Court dismissed the tax authorities’ appeal.
The Court considered the company’s insurance agency activity and its services to the car dealers to constitute separate legal and economic relationships. The fact that the same company participated in both arrangements was not sufficient to merge the transactions into a single insurance-related activity.
The dealers were responsible for the insurance premiums payable to the insurance companies. The company did not receive the premiums as remuneration for a service supplied to the dealers. Instead, it temporarily advanced amounts that the dealers themselves owed to third-party insurers.
The subsequent payments received from the dealers therefore represented repayment of those advances. They were not consideration for the company’s taxable management services and were not consideration for a separate exempt insurance supply made by the company.
5. Article 15 treatment of pass-through amounts
Article 15 of the Italian VAT Act excludes certain amounts from the VAT taxable amount. This includes documented reimbursements of advances made in the name and on behalf of the counterparty.
The rule should be distinguished from a normal recharge of costs. A cost does not fall outside the VAT taxable amount merely because the supplier invoices it separately, charges it at cost or labels it as a reimbursement.
For the Article 15 exclusion to apply, the factual and contractual relationship must demonstrate that:
- the expense belongs legally to the client;
- the intermediary pays the expense in the client’s name;
- the payment is made on the client’s behalf;
- the intermediary is acting under a mandate with representation;
- the amount is separately identifiable and properly documented; and
- the reimbursement does not contain remuneration or a margin for the intermediary.
Article 15 expressly refers to amounts reimbursing advances made in the name and on behalf of the counterparty, provided that those advances are properly documented. Article 15 of Presidential Decree No. 633/1972 reproduces this requirement. [brocardi.it]
6. Mandate with representation is the decisive element
A central feature of the judgment is the distinction between a mandate with representation and a mandate without representation.
Under a mandate with representation, the agent acts directly in the principal’s name and on the principal’s behalf. The legal effects of the transaction arise for the principal. Amounts paid by the agent to settle the principal’s liability may therefore qualify as genuine pass-through amounts when the applicable conditions are met.
Under a mandate without representation, the intermediary acts in its own name, even though it may act for another person’s benefit. EU VAT rules may then treat the intermediary as having received and supplied the relevant service itself. In that situation, a payment received from the principal is not automatically a reimbursement outside the taxable amount.
In the case before the Supreme Court, the agreements expressly granted the company a mandate with representation covering payment of the insurance premiums. This contractual structure supported the conclusion that the premiums remained expenses of the dealers and that the company merely advanced the money needed to pay them.
7. Relevance of EU VAT law and CJEU case law
The Supreme Court referred to Article 135(1)(a) of the EU VAT Directive, which exempts insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents.
The Court recalled that VAT exemptions must be interpreted strictly and that the VAT characterization of a transaction depends on its actual economic nature. The status of a supplier as an insurance agent does not mean that every payment received by that supplier constitutes consideration for an exempt insurance-related service.
The Court also considered the principles governing single and multiple supplies. Separate supplies may only be treated as one transaction when they are so closely connected that they objectively form a single indivisible economic supply, or where one element is ancillary to a principal supply.
In Case C-224/11, BGŻ Leasing, the Court of Justice held that insurance for a leased asset and the leasing service are, in principle, distinct and independent supplies. The national court must nevertheless assess whether the particular transactions are so closely linked that they constitute a single supply. The CJEU also held that where a lessor insures an asset and re-invoices the exact insurance cost to the lessee, the transaction can constitute an insurance transaction under Article 135(1)(a) of the VAT Directive. [eur-lex.europa.eu], [eurlexsearch.com]
The Italian Supreme Court additionally referred to Case C-42/14, Wojskowa Agencja Mieszkaniowa w Warszawie and Case C-42/22, Generali Seguros. These authorities supported its analysis of economic reality, the distinction between separate and composite supplies and the need to determine precisely what the payment represents.
8. Why the reimbursement was not an exempt insurance recharge
The outcome should be distinguished from a situation in which a business purchases insurance in its own name and subsequently re-invoices the exact cost to its customer.
In BGŻ Leasing, the lessor itself insured the leased asset and re-invoiced the insurance cost to the lessee. The CJEU accepted that the recharge could constitute an exempt insurance transaction. [eur-lex.europa.eu], [eurlexsearch.com]
In the Italian case, the Supreme Court found a different legal structure. The dealers owed the premiums to the insurers, and the company only paid those amounts under a mandate with representation. The company was not passing on the cost of an insurance service that it had acquired and supplied in its own name. It was recovering money advanced to settle the dealers’ own obligations.
This distinction explains why the premiums were excluded from the taxable amount rather than classified as exempt insurance turnover.
9. Practical implications for businesses in Italy and cross-border arrangements
The ruling is relevant to insurance agents, warranty administrators, vehicle-sector businesses, property managers, travel businesses and other intermediaries that make third-party payments before recovering them from clients.
Businesses relying on pass-through treatment should ensure that the legal documentation and operational process are aligned. In particular, they should verify that:
- the agreement expressly establishes a mandate with representation;
- the intermediary is authorized to act in the client’s name and on the client’s behalf;
- the third-party liability legally belongs to the client;
- invoices, policies or other supporting documents identify the appropriate principal;
- the reimbursement equals the amount advanced;
- any separate management or agency fee is clearly identified and receives its own VAT treatment;
- the accounting records distinguish pass-through amounts from revenue and exempt turnover; and
- the treatment does not incorrectly affect the company’s input VAT deduction pro rata.
The ruling does not establish that every insurance-premium recharge is outside the scope of VAT. The result depends on the legal relationships, contractual mandate, payment flow, invoicing and supporting documentation.
10. Conclusion
Order No. 19536 of 12 June 2026 confirms that the VAT treatment of reimbursed expenses cannot be determined from the nature of the underlying cost alone.
An insurance premium may represent consideration for an exempt insurance transaction in one structure, part of the consideration for a broader taxable service in another, or a VAT-excluded pass-through amount in a third.
In the case examined by the Italian Supreme Court, the decisive factors were that the dealers owed the premiums, the company paid them under an express mandate with representation, and the company acted in the dealers’ name and on their behalf. The repayments consequently fell under Article 15 of the Italian VAT Act and did not affect the company’s taxable turnover or exempt insurance turnover.
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