The 2017 Italian Finance Act implemented the VAT group
regime in Italy, laid down by Article 11 of the VAT Directive.
The provisions will enter into force from January 1 2018 and
the regime will be effective as of 2019.
In broad terms, the Italian VAT group regime provides that
VAT taxable persons acting as such (i.e. companies and
individuals) having financial, economic and organisational
links among themselves may opt to be treated as a single
taxable person (i.e. a VAT group). Under the VAT group regime,
supplies of goods and services between members of the group are
no longer relevant for VAT purposes.
To be part of a VAT group in Italy, the following conditions
must be jointly met:
- Taxable persons joining the VAT group must
be resident for VAT purposes in Italy;
- "Financial", "economic" and
"organisational" links must be satisfied between the members
of the VAT group; and
- A specific election must be filed with the
Italian tax authorities.
A "financial" link is presumed to exist in cases in which a
parent company directly or indirectly controls the majority of
the voting rights of the subsidiaries. This presumption is
rebuttable. The VAT group regime among subsidiaries can also
apply if the parent company is established outside of Italy,
provided that the state where the parent is established allows
an effective exchange of information with Italy. An "economic"
link is deemed to exist if the taxable persons concerned carry
on similar activities that are ancillary to each other or
activities that are substantially for the benefit of one of the
participants. Finally, an "organisational" link is deemed to
exist if the companies are subject to common coordination
(direzione e coordinamento) as provided by Italian
In any event, "financial", "economic" and "organisational"
links are always deemed to be met in case of direct or indirect
control of voting rights (i.e. they are presumed to exist in
case of a standard group situation). Where "financial",
"economic" and "organisational" links are deemed to exist
according to the above mentioned presumptions, in order to keep
a subsidiary out of the VAT group, a ruling application must be
filed to prove the absence of at least one of the above
The VAT group regime is indeed subject to an "all in
– all out" rule. If a company, which meets the
conditions to be part of the VAT group, does not opt in, then
any tax benefit is assessed upon the VAT group as if the
company were part of the VAT group. The election into the VAT
group regime is forfeited, unless a new option including all
subsidiaries is newly filed for the year following the one in
which it has been assessed that a company was wrongly left out
of the VAT group.
The possibility to be part of a VAT group is excluded
- Non-resident taxable persons;
- Foreign permanent establishments of
resident taxable persons;
- Taxable persons who are subject to certain
pre-emptive judicial measures;
- Taxable persons undergoing bankruptcy
- Taxable persons undergoing a
The option must be filed by September 30 of the year before
the year in which the regime is intended to apply and is valid
for three years. Special rules apply if the "financial",
"economic" and "organisational" links cease to exist.
The members of the VAT group are jointly and severally
liable for VAT, penalties and interest deriving from assessment
and control activities.
The implementation of the VAT group regime rules does not
impinge on the possibility to opt for the existing Italian VAT
consolidation system that will remain applicable.
Andrea Rottoli (firstname.lastname@example.org),
Maisto e Associati
Tel. +39 02 776931