VAT Plafond and permanent establishment – Ruling reply no. 336/2020

Prepared by Luca Ghelli e Beatrice Pelo

The Italian Tax Authority, with the ruling reply no. 336/2020, dated September 10th 2020, has clarified whether the status of usual exporter can be attributed to the permanent establishment in Italy of a Company which has previously transferred its tax residence abroad, pursuant to article 166, of the TUIR.

As known, the usual exporter regime is ruled by article 8, paragraph 1, letter c), of Presidential Decree no. 633/1972. According to this provision, the taxable persons who carry out VAT exempt transactions (with right to deduction), so called “qualified transactions” such as exports and intra-Community supplies, may exempt purchases within the thresholds of the qualified transactions carried out during the preceding calendar year, or in the previous twelve months.

The aim of the above mentioned rule is to simplify the permanent VAT credit position of the usual exporters, allowing the latter not to pay VAT on purchases that should be then asked for refund.

For this reason, the taxpayer asked the Italian Tax Authority whether the permanent establishment that may be ascribable in Italy could receive the VAT plafond generated by the Company that has transferred abroad its legal and tax residence.

In the case submitted to the tax authorities, only briefly described in the published version, the taxpayer deems that this possibility should be granted.

In fact, in case the Company has transferred abroad its registered office, and a permanent establishment arises in Italy, in the opinion of the applicant, the Italian Tax Authority should apply the same principles used to comment on the transfer of the VAT plafond in the context of extraordinary transactions/business combinations (mergers, demergers, ToGC).

With reference to such transactions, the tax authorities, in line with the article 19, paragraph 1, of Directive 2006/112/EC, clarified that, when there is a transfer of a going concern or a business combination, the plafond accrued by the giving entity can be in principle allocated to the receiving entity.

However, it is necessary that certain conditions are met.  

In particular, the successor in title must, without interruption:

  • continue the activity of the business transferred, previously carried out by the transferor;
  • take over the legal relations relating to the business transferred to it.

The existence of the above mentioned conditions has recognized by the Office in the case of the ruling no. 336/2020.

Therefore, the Italian Tax Authority agreed with the applicant, with reference to the applicability to the concrete case, of the same principle that concerns the extraordinary operations.

It follows, that the VAT plafond accrued by the Company which transferred abroad the legal and tax residence could be attributed to the permanent establishment arising in Italy.

The latter, in fact, hand over the activity of the Company, without interruption as well as the legal relations pertaining to the transferred Company.

This circumstance is strengthen by the fact that the permanent establishment would maintain the same VAT number and fiscal code of the transferred Company (according to the comments provided by the tax authorities in the ruling reply no. 73/2018).

Therefore, the above conclusions are in line with the principles already laid down by the tax authorities in previous guidelines.

In the light of the above, the Italian Tax Authority, with the ruling reply no. 336/2020, confirmed its consolidated practice and guidelines, according to which the VAT plafond may be transferred if there is substantial continuity between the giving entity and the receiving entity.

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Luca Lavazza

PwC TLS Avvocati e Commercialisti


Luca Ghelli

PwC TLS Avvocati e Commercialisti