VAT Deduction Permitted for Importers Lacking Ownership of Goods

• VAT Deduction Inquiry: ALFA S.r.l. seeks clarification on whether it can deduct VAT paid at customs for importing production factors, specifically for the drug YY, which is produced from materials owned by a Japanese client but processed and marketed by ALFA.
• Legal Framework: The request references Articles 19 and 67 of Presidential Decree No. 633 of 1972, asserting that the right to VAT deduction is integral to the VAT system, and should not be limited, as supported by EU Court of Justice jurisprudence.
• Customs Obligations: The response highlights that even if ALFA does not own the imported goods, it can still be considered the importer for VAT purposes and has the right to deduct VAT, provided the imported goods are used in its business activities.
• Direct Link Requirement: The VAT deduction is valid if there is a direct connection between the imported goods and the company’s business operations, emphasizing that the imported goods must be relevant to the business activity, regardless of ownership.
• Administrative Control: The tax administration retains the right to verify the legitimacy of the VAT deduction claims and the conditions under which they are exercised, ensuring compliance with VAT regulations and customs law.

Source Agenzia Entrate

ECJ cases referred to

• C-132/16 (Iberdrola Inmobiliaria) – VAT Deduction for Third-Party Property Improvements – VATupdate
• C-621/19 (Weindel) VAT Deduction – Import Costs and Ownership – VATupdate
• C-187/14 (DSV Road) – No deduction of VAT on import by the carrier – VATupdate

Unofficial translation

Response No. 213/2025

SUBJECT: VAT – Deduction of VAT paid at customs by the importer of goods – Articles 19 and 67 of Presidential Decree No. 633 of 1972

With the request for clarification specified in the subject, the following QUESTION was presented:

ALFA S.r.l. (hereinafter referred to as “the Company,” “the requesting company,” or “the requester”) states that it operates in the personalized marketing of pharmaceutical compounds and in the related selection and monitoring of suppliers, in addition to engaging in wholesale trade of industrial chemical products for the pharmaceutical industry.

Specifically, one of the significant businesses of the company is to market active pharmaceutical ingredients following processing carried out within the territory of the State.

In particular, this request concerns the flow that the company intends to implement for the production and marketing of YY (NC: xxxx xx xx), a drug with activity…

In this flow, the Company will manage the importation from China of the basic production factor ZZ (NC: xxxx xx xx), owned by the Japanese client (BETA), and the production (along with other production factors) of the finished product YY, which is the drug intended for final commercialization.

The production of the drug is entrusted by the requester to the Italian company GAMMA, which will subject the various production factors (including ZZ) to transformation.

ALFA points out that the basic production factor ZZ (NC: xxxx xx xx) will formally remain the property of the Japanese client, who will transfer it to the requester free of charge to facilitate the production, commercial, and economic flow. Specifically, the transfer of this fungible raw material between the Japanese owner and the requesting company will occur without the expectation of any consideration, i.e., free of charge, even though the requesting Company has the authority to dispose of it as if it were its owner.

Once produced, YY (NC: xxxx xx xx) will be sold by the requesting company to the Japanese promoter primarily in Germany, where the Japanese client has a tax representative for VAT purposes or, alternatively, in non-EU territory (for example, Brazil).

In light of the above, the requester asks whether, with reference to the specific case, the VAT deduction regime pursuant to Article 19 of Presidential Decree No. 633 of 1972 can be applied to imports made by the requester.

INTERPRETATIVE SOLUTION PROPOSED BY THE TAXPAYER

The requesting Company, after recalling the regulations set forth in Article 19 of Presidential Decree No. 633 of 1972, highlights that the right to deduction is an integral part of the VAT mechanism and that, in principle, it cannot be subject to limitations, as asserted by consolidated jurisprudence of the EU Court of Justice.

The requester cites the customs regulations concerning the subjects obligated to pay customs duties (Articles 38 and 56 of Presidential Decree 23 January 1973, No. 43 – the so-called “TULD”) and references the ruling of 23 May 2001, No. 7016 of the Court of Cassation, in which the Supreme Court, regarding the deduction of VAT paid at customs by an importer who is not also the owner of the goods, states that the importation operation, as an autonomous taxable presupposition (distinct from the sale of goods, whose objective presupposition requires the transfer of ownership or real rights of enjoyment), gives rise to the right of deduction for the importer, even if the importer is not the owner of the goods, provided that the conditions set forth in Articles 19 and following of the VAT Decree are met. The motivations of the Court of Cassation are cited, according to which: “due to the combined provisions of the uniform community legislation and domestic customs law, all subjects who qualify as debtors of VAT in relation to import operations have, in principle, the right to deduct the tax paid, provided that the further conditions for the emergence of this right are met, and mainly the use of the imported goods for the exercise of the business and for the carrying out of operations subject to VAT, or, according to the common expression in Italian practice, the relevance to the exercise of the business.”

