Prepared by Lucia Pagliari, Amélie Mammone and Antonio Colella
The VAT rate applicable to the supplies, for a unique consideration, of food boxes including ingredients for the preparation of meals subject to different VAT rates is the highest one among those applicable to the ingredients included in the package.
This is the main clarification released by the Italian Tax Authorities in the answer to the ruling 20 January 2022, no. 35 in which they provide guidelines on the VAT treatment of consideration referred to transactions in which several elements may be subject to different VAT rates.
More in the details, the case analyzed by the Italian Tax Authorities relates to a Company that intends to operate in Italy in the on-line trade of food boxes including recipes and ingredients for the preparation or completion of meals.
Moreover, for the sale of such goods, the Company requires a previous subscription of the customer for which, at the time of the client’s subscription, the consideration will be paid in advance.
Together with the boxes, the Company also provides the packaging and transport services.
In this regard, the advance payment linked to the supplies of the boxes does not cover the transport provided by the Company, for which the latter would make a separate charge only at the time of the customer’s order.
Therefore, based on the facts described in the ruling request, the following circumstances have been clarified:
- the box is sold for a unique consideration (not broken down in relation to each ingredient, for which the related cost includes VAT);
- it is not possible to identify a prevailing ingredient;
- the box is offered on a subscription basis and the consideration is paid in advance when such subscription is signed;
- it is not possible to predict which ingredient will be included/prevail at the time of online subscription and prepayment.
With regard to the VAT rate to be applied, the Italian Tax Authorities, specifically asked on this point (together with the determination of the taxable base), are of the opinion that the entire consideration should be subject to the 10% VAT rate, which is the highest VAT rate of the individual ingredients of which the box is usually composed, according to the Company’s assumptions.
Moreover, the above-mentioned Italian Tax Authorities warns that, following the same approach, the ordinary VAT rate of 22% should apply in cases that the box includes ingredients subject to such an ordinary VAT rate (i.e. for those ingredients not included in Part II, Part II-bis and Part III of Table A annexed to Italian VAT code).
According to the Company statements, the latter scenario represents an hypothetical case not present in the current situation under exam and that, in any case, the Company intends to manage separately.
The clarifications released by the Italian Tax Authorities on the applicable VAT rate are based on its previous tax practice as referred in rulings no. 142 dated August 26, 1999 and the more recent one no. 111/E dated August 5, 2004.
On the basis of the above-mentioned acts, the Italian Tax Authorities recognized the existence of a “general principle governing VAT system” for which, at the time of invoicing a “whole consideration” for several transactions, the highest VAT rate among those applicable to the goods and services supplied must be taken into account. This criterion should be applicable regardless of the prevalence of any goods or services at a lower VAT rate, as otherwise provided in the ruling No. 51/E dated May 21, 2019 concerning a similar case.
Indeed, in the ruling no. 35 of 2022 under discussion, no reference has been made to the guidelines provided in the above-mentioned ruling of 2019 that provided some clarifications on the VAT rate applicable to a supply of mixed packages of aromatic plants (containing different types of product) subject to different VAT rates and for which a single consideration is paid.
More in particular, in this occasion the Italian Tax Authorities adopted the instructions issued by the Italian Customs Authorities (included in the Note of last 28 August 2018 no. 94063) according to which, for mixed packages (or for articles composed of different materials or made up of the assembly of different objects) as well as for goods presented in kit prepared for retail trade, the commodity classification (for which, as a general rule, the technical assessment, necessary for identifying the applicable VAT rate, is carried out by the Italian Customs Authorities) depends on the “material or object which gives them their essential character”.
Following said clarifications, the commodity classificationof the above-mentioned products must be made “taking into account the goods which give the set its essential character” (in this specific case, features as “quantity, volume and value” of the elements may be taken into account).
Only in the event that it is not possible to identify such a prevalence, the resolution no. 51 of 2019, following the approach of the Italian Customs Authorities, admits the use of the criterion of the highest VAT rate (which is in line with the answer to the ruling no. 35 under discussion).
Given the above, and by comparing these last clarifications with the approach followed in the ruling no. 35 under discussion, it is worth noting that, since its premises, the Italian Tax Authorities pointed out the difficulty of determining a prevalence among the ingredients included in the boxes at the time of the tax point (advance payment).
Finally, by adopting a questionable approach, the Italian Tax Authorities reject the thesis aimed at considering transport service as ancillary to the supply of the kits. As a consequence, these transactions should be treated as autonomous and separate ones for tax purposes.
In reaching out such a conclusion the Italian Tax Authorities recall general principles applied in some previous acts (e.g. Resolution no. 337/E of last August, 1st, 2008) according to which, in line with the clarifications of the Court of Justice of the European Union (CJEU), it is necessary that the ancillary service “(…) does not constitute for customers an end in itself but a means of better enjoying the principal service supplied (…)”. (see judgment of 18 January 2018, Stadion Amsterdam CV, C-463/16, EU:C:2018:22, paragraph 23).
The publication of the answer to the no. 35 of 2022, may be included within the resolutions of Italian Tax Authorities concerning the identification of the applicable VAT rate for goods/services subject to different VAT rates and for which a single consideration is agreed upon by the parties.
As also attested/proved by the various administrative resolutions released on the matter, the issue of identifying the VAT rate to be applied is not immediate not only in the cases related to transactions for which, in principle, different VAT rate seems applicable, such as the one as above described.
Indeed, difficulties could also arise for cases of individual supply of products for which – as highlighted above– the technical assessment for the preliminary goods classification for customs purposes (commodity code classification) needs to be carried out.
In this regard, it is necessary for Companies to periodically update and review the internal procedures used in order to apply the correct VAT rate at the time of invoicing and to mitigate the related risks with incorrect identification of the same (and the related penalties).
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PwC TLS Avvocati e Commercialisti
PwC TLS Avvocati e Commercialisti