The Italian tax authorities have guidance on the VAT rules regarding the use of credit notes to be issued in case a taxpayer is subject to bankruptcy proceedings.
The rules regarding credit notes are found in Art. 26, par. 2 of Presidential Decree No. 633/1972, which was amended by Law Decree no. 73/2021 (the so-called “Decreto Sostegni-bis”). The Italian tax authorities recently provided some clarification on the amendments in Circular 20/E, dated 29 December 2021.
The circular’s principal change addresses the timing when a supplier/provider may issue a credit note to recover the amount of VAT not paid by the customer. Before the amendment, issuance was possible only at the end of the bankruptcy proceedings. Now the credit note may be issued at the beginning of the proceedings, depending on the type of bankruptcy proceedings. Because of this change, the supplier/customer does not have to wait until the end of the proceedings, which sometimes may take years.
As an additional relevant point, the supplier/customer does not have to take part in the bankruptcy proceedings. Before the amendments, the supplier/customer had to request permission to participate in the proceedings; if participation was not possible for any reason, the credit was not recognized and the right to recover the credit was lost.
The credit note may be issued until the deadline for filing the annual VAT return for the year in which the right to adjust the output VAT was triggered.
The deduction of the VAT arising from the credit note may be made in the periodic (monthly or quarterly) VAT calculation of the period in which the credit note is issued or, at the latest, in the annual VAT return related to the year in which it was issued.
The new rules apply to bankruptcy proceedings opened after 26 May 2021, the date when Law Decree no. 73/2021 entered in force.
To align Italy’s domestic VAT rules with the principles of the European Court of Justice regarding the of services related to the international transport of goods, the rules were amended effective 1 January 2022.
The ECJ’s decision of 29 June 2017 (ECJ C-288/16) provided an interpretation of art. 146, par. 1, lett. e) of the VAT Directive 2006/112/CE and clarified that the exemption (in Italian, “non imponibilità”) provided by that rule applies to services related to the transport of goods to a non-EU country, on the condition that they are rendered directly to the sender or to the recipient of the goods.
Law Decree no. 146 of 21 October 2021 became law on 15 December 2021. The decree provides that, effective 1 January 2022, the zero-rated regime for the international transport of goods will not apply to transport services rendered to parties other than the importer, the exporter, the recipient of the goods, the holder of the transit provision or the service provider. In other words, the VAT exemption will be recognized if the transport services are rendered directly to parties listed.
The new rule applies to transport services provided in connection with:
VAT must be charged if the transport services are rendered to different parties, for example, when the main transport contractor delegates the transport to a third party (even if the third party belongs to a consortium established for transport purposes). In such a case, the invoice issued by the third party to the main transport contractor is subject to VAT.
In sum, the VAT exemption applies only to the “direct relationship” with one of the above parties (exporter of goods, importer, etc.) and not to internal or subordinate relationships between the main transport contractor and its eventual partners acting with it to perform the transport services.
Francesco Grandolfo
francesco.Grandolfo@bdo.it
Fabrizio Papotti
fabrizio.Papotti@bdo.it