The EU General Court has registered case T-232/26 involving Italian auction house Appellant_1 Srl, which challenges the Italian tax authority's interpretation of VAT deductibility rules under the special margin scheme for auction sales.

The dispute stems from a 2017 tax audit by the Agenzia delle Entrate, which disallowed VAT deductions on certain expenses such as transport, valuations, and advertising. The tax authority argued these "incidental expenses" were not passed on to buyers and thus non-deductible under Article 40 bis(2) of Italian Decree-Law No 41/1995, which implements the EU margin scheme for second-hand goods, works of art, antiques, and collectors' items.

Legal Questions

The referring court has asked the Court of Justice to determine whether Articles 342 and 167 of the VAT Directive, along with the principle of tax neutrality, preclude national practices that extend VAT non-deductibility to expenses not attributable to individual auction items or not charged to buyers. A second question examines whether Treaty provisions on freedom to conduct business preclude interpretations that restrict auction houses from choosing whether to pass general operating expenses to purchasers.

Appellant_1 Srl contends that expenses not directly charged to purchasers or specifically attributable to individual lots should remain VAT deductible, as they are not truly "incidental to the sale" in a way that prevents deduction. The company argues the broad interpretation infringes upon deduction rights, tax neutrality, and business freedom.

Context

The case centers on the intersection between EU margin scheme rules under Articles 333-341 of the VAT Directive and general deduction principles. Under Article 336, the taxable amount for margin scheme supplies is calculated as the total invoiced amount minus the net amount paid to the principal and applicable VAT. The outcome could clarify the scope of VAT deductibility restrictions for auction houses operating across the EU.