Prepared by Davide Accorsi, Stefano Luigi Airaghi and Cristina Mosca
With their reply No. 230/2023, dated March 1, 2023, the Italian tax authorities provided their feedback to the request of ruling submitted by a company that operates in the flexible packaging sector and, in particular, produces pouches in various materials, suitable for containing food in a solid and liquid state, which can be customized according to customers’ needs, with regard, for example, to format, accessories or graphics.
The applicant company disposes of a website through which customers, mainly EU taxable persons, can configure products online and conclude the order directly from the website. The supplies of goods are made with transportation arranged by the applicant company mostly through couriers. Given that the transactions take place online and the physical delivery of the goods is carried out through traditional channels, the activity in question would fall under the indirect e-commerce.
In the context described above, the applicant company brings to the attention of the tax authorities the fact that, during 2022, some customers located in other countries of the European Union (hereinafter also “EU”) to which the goods are shipped from Italy, at the time of the conclusion of the order, have communicated an identification number not registered in the VIES archive.
In this regard, the applicant company requests clarifications on the correct interpretation of the combined provisions of Articles 38-bis, 40 and 41 of Law Decree No. 331/1993 and, specifically, whether:
- the sales carried out towards customers who have communicated a VAT number not included in the VIES archive, are to be qualified as intra-EU distance sales exempt from VAT with right to deduct in Italy pursuant to Article 41, paragraph 1, letter b), Law Decree No. 331/1993 and subject to VAT in the country of destination, or as intra-EU supplies subject to VAT in Italy;
- for the purposes of determining the VAT taxable status of the customers established in other EU countries, may rely on the information contained in the aforementioned VIES archive.
In order to provide a response to both the questions, the Italian tax authorities, first of all, recall the requirements that must exist in order to qualify a transaction as an exempt from VAT with right to deduct intra-EU supply under Article 41, paragraph 1, letter a), Law Decree No. 331/1993. Specifically, the conditions that must necessarily be met are as follows:
- the taxable status VAT purposes in different EU Member States of the supplier and the customer;
- the transfer of the right of ownership or other real right over the goods;
- the onerousness of the transaction;
- the actual movement of the goods from Italy to another EU Member State.
In addition to these conditions, those ones provided by Article 41, paragraph 2-ter, Law Decree No. 331/1993 should be considered as well, which also requires:
- the communication to the supplier of a VAT identification number obtained by the customer in another EU Member State; and
- the submission or justification of incomplete or omitted submission of EC Listings/Intrastat by the supplier.
On this point, the Italian tax authorities note how the EU Commission, in the Explanatory Notes regarding the changes to the EU VAT system brought by the “quick fixes” directive released in December 2019, clarified in paragraph 4.3.4 that “only the VAT identification number with a prefix by which the Member State of issue may be identified is relevant for the purposes of Article 138 VD. This is the only VAT identification number that the Member State of identification includes in the VIES archive and therefore the only VAT identification number the supplier is able to verify”.
In the light of the above, it follows that, as in the case under analysis, the failure of the customer to communicate to the supplier a VAT identification number registered in the VIES archive results in the impossibility of benefiting from the exemption described above and, therefore, in the taxability for VAT purposes in Italy of the relevant supply.
In the view of the tax authorities, therefore, in the case at hand, it is not possible to apply the rules provided by Article 38bis, Law Decree No. 331/1993, according to which intra-EU distance sales of goods are the supplies of goods dispatched or transported by or on behalf of the supplier, even when the supplier intervenes indirectly in the transport or dispatch of the goods, from a Member State other than the one in which the dispatch or transport arrives to the destination of:
- non-taxable persons (consumers);
- taxable persons or non-taxable legal persons listed in Article 151 of the VAT Directive 2006/112/EC (diplomatic arrangements, international bodies, NATO, etc.), corresponding to Article 72, paragraph 2, Presidential Decree No. 633/1972;
- with the exclusion of goods subject to excise duty, customers who are not required to apply VAT on intra-EU purchases and who have not opted for its application. As clarified in Section 3.2.5 of the Explanatory Notes on the VAT e-commerce rules, published in September 2020, this includes: i) taxable persons carrying out only supplies of goods or services in respect of which VAT is not deductible, ii) taxable persons subject to the common flat-rate scheme for farmers, iii) taxable persons subject to the second-hand margin scheme and iv) non-taxable legal persons – (also known as the group of 4).
This, under the assumption that the applicant company’s customers do not belong to any of the above mentioned categories (they are not, for example, taxable persons subject to the flat-rate scheme provided for farmers who have not opted for the application of VAT on intra-EU purchases and whose VAT number is not, for that reason, registered in the VIES archive), given that no circumstances to the contrary can be discerned from the ruling request submitted.
Finally, pointing out that “the applicant company would not have specified with respect to which tax provision the status of the customer object of the request for clarifications would be relevant”, the Italian tax authorities resolve the second question, declaring it absorbed in the answer provided to the first. In particular, the Italian tax authorities also add that the communication, by the customer, of the VAT identification number registered in the VIES archive assumes, in the aforementioned terms, a substantial value, in light of the new EU and domestic regulatory framework (i.e., Article 41, paragraph 2-ter, Law Decree No. 331/1993 and Article 138 of Directive 2006/112/EC, as amended by EU Directive 2018/1910 of the Council of December 4, 2018), for the purposes of the application of the exemption with right to deduct regime to the (intra-EU) supplies referred to in the aforementioned Article 41, paragraph 1, letter b), Law Decree No. 331/1993.
The answer given to the latter question, however, does not seem to be completely clear. In particular, due to the reference to Art. 41, paragraph 1, letter b), Law Decree No. 331/1993, it would seem that the Italian tax authorities believe that the registration of the client’s VAT number in the VIES archive is relevant not only for the purposes of the exemption of intra-EU supplies, but also for the purposes of the exemption of intra-EU distance sales, at least in those cases where the client falls into one of the categories reserved for taxable persons among those provided by Article 38bis of Law Decree No. 331/1993.
However, considering that the conditions for the registration of the client’s VAT number in the VIES archive and the preparation of EC Listings/Intrastat by the supplier provided by Article 41, paragraph 2-ter, Law Decree no. 331/1993, are applicable only to the supplies referred to in paragraph 1, letter a) and paragraph 2, letter c) of the same article, but not also to those referred to in paragraph 1, letter b), it would seem more correct to conclude that the registration in the VIES archive (as well as the submission of EC Listings/Intrastat) is never necessary for the purposes to exempt intra-EU distance sales, not even where the supplier falls into one of the categories reserved for taxable persons among those provided by Art. 38bis, Law Decree No. 331/1993.
In any case, the receipt of a VAT identification number of the customer, the validity of which cannot be confirmed by the VIES archive, would not seem to be a sufficient condition for the supplier to consider that the customer has the status of a non-taxable person, as could instead be the case pursuant to Article 18, paragraph 2, second period, of EU Regulation No. 282/2011, for suppliers of telecommunication, broadcasting and electronically supplied services.
In this regard, no clarification emerges from the Italian tax authorities’ response as to how, in the case of intra-EU distance sales, the supplier can verify and prove whether a customer is not a taxable person and, therefore, consider the supply exempt from VAT with right to deduct in Italy and apply VAT in the EU Member State of destination of the goods.
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