Edited by Davide Accorsi, Pier Francesco Berardinelli
Through recent judgment no. 6969 of March 23, 2026, the Court of Cassation ruled again on the VAT treatment of public subsidies paid to taxable persons, confirming the principles established by the EU case law (in particular, by the recent judgment of the CJEU of May 8, 2025, case C-615/23).
The case originates from an audit carried out by the Italian tax authorities concerning the tax treatment of sums disbursed by the Piemonte Region and the Province of Turin to the company Alfa for interventions on the road infrastructure connected to the Turin Freeway System (so-called “SATT”).
Alfa had qualified these sums as mere financial transfers outside the scope of VAT pursuant to Article 2(3)(a) of Presidential Decree no. 633/1972. Differently, the Italian tax authorities held that (i) the amounts disbursed by public authorities served to supplement Alfa’s revenues in order to keep prices down for the benefit of service users and (ii) should therefore be classified as a subsidy directly linked to the price of the supply, to be included in the VAT taxable base pursuant to Article 13(1) of Presidential Decree No. 633/1972.
According to the Court’s opinion, for the purposes of assessing the VAT treatment of public contributions, it is necessary to identify the purpose of the contribution and its connection to the price of the service. After recalling national[1] and EU[2] case law, the Court sets forth the following principle: for a subsidy to be linked to the price paid by third-party users of the service to the service provider, the subsidy must affect the consideration for the service, enabling the subsidy recipient to charge a lower price than would be applicable in the absence of the subsidy.
On the other hand, the Court clarifies that the mere fact that a contribution may influence the price of goods sold or services provided by the supplier is not sufficient to always subject such a contribution to VAT as a subsidy directly linked to the price of the supply within the meaning of Article 73 of the VAT Directive. In fact, the link between the subsidy and the price must be considered interrupted if the services provided are directed at the general public – i.e., at every potential user – without the users being clearly identifiable: in such a case, the compensation is calculated without taking into account the identity and number of users of the service provided.
Therefore, the Court of Cassation implements the principles expressed by the Court of Justice of the EU in its judgment of May 8, 2025, case C-615/23. According to EU case law, three conditions must be met for a subsidy to be directly linked to the price of the transaction: (i) the subsidy must be paid specifically to the subsidized operator so that the latter may supply a specific good or provide a specific service; (ii) the price charged to the purchaser must be set so as to decrease in proportion to the subsidy granted to the supplier; (iii) the consideration represented by the subsidy must be at least determinable.
In summary, the Court of Cassation confirmed that a price reduction for service users on the basis of a contribution does not automatically qualify such a contribution as part of the consideration subject to VAT.
From a practical standpoint, the Court of Cassation’s judgment requires businesses receiving contributions – whether public or private – to conduct a case-by-case assessment of the nature of the sums received, verifying whether there is a direct and specific link between the contribution and the price charged to service users. If not, the contribution will not be relevant for VAT purposes.
[1] Court of Cassation, judgment November 18, 2021, no. 35154; Court of Cassation, judgment November 19, 2020, no. 26318.
[2] CJEU, case C-615/23, May 8, 2025. See also our previous Newsletter.
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