The long-awaited judgement on Case C-341/22, involving a well-known Italian wine company and the Italian Tax Authority, has just been released by the ECJ.
The Court of Justice, requested to rule following a preliminary reference by the Italian Supreme Court (see Cass. Civ., Sec. V, Ord. No. 16091 of May 19, 2022), has ruled that Article 9 and 167 of the VAT Directive are incompatible with Article 30, of Law Dec. 23, 1994, no. 724, insofar as it precludes the exercise of the right to deduct input VAT paid on purchases to companies deemed “non-operating” due to the ratio of the amount of revenue to certain assets. Specifically, the Court held that:
Article 9(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that it cannot lead to denying the status of a taxable person for value added tax (VAT) to a person who, during a given tax period, carries out VAT-relevant transactions whose economic value does not reach the threshold set by a national law, which threshold corresponds to the revenue that can reasonably be expected from the assets that person has.
Article 167 of Directive 2006/112 as well as the principles of neutrality of VAT and proportionality must be interpreted as precluding national legislation under which a taxable person is deprived of the right to deduct input VAT because of the amount, which is considered insufficient, of the VAT-relevant transactions carried out by that taxable person downstream”.
In the context of the argumentative process, it is also important the confirmation of the principles set forth in Ferimet, C-281/20, and Eqiom and Enka, C-6/16, that the right to deduct can be denied only if the facts relied on to prove evasion or abuse are sufficiently proven with evidence other than supposition, and that, therefore, a general presumption of evasion or abuse cannot justify a measure that undermines the objectives of a European Directive. Similarly, it cannot be accepted that a presumption – although rebuttable – determines the disallowance of the right to deduct input VAT paid for reasons unrelated to a finding of fraudulent or abusive invocation of that right.