VAT implications of a transfer of stock in the context of a business reorganisation between non-EU entities

In Ruling No. 194 of 2024, the Italian Tax Authority clarified that the transfer of a stock physically located in Italy in the context of a transfer of a going concern between two non-EU entities must be regarded as subject to VAT (instead of being disregarded, in accordance with the option granted by Article 19 of the VAT Directive).

The Italian Tax Authority claimed that due to the non-EU status of (i) the two companies and (ii) the predominant part of the transaction was the asset transfer, the stock in Italy could not be considered as part of a "going concern" from an Italian VAT perspective. Consequently, the stock would be subject to general VAT rules as it is treated separately from the underlying transaction.

This interpretation is in line with the position previously outlined in Ruling No. 637/2021, where the Italian Tax Authority considered as excluded from the concept of "universitas", an asset located in a country different from that of the remaining complex business.

Key takeaway

In this context, particular attention should be paid to transactions where only a minor part of the assets are located in Italy, as the VAT exclusion may not apply.

It is crucial for non-EU companies to carefully assess the location of assets in a going concern transaction in order to assess the VAT (as seller) and for the purchaser to recover the input VAT by appointing a VAT representative in Italy. In Italy the thirteenth VAT refund procedure for non-EU residents only applies to Norwegian, Israeli, Swiss and UK taxpayers.

Reference

Italian Tax Authority, Ruling No. 194 of 8 October Stampa pubblicazione