NON-TAXABLE TRANSACTION WITHOUT VAT DEDUCTION

Premise

The assignee is not entitled to deduct VAT wrongly paid in respect of a non-taxable transaction. This is only due if the mistake made by the supplier concerns the application of a higher rate than that due.

The orientation of Practice and Law

Both by Court of Cassation sentence no. 24289/2020 of 3 November 2020, which expressly excluded the possibility for the transferee/purchaser to proceed with the deduction regarding an invoice in which VAT was erroneously charged, in the application of Article 6, paragraph 6, of Legislative Decree no. 471/1997 as amended by the 2018 Budget Law, with retroactive effect. In this sense is also expressed in the circular issued by the Finance Police which amended the provisions of its previous circular (114153/2018).

Sanction

As a consequence of the orientation of the Supreme Court and, now, also that of the Guardia di Finanza, if the client has paid to the supplier (and consequently deducted) the VAT charged to him for error in the invoice, a penalty of 90% of the amount of the deduction unlawfully made by the transferee/committer is envisaged. Therefore, in addition to the heavy consequence due to the recovery of the deducted VAT, there is the imposition of a sanction of a proportional and not fixed kind.

Care must therefore be taken to rectify in time those transactions which are not taxable, exempt or excluded from tax and which are treated, by mistake, as taxable for VAT purposes[1].

These operations, even in the absence of fraud or damage to the Treasury (where the supplier has paid the tax), will be subject to recovery by the Tax Administration, which has preferred to comply with the restrictive orientation of the Supreme Court.

Therefore, in the concept of “VAT applied at a higher rate than the actual VAT, only those cases where the supplier has applied a higher rate than the correct one and not those where he has applied the tax in respect of exempt, non-taxable or non-taxable transactions can be traced back.

LDP remains at your disposal for any further information or in-depth study of the above mentioned topics.

[1]    In order to eliminate inaccuracies in the invoice, please note the change procedure regulated by art. 26 of Presidential Decree 633/1972.