Prepared by Alessia Zanatto, Luca Ghelli and Alberto Corvitto
With the reply to the tax ruling no. 643/2021, the Italian tax authorities has provided some clarifications regarding the application of article 17, paragraph 6, letter c), Presidential Decree no. 633/1972. This provision identifies the transactions subject to the “reverse charge” mechanism related to “the supply of game consoles, tablet PCs and laptops, as well as the supply of integrated circuit devices, such as microprocessors and central processing units carried out before their installation in end-user products”.
The applicant (hereinafter also “Alfa”) carries out the distribution of IT products (hardware, software) and retail electronics to various types of customers (i.e. resellers, large-scale distribution operators) operating in the distribution phase that precedes the retail business.
With the submission of the mentioned tax ruling, Alfa requested clarification to the Italian tax authorities, regarding the following recurring cases.
Question no. 1 – Declaration of final use of the products
Alfa sells to its customers that are taxable persons which resale “tablets”, “laptops”, “game consoles”. It may happen that, at the time of purchase, the retailers declare that the specific purchase is carried out for purposes other than resale, also providing, to Alfa, a specific declaration of final use of the products.
On this point, the Italian tax authorities as previously clarify with the Circular letter no. 21/E/2016, confirmed the application of the “reverse charge” mechanism according to article 17, paragraph 6, letter c, Presidential Decree no. 633/1972, considering as not relevant the declaration of the reseller and the actual use of the products that the latter will undertake.
In particular, the Italian tax authorities confirmed their previous interpretation of the aforementioned provision considering the “reverse charge” mechanism applicable only to “transactions carried out in the distribution phase preceding the phase of retail trade of the products”.
According to the opinion of the Italian tax authorities, the ratio for the aforementioned limitation is linked, in the retail trade, to the frequency of transactions which is excessively burdensome to make the application of the “reverse charge” mechanism in relation to the status of taxable person of the purchaser, on a case by case basis.
It is not clear, in our opinion, whether the reply to the tax ruling provided by the Italian tax authorities is led by the fact that the applicant declared in the request that its clients are “resellers” or whether the Italian tax authorities actually consider that the “reverse charge” mechanism is applicable, in general, in all transactions between the producer and a taxable person.
Question no. 2 – Objective scope of application of the reverse charge mechanism
Alfa purchases from its suppliers, products subject to the “reverse charge” mechanism according to article 17, paragraph 6, letter c), Presidential Decree no. 633/1972, together with products connected to them (i.e. cables, adapters, “monitors”). The aforementioned “connected products” are subject to subsequent resale with a single delivery or multiple deliveries (together or not with the products subject to the “reverse charge” mechanism) to Alfa’s customers.
The Italian tax authorities confirmed the applicability of the “reverse charge” mechanism exclusively to the assets identified by the aforementioned legislative provision.
However, the Italian tax authorities excluded the application of the “reverse charge” mechanism according to article 17, paragraph 6, letter c), Presidential Decree no. 633/1972 to the supply of connected products (i.e. cables, adapters and monitors) sold stand alone, for which the standard VAT regime will apply.
Question no. 3 – Supply of electronic products to taxable persons not resident/established in Italy
In the course of its business, Alfa sells products included in the list referred to in article 17, paragraph 6, letter c), Presidential Decree no. 633/1972 to its taxable customers not resident/established in Italy.
In such cases, the Italian tax authorities have confirmed, as previously confirmed through the Resolution letter no. 28/2012 and through the reply to the tax ruling no. 11/2020, that the person liable for the VAT payment is the purchaser. Accordingly, in case the purchaser is not a taxable person resident/established in Italy, the latter will be obliged to register for VAT purposes in Italy through the direct identification (if the conditions are met) or through the appointment of a fiscal representative.
However, such clarification does not seem to be in line with the most recent case law of the Italian Supreme Court (please refer to the decision no. 10152 dated May 28th, 2020), where, although with reference to a different case from the one referred to the tax ruling, the judges of the Italian Supreme Court stated that for the supply of scraps (subject to the “reverse charge” mechanism according to article 74, paragraphs 7 and 8, Presidential Decree no. 633/1972), VAT is due by the purchaser through the “reverse charge” mechanism only in case the latter is a taxable person resident/established in Italy. Accordingly, based on such a conclusion of the Court, it should not be sufficient that the operators involved in a domestic purchase of scraps carried out in Italy are taxable persons established in an EU Member State.
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