Prepared by Davide Accorsi and Pirola Lorenzo
With the ruling reply no. 136, published on 23 January 2023, the Italian tax authorities provided clarifications on the VAT treatment of a chain supply with goods to be exported outside the territory of the European Union (hereinafter also “EU”).
The proposed case is the following:
- Alfa (hereinafter also “the Taxpayer” or “Claimant Company”), a non-resident company registered for VAT purposes in Italy, will purchase goods from Gamma, a non-resident company not identified for VAT purposes in Italy. Both companies are part of the multinational corporate group Beta;
- at the same time, Alfa will sell the aforesaid goods to other companies of the group (hereinafter also referred to as “Distributors”) which will be in charge of the distribution of the products. These companies are established in Italy, or in another EU Member State, or in non-EU countries;
- the goods, at the time of the transaction referred to in the first bullet, will be located in Italy, in a warehouse of a third company, which will take care of the transport of the goods to the Distributors on behalf of Alfa.
The Taxpayer, in the specific case where the Distributor is resident in non-EU countries and the goods are shipped from Italy outside the EU territory, asks:
- the correct VAT treatment to be applied to the “chain” transactions described above, should he decide not to apply the facilitation provided for “indirect” exports pursuant to article 8, first paragraph, letter b), of Presidential Decree No. 633/1972;
- should it decide not to apply the exempt with right to deduction regime provided for “indirect” exports, confirmation of Alfa’s right to deduct the VAT paid in Italy in relation to the purchase of the products from Gamma.
The Italian tax authorities, outlining the conditions required by article 8, paragraph 1, letter b), of Presidential Decree No. 633/1972, in order to qualify a transaction as an “indirect” exports supply, clarify that this provision qualifies as exempt with right to deduction the supply of goods existing in the Italian territory towards customers not established in Italy, provided that such customers, directly or through a third party, transport the goods out of the customs territory of the European Union within 90 days of delivery (in their original state and without having any processing or transformation carried out on them).
Moreover, the tax authorities clarify that the above-mentioned conditions are not met in the transaction under analysis, as “the transport of the goods outside of the customs territory of the European Union is carried out by the third-party warehouse operator on behalf of Alfa in its capacity as supplier of the goods to the non-EU Distributor. This is because it is only in relation to the first supply between Gamma (first supplier) and Alfa that the latter assumes the role of non-resident customer, whereas, with respect to the supply with the non-EU Distributors, the Claimant Company is the second supplier”.
The Italian tax authorities’ opinion could be based on the fact that, regardless of the method of transfer of the goods from Alfa to the Distributors (i.e., “flash title”), which implies that the supply of the goods from Gamma (first supplier) to Alfa (first customer) and between the latter and the non-EU Distributor (second customer) are almost simultaneous, the transport of the goods relating to the supply between Alfa and the non-EU Distributors is carried out by Alfa as supplier.
In the writer’s opinion, the attribution of the transport abroad to the first or second supply does not seem to have been resolved by the clarifications given, which, presumably, are based on documentary evidence provided at the time of the ruling request and not clearly reported in the published reply. Therefore, we should expect for a further intervention by the tax administration aimed to specifying whether and under what conditions it is possible to consider the first supply an “indirect” export.
After the exclusion of the application of the so-called “indirect” exports discipline to the case at hand, the Italian tax authorities examine the VAT treatment of the transactions under analysis and clarify that they must be considered as separate transactions. Therefore:
- the first supply between Gamma and Alfa is territorially relevant for VAT purposes in Italy, pursuant to article 7-bis of Presidential Decree No. 633/1972 and, considering the status of the parties involved, for which the reverse charge mechanism is not applicable, Gamma will be required to identify itself for VAT purposes in Italy and issue an invoice charging VAT to Alfa;
- the second supply between Alfa and the Distributors is a “direct” export supply, pursuant to article 8, first paragraph, letter a), of Presidential Decree No. 633/1972. Therefore, Alfa will issue a VAT exempt with right to deduction invoice to the Distributors.
The Italian tax authority emphasizes that “the proposed solution, according to which the supplies between Gamma and Alfa and between Alfa and the non-EU Distributor have an independent tax relevance, respectively, is made taking note of the representation of the different passages of the goods provided by the Claimant Company and of the circumstance that, not even in the supplementary documentation request, the latter has produced documentary evidence useful to qualify the complex transaction in a different way, for example as an export triangulation”.
Although it is not clear from the published reply what the scope of the above-mentioned sentence is, it could be inferred that the Italian tax authorities may have a less restrictive position than in the past with reference to the conditions of transport in order to carry out a triangular export supply, this, since, in the case under analysis, the transport abroad is carried out by the middleman of the triangulation on its own account.
With reference to the second question requested by the Claimant Company, the Italian tax authorities clarify that the VAT paid by Alfa in relation to goods and services purchased in Italy may be deducted in accordance with the ordinary rules set forth in article 19 and following of Presidential Decree No. 633/1972 (or requested for refund), provided that the inherent nature of such purchases with respect to the activity carried out by Alfa is established.
Finally, the Italian tax authority, completes by clarifying that Alfa, by making so-called “direct” export sales to non-EU Distributors, could acquire the status of habitual exporter.
 It should be noted that, in order to settle the question in similar circumstances, in the case of a dispatch to another EU Member State, the EU legislator had to intervene by means of the so-called “quick fixes”, which established that intra-EU transport can be attributed to the first or second supply on the basis of the VAT number communicated by the so-called “intermediary” to the first supplier. It is clear that the clarifications provided with reference to intra-EU chain supplies cannot be applied sic et simpliciter to the chain supplies that are the subject of the ruling reply, if only because the first customer might not have a VAT number to communicate to the first supplier. Nevertheless, there may be parallels between the two cases that should be further investigated.
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