Prepared by Luca Lavazza and Francesco Pizzo
As anticipated in the previous Newsalerts, the Article 18 of Law Decree no. 73 of 25 May 2021 (Urgent measures related to the emergency from COVID-19, for businesses, work, young people, health and local services) amends the art. 26 of the Presidential Decree n. 633/1972 on the recovery of VAT on outstanding receivables towards customers subject to insolvency proceedings.
In particular, the new paragraph 3-bis has been introduced pursuant to which the right to recover VAT starts from the date on which the debtor is subject to an insolvency procedure (i.e. date of the sentence declaring the bankruptcy, of the decree of admission to the procedure of arrangement with creditors, etc.…).
With the Circular letter n. 20/E dated 29 December 2021, the Tax Authority provides significant clarifications on the new provisions of the above-mentioned art. 26. In particular, the following points must be highlighted due the importance for creditors.
First, with reference to the issue of the creditor’s prior introduction to the debtor’s liabilities as a prerequisite for the recovery of the VAT, the Tax Authority clarifies that, in compliance with the new wording of the law, the issuance of the credit note (from the date the insolvency procedure starts) is not precluded to the creditor who decided to not join to the procedure. Therefore, the previous tax authority’s practice that subordinated the issuance of the credit note to the “necessary participation of the creditor to the procedure” has been replaced.
Another important point concerns the deadline within which the creditor can issue the credit note and exercise, consequently, the right of VAT recovery. On this point, the tax authority provides with the following example.
In the case of sentence declaring the bankruptcy of the debtor in the course of 2022, the creditor will have the right to issue the credit note in the same year and recover VAT, at the latest, with the annual VAT return to be submitted within 30 April 2023 (relating to the 2022).
However, it is also possible for the creditor to issue the credit note within the first four months of 2023 (deadline for submission of VAT return relating 2022) and, in such a case, exercise the right to the VAT recovery in the periodical settlement of issuance of the credit note or in the annual VAT return to be submitted within 30 April 2024 (relating to 2023).
Finally, the Circular letter confirms that the new provisions apply only in relation to insolvency proceedings started after 26 May 2021. For the proceeding started before, the VAT recovery is possible when they are concluded based on the previous rules.
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