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Transfer of VAT credit denied for non-EU residents

The Revenue Agency has established that, currently, only VAT credit resulting from the annual or infra-annual VAT return (VAT TR form) can be assigned.

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With its reply to ruling No. 278 of 19 May 2022, the Italian Revenue Agency provided clarification on the subject of the assignment of VAT credits by entities resident in non-EU countries.

The cross-border VAT refunds framework

Cross-border VAT refunds are regulated differently depending on whether the applicant is a taxable person belonging to one of the countries of the European Union, or a taxable person outside the EU. For the former, the discipline can be found in art. 38-bis2 of the VAT decree, which provides for the use of a “European portal” and, above all, allows the community operator to request reimbursement through their own tax administration; for the latter, the discipline is contained in the following article 38-ter.

For subjects resident in the European Union, the refund request procedure is therefore simplified, as they can request a refund of the VAT paid in Italy on purchases and imports of movable goods and services relating to their business, as long as it is deductible, by submitting a request to the competent Administration, without the need to identify oneself in Italy, nor to have to fulfill tax obligations like resident subjects.

This procedure, however, operates on condition of reciprocity with the State of origin of the economic operator: it is therefore necessary that the foreign State to which the applicant belongs ensures the same treatment for Italian economic operators, who can obtain reimbursement of the VAT paid in that State, for the purchase of goods and / or services.

At present the conditions of reciprocity exist only with Norway, Israel and Switzerland.

The transfer of the VAT credit according to art. 5, paragraph 4-ter, D.L. n. 70/1988

Regarding the possibility for a taxable person to transfer its VAT credit, the same, always denied in the past, has been implicitly recognized by the legislator through the provision contained in art. 5, paragraph 4-ter, D.L. n. 70/1988, according to which, in case of assignment of the credit resulting from the annual return it must be understood that the value added tax office can also repeat the reimbursed sums by the transferee, unless the latter does not provide the guarantee provided for in the second paragraph of the aforementioned article until the assessment is final.

Therefore, for tax purposes, only the VAT credit resulting from the annual VAT return could be transferred, provided that a refund was requested.

The position taken by the Revenue Agency with reply no. 278 of 19 May 2022

The Revenue Agency, with reply no. 278 of 19 May 2022, underlined that, as clarified by the circular of 13 February 2006, n. 6 / E, answer 12.4, “credit resulting from the annual return” must be understood as that indicated in the annual VAT return and, therefore, only these credits are susceptible to transfer.

Since the legislator has not inserted any reference to VAT refunds made to subjects not resident in the European Union, and that the same art. 38-ter of the VAT decree and the D.M. May 20, 1982, n. 2672 (containing the implementing rules of the provisions of art.38-ter) do not bear any indication as to the possibility of transferring the VAT credit requested for reimbursement to third parties, the Agency believes that currently only the VAT credit resulting from the Annual or infra-annual VAT return (VAT TR form) can be transferred.

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Regulatory Framework

Circular of 13 February 2006, n. 6 / E

Reference (Italian only)

Reply to ruling no. 278 19 May 2022

Reference (Italian only)

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