The requester also cites the resolution of the Ministry of Finance, General Customs Directorate, of 10 August 1989, No. 529, which was called upon to rule on the ability of mere holders of goods to carry out customs operations directly, in the absence of the owner. The Ministry clarified that even “subjects other than the actual owner of the goods” can carry out customs operations “in their own name and on behalf of the said actual owner,” as the legal system “considers as the owner of the goods the person who presents them at customs or who holds them at the time of entry into the customs territory or exit from the same territory (Article 56, second paragraph, T.U.).” From this premise regarding the subject of customs operations, it was concluded that “for all tax purposes, the importing subject must be considered as the one who makes the declaration in their own name even if they indicate that they are doing so on behalf of others,” therefore, “the acts of the customs operations they carry out will be addressed to them; they will themselves be considered the importing subject for VAT purposes (and this also for the effects of what is provided by Article 19 of Presidential Decree No. 633/1972).”

In conclusion, after recalling the numerous administrative documents in line with the principles derived from European jurisprudence (see, in this sense, Resolution of 11 May 2007, No. 96, Resolution of 5 August 2008, No. 346, Response No. 6 of 11 January 2019, Response No. 509 of 26 July 2021, Principle of Law No. 13 of 29 September 2021, Response No. 410 of 4 August 2022), the requester believes that, based on the principles outlined so far, they have the right to deduct the VAT paid at the importation of the goods, even if they are not the owner, since such goods are relevant to their business activity.

The company states that the importation from China of the basic production factor ZZ (NC: xxxx xx xx) is an indispensable element in the production process to produce and then market the drug YY (NC: xxxx xx xx). In fact, although there is no transfer of ownership, ALFA disposes of the production factor ZZ as if it were the owner and delivers it, along with other production factors, to GAMMA to obtain the finished product YY.

Therefore, this commercial flow presents, in the opinion of the requester, an evident “direct and immediate connection” with the object of the Company’s business activity.

In light of the above, the requesting Company intends to adopt the following behavior:

• Import the raw material (ZZ) relevant to its activity from non-EU countries (i.e., China), fulfilling all customs obligations (duties and other costs related to customs clearance) and paying VAT at customs upon introduction into the territory of the State;
• Register the import bill for VAT purposes in the purchases register pursuant to Article 25 of Presidential Decree 26 October 1972, No. 633 and exercise the right to deduct VAT pursuant to Article 19 of the same Presidential Decree No. 633 of 1972;
• Depending on the cases, sell the drug YY through an intra-community supply, pursuant to Article 41 of Law Decree No. 331/1993, to the German taxable person, or “an export sale pursuant to Article 8 of Law Decree No. 331/1993” (correctly Presidential Decree No. 633 of 1972).

OPINION OF THE REVENUE AGENCY

Preliminarily, it should be noted that the response to the request at hand, concerning the right to deduct VAT paid at customs by the importer who is not also the owner of the goods, is provided based on the elements and facts represented by the requester, which, for the purposes of this opinion, are taken at face value, and regarding which every power of control by the tax administration remains unaffected.

That said, regarding the question subject to the request for clarification, it is highlighted that Article 19, paragraph 1, of the Presidential Decree of 26 October 1972, No. 633 states that, “for the determination of the tax due under the first paragraph of Article 17 or the excess referred to in the second paragraph of Article 30, the amount of tax paid or owed by the taxable person or charged to them by way of reimbursement in relation to goods and services imported or acquired in the exercise of the business, art or profession is deductible from the amount of the tax relating to the operations carried out.”

Article 67 of the aforementioned Presidential Decree No. 633 of 1972 identifies the operations that constitute imports concerning which VAT must be assessed, liquidated, and collected by the Customs and Monopolies Agency upon the introduction of goods into the territory of the State.

Regarding the subject liable for the customs obligation, Article 38 of Presidential Decree 3 January 1973, No. 43 (T.U.L.D.) establishes that: “The owner of the goods … and, jointly, all those on behalf of whom the goods have been imported or exported are obligated to pay the customs duty.” In this regard, Article 77 of Regulation (EU) No. 952 of 2013 specifies that “The debtor is the declarant.”

Specifically regarding value-added tax, Article 201 of Directive 2006/112/EC (briefly, the “VAT Directive”) states that “At importation, VAT is due from the person or persons designated or recognized as debtors by the member state of importation.”

In general terms, concerning the right to deduct VAT, it is useful to recall the constant jurisprudence of the Union in this matter, according to which “the existence of a direct and immediate link between a specific upstream operation and one or more downstream operations, which confer the right to deduction, is necessary, in principle, for the right to deduct VAT paid upstream to be recognized to the taxable person and for determining the scope of such right. The right to deduct VAT arising from the purchase of goods or services upstream presupposes that the expenses incurred to acquire these latter are part of the cost components of the price of the taxable downstream operations that confer the right to deduction (…).

The right to deduction is, however, granted to the taxable person even in the absence of a direct and immediate link between a specific upstream operation and one or more downstream operations that confer a right to deduction, provided that the costs of the relevant services are part of the general expenses of the taxable person and, as such, are cost components of the price of the goods or services they provide. Such expenses indeed present a direct and immediate link with the overall economic activities of the taxable person” (see Court of Justice, 14 September 2017, C-132/16, Iberdrola, paragraphs 28 and 29 and related jurisprudence referenced therein